Quick Answer
Open-end funds and Unit Investment Trusts (UITs) redeem at forward Net Asset Value (NAV); closed-end funds and Exchange-Traded Funds (ETFs) trade on the secondary market. Sales charges cap at 8.5% of the Public Offering Price (POP) absent an asset-based charge, 12b-1 fees at 1.00%. Variable annuities split into a separate account (customer risk) and general account (insurer risk).
The most heavily tested Series 6 unit on one sheet: fund structures, share classes, breakpoints, fees, and variable contracts.
How Are Fund Shares Issued and Priced?
| Type | Redeemable? | Pricing | Where It Trades |
|---|---|---|---|
| Open-end (mutual fund) | Yes, with the fund | Forward NAV | Directly with the fund |
| Closed-end fund | No | Market price (premium or discount to NAV) | Secondary market (exchange) |
| UIT | Yes, with the sponsor | NAV-based | Redeem with sponsor; some secondary |
| ETF | Only in creation-unit blocks (authorized participants) | Market price, stays near NAV | Secondary market (exchange) |
- UITs have no board, investment adviser, or portfolio manager: the portfolio is fixed and terminates on a set date.
- Interval funds are a closed-end structure with periodic (typically quarterly) repurchase, not daily redemption.
What Are the Mutual Fund Share Classes?
| Class | Sales Charge | 12b-1 | Converts? | Best For |
|---|---|---|---|---|
| A | Front-end load; breakpoint-eligible | Low (about 0.25%) | n/a | Long-term, larger-dollar investors |
| B | Contingent Deferred Sales Charge (CDSC), declines to zero | Higher (up to 1.00%) | Yes, to Class A | Long-term, largely discontinued |
| C | Small CDSC first year only | Ongoing 1.00% indefinitely | No | Short-to-medium holding |
| No-load | None | 0.25% or less | n/a | Direct-sold funds |
What Are the One-Liners That Win Points?
- Forward pricing: an order before the fund's daily cutoff (typically 4:00 p.m. Eastern Time) gets that day's NAV; after, next day's NAV.
- Late trading is illegal; market timing is legal but restricted (redemption fees, frequent-trading policies).
- Class C is cheaper to enter but costs more long-term.
- The separate account is protected from the insurer's general creditors.
- Accumulation: units AND value fluctuate. Annuitization: units fixed, only value (the payment) varies.
- The Assumed Interest Rate (AIR) comparison is always to the AIR, not the prior payment: beat it, the check rises; miss it, the check falls.
- A 529 plan is a Municipal Securities Rulemaking Board (MSRB) municipal fund security, not a mutual fund.
Which Numbers Must I Memorize?
| Item | Value |
|---|---|
| Maximum sales charge (breakpoints, Rights of Accumulation, no service fee) | 8.5% of POP |
| 12b-1 aggregate cap | 1.00% (0.75% distribution + 0.25% service) |
| "No-load" 12b-1 threshold | 0.25% or less |
| Redemption proceeds deadline | 7 calendar days |
| Letter of Intent window | 13 months (backdate up to 90 days) |
| Open-end fund borrowing coverage | 300% (bank borrowings only) |
| Closed-end debt / preferred coverage | 300% debt / 200% preferred |
| Names Rule asset match | 80% of net assets |
| Independent directors | 40% minimum; majority with a 12b-1 plan |
| Deferred variable annuity principal review | 7 business days from Office of Supervisory Jurisdiction (OSJ) receipt |
| 10% federal penalty on earnings | Annuity: pre-59½; 529/ABLE: non-qualified use |
| 529 superfunding (2026) | $95,000 single / $190,000 married per beneficiary |
| Achieving a Better Life Experience (ABLE) annual contribution (2026) | $20,000 (no longer equal to the gift-tax exclusion); onset of disability before age 46 |
What Other Products Should I Know Beyond Mutual Funds?
- Variable annuity fees stack: Mortality and Expense (M&E), admin, sub-account expense ratios, and rider fees can top 2.5% per year. Surrender charges run 6 to 8 years.
- Annuity earnings come out Last-In-First-Out (earnings first, ordinary income), with no step-up in basis and no long-term capital-gain rate.
- Variable life guarantees a minimum death benefit but no minimum cash value.
- Municipal fund securities are three MSRB categories: 529 plans, Local Government Investment Pools (LGIPs), and Achieving a Better Life Experience (ABLE) accounts. Reporting: semi-annual for 529 and ABLE; LGIPs are excluded.
- Dollar-Cost Averaging (DCA) reduces timing risk, not market risk, and does not guarantee profit; average cost is less than average price.
Which Gotchas Show Up Most?
- Exchanges and conversions within a fund family are taxable events even when no new sales charge applies.
- Reinvesting distributions does not defer tax: tax is owed in the year received, and basis rises by the amount reinvested.
- Return of capital is not a dividend: untaxed when received, but lowers cost basis, creating a larger gain at sale.
- Long-term capital gains distribute once per year (plus a narrow supplemental allowance): monthly "distributions" are almost always income, not capital gains.
- A breakpoint sale is a violation even if the customer never complains; the rep must inform, and Rights of Accumulation aggregate across spouse, children, broker-dealers, account types.
- Closed-end fund discounts are normal, a structural feature, not distress; holders exit through the secondary market, not redemption.
- The deferred variable annuity clock starts at OSJ receipt of a complete and correct application, not when the customer signs.
One-Breath Recap
Open-end funds and unit investment trusts redeem at forward net asset value while closed-end funds and exchange-traded funds trade in the market, share classes just repackage the same sales charge under the 8.5% and 1.00% ceilings, and variable contracts split investment risk into the separate account and guarantees into the general account. Lock the pricing numbers, the redemption deadline, and the accumulation-versus-annuitization asymmetry, and this heaviest unit answers itself.
Need more than the recap? Read the full Investment Products and Features unit.