Home › FINRA SIE › Finance › Investment Products and Risks › Why does the back-end load on Class C shares not…
Why does the back-end load on Class C shares not shrink over time?
AThe load is capped at 2% by rule from day one
BThe load is paid into fund assets, not a broker
CThe shares carry lower annual expenses than A
DThe shares generally do not convert to another class
Answer & Solution
Correct answer: D. The shares generally do not convert to another class
1. Class C shares might carry a 12b-1 fee, other annual expenses and either a front-end or a back-end load.
2. Unlike Class B shares, Class C shares generally do not convert to another class.
3. Because no conversion arrives, the back-end load does not fall away over time.
4. Class C shares also tend to carry higher annual expenses than either Class A or Class B.
5. The 2% ceiling belongs to redemption fees paid to the fund, not to sales loads paid to a broker.
6. Saying Class C expenses are lower than Class A reverses the actual ranking.
_Source: US SEC Office of Investor Education and Advocacy, "Mutual Funds and ETFs: A Guide for Investors", section Classes of Mutual Funds_
Related questions
How does an investor get a statement of additional information?What does the financial highlights section of a prospectus hold?Which two kinds of prospectus does a mutual fund use?An investor buys 200 ETF shares at an ask of $60 and sells at once at a bid of $59.50. WhaA brokerage firm sells a client an amount just below a fund's breakpoint to earn a bigger What may happen to Class B shares held long enough?What is typical of Class A mutual fund shares?What do the several share classes of one mutual fund share?