SIE (Securities Industry Essentials) Practice Exam

Failing to make a customer aware of an upcoming quantity discount available through a mutual fund is:

1. A breakpoint sale and is prohibited

2. A standard industry practice

3. Advised for portfolio diversification

4. Part of a dollar-cost averaging strategy

The correct answer is: A breakpoint sale and is prohibited

Failing to make a customer aware of an upcoming quantity discount available through a mutual fund is considered a breakpoint sale which is prohibited in the financial industry. A breakpoint sale refers to deliberately omitting information about a quantity discount in hopes of increasing the sales commission. This practice is prohibited because it is seen as a manipulation tactic and goes against the principles of fair dealing and transparency. Options B, C, and D are incorrect as they do not accurately describe the scenario and would not be considered a breakpoint sale. Option B is incorrect because purposely withholding information about a quantity discount is not a standard industry practice. Option C is incorrect because diversifying a portfolio does not involve withholding information from customers. Option D is incorrect because dollar-cost averaging strategy does not involve withholding information or taking advantage of customers.