What would likely happen if an investor fails to meet the terms of a Letter of Intent?

If an investor fails to meet the terms of a Letter of Intent (LOI), the most likely consequence is that higher sales charges will apply. A Letter of Intent is typically used in mutual fund investing to allow investors to commit to invest a certain amount of money over a period, which can sometimes qualify them for reduced sales charges based on that commitment. If the terms outlined in the LOI are not met, the investor will be subject to higher sales charges that were initially waived under the assumption that the full investment would be made.

This incentivizes investors to follow through on their promised amounts, as the benefits of reduced charges are contingent on fulfilling the LOI terms. Other outcomes like liquidation of the investment or losing all contributions are less common and would typically depend on specific circumstances unrelated to just the LOI itself. Fines from the SEC are also not standard consequences of failing to uphold a Letter of Intent, which is more a matter of contractual obligation between the investor and the fund rather than a regulatory issue.