12B-1 Fund

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 ?
Receipt of 12b-1 fees "not only created a conflict of interest that was not adequately disclosed to EFG's clients, but favoring 12b-1 funds over others was inconsistent with EFG's duty to seek best execution for its clients," the SEC said.
Funds that impose these fees are sometimes known as "12b-1 funds."
Malhotra and McLeod (1997) find that 12b-1 funds have higher expense ratios than non-12b-1 funds and that expense ratios are positively related to turnover but negatively related to fund size and age.
Another study in 1990 concluded that net returns (returns minus the expense ratio and portfolio transactions costs) were lower for 12b-1 funds than non-12b-1 funds.
"In general, 12b-1 funds have higher expense ratios and lower net investment returns than non-12b-1 funds."