12B-1 Fund

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12B-1 Fund

A mutual fund that charges shareholders a small percentage of the fund's market value, instead of a load (or sales fee). That is, a 12B-1 Plan does not require shareholders to pay a fee when buying or selling shares; rather, they simply deduct what is owed to the shareholder once per year. Usually a 12B-1 plan charges less than 1%.
References in periodicals archive ?
The guidance, Fleming notes, addresses the possibility of "potential mischaracterization" of 12b-1 and other fund fees, as well as the potential for the inappropriate use of fund assets to pay for distribution-related activities outside of a 12b-1 plan.
Unless part of a 12b-1 plan, he said, "the firm should bear those costs, not the shareholders.
These total returns do account for management fees, administrative fees, 12b-1 plan fees, and other expenses for which the investment company withdraws money from investor assets.
In an effort to protect against the fund's adviser using undue influence to extract fees, the rule provides that a 12b-1 plan and any related agreements must be initially approved by a majority of the fund's shareholders, and by both a majority of the fund's board of directors, and a majority of the fund directors who are not interested persons of the fund and who have no direct or indirect financial interest in the operation of the plan or in any related agreements.
Investment companies with board-contingent plans to recognize a liability for excess costs, computed in the same way as for an enhanced 12b-1 plan, when the company's board commits to pay such costs.
We've eliminated our Rule 12b-1 plan to simplify our pricing and remove the potential additional costs," said Crawford.
White also reminded mutual fund boards and directors of their obligations to ensure that fund payments to financial intermediaries that are being used to finance distributions are paid pursuant to a rule 12b-1 plan, pointing to recent SEC staff guidance on funds boards' obligations.
This cold reality ought to trouble a conscientious mutual fund director called on to approve a 12b-1 plan.
Here's where the crux of the distribution-in-guise initiative begins to unfold: depending on what services the intermediary performs in exchange for these fees, the fund may need to pay at least some of these fees pursuant to a 12b-1 plan.
Subject to approval by the Fund's Board of Directors, the Distributor intends to eliminate the 12b-1 plan.
Unless part of a 12b-1 plan, the firm should bear those costs, not the shareholders.
After 27 years of 12b-1 plan adoptions and renewals, no proof of 12b-1 fees' cost-effectiveness has surfaced.