SIE (Securities Industry Essentials) Practice Exam

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Under what condition can a mutual fund be considered no-load?

If it operates without a board of directors
If it does not carry a sales charge and does not charge more than 25 basis points in annual 12b-1 fees
If it invests exclusively in government securities
If it offers dividends and capital gains annually

The correct answer is: If it does not carry a sales charge and does not charge more than 25 basis points in annual 12b-1 fees

Explanation A mutual fund can be considered no-load if it does not charge a sales charge and keeps its annual 12b-1 fees below 25 basis points (0.25%). Option A is incorrect because the board of directors has no direct impact on the fees and charges associated with the fund. Option C is incorrect because the types of securities a fund invests in do not determine whether it is no-load or not. Option D is incorrect as well because offering dividends and capital gains is not indicative of the fees and charges associated with the fund. Only option B satisfies the requirements for a mutual fund to be considered no-load.