Practice Quiz

FINRA Series 6

Category - Series 6

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The difference between a “redemption fee” and a “rear-end load” is that:
  1. the redemption fee is another name for a 12b-1 fee, which is an annual expense associated with the fund.
  2. a rear-end load is used to compensate a salesperson who has sold shares of the fund; a redemption fee is charged to offset the expenses a fund incurs in processing share redemptions.
  3. the redemption fee refers to charges incurred by the fund when it sells securities it owns; the rear-end load is a fee that is incurred by investors in the fund when they redeem their shares of the fund.
  4. There is no difference. These are synonymous terms.
Explanation
Answer: B - The difference between a “redemption fee” and a “rear-end load” is that a rear-end load is used to compensate a salesperson who has sold shares of the fund, while a redemption fee is charged to offset the expenses a fund incurs in processing share redemptions.
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