In other words, mutual-fund advisers who charge 12b-1 fees
take nearly the entire 12b-1 fee
to the bank.
The Advisor class, he explains, is used for intermediaries who have 12b-1 fee
shareholder servicing costs, while the R class is for advisors who are putting together a 401(k) plan.
In two recent actions, the agency barred the principal and chief compliance officer of an advisory firm for failing to disclose in Form ADV a 12b-1 fee
revenue sharing arrangement with a broker-dealer as well as the firm's financial condition, and a former Credit Suisse advisor agreed to pay more than $2 million for recommending A-class shares that carried a 12b-1 fee
instead of lower-expense institutional shares.
P shares "coincides with the emerging industry trend of launching lower cost shares as well as added features that aid intermediaries' objectives of eliminating conflicts of interest," Elder said, and includes a 25 basis-point 12b-1 fee
, similar to other firms' newly launched "T shares.
The 12b-1 fee
is considered an operational expense and, as such, is included in a fund's expense ratio.
A 12b-1 fee
is paid by a mutual fund out of fund assets to cover certain distribution expenses, and such fees are often used to compensate service providers.
Some funds also add a marketing charge, known as a 12b-1 fee
, that can cost you as much as 2% a year.
In the first month of the new year, the SEC issued guidance that warned advisors and broker-dealers to pay more attention to these fees, and also announced it took yet another enforcement action against an advisor related to 12b-1 fee
Broker/dealers historically have delivered prospectuses, which contain 12b-1 fee
information to clients, he says, but broker/dealers now will need to provide more detail about the compensation and services.
If the answer to that question is "no," then the sponsor's conduct in raking off the 12b-1 fee
begins to take on the trappings of theft.
235, 236 (2006) (presenting findings suggesting "that the detrimental impact of 12b-1 fees
on expense ratios has been understated, that funds with 12b-1 fees
have higher expense ratios above and beyond the impact of the 12b-1 fee
, that the effect on shareholders is becoming more widespread over time, and that 12b-1 fees
are a contributing factor to the failure of mutual funds").