12B-1 fees

12B-1 fees

The percent of a mutual fund's assets used to defray marketing and distribution expenses. The amount of the fee is stated in the fund's prospectus. The SEC has recently proposed that 12B-1 fees in excess of 0.25% be classed as a load. A true no load fund has neither a sales charge nor a 12b-1 fee.

12B-1 Fee

A fee one must pay in a 12B-1 Plan. A 12B-1 plan is a mutual fund that, instead of a load (or sales fee), annually charges shareholders a small percentage of the fund's market value, which is called a 12B-1 fee. Instead of assessing a fee when buying or selling shares as most mutual funds do, 12B-1 fees are deductions from the fund's market value per shareholder. Usually a 12B-1 fee is less than 1% of the market value.
References in periodicals archive ?
Thus, speaking for fund sponsors, not fund shareholders, the ICI has argued to the SEC that 12b-1 fees "have permitted the establishment of viable distribution systems which are essential to the continued existence of open-end funds and their shareholders.
Known as 12b-1 fees in mutual fund jargon, marketing fees go to pay for marketing and advertising costs, and also to compensate selling agents.
Fund returns are measured against those of all funds in its Lipper category and do not reflect any sales charges or 12b-1 fees.
The Securities and Exchange Commission continues its assault on 12b-1 fees.
In case you missed it, the Securities and Exchange Commission's annual investment advisor compliance outreach summit, held in mid-April at the agency's Washington headquarters, was chock full of vital information about what the securities regulator will be zeroing in on this year -- particularly 12b-1 fees, succession planning and third-party advisor audits.
In one case, a fiduciary received 12b-1 fees from mutual funds he recommended-along with the adviser's stated fee.
For example, broker/dealers (B/Ds) may receive 12b-1 fees, insurance commissions and revenue sharing.
A respected money manager recently condemned the SEC's approval of 12b-1 fees in strong, unequivocal terms steeped in frustration and disappointment:
The concern that has surrounded 12b-1 fees is that they have been sold inappropriately, he continues.
Designed for Use in Advisory Fee-Based Wrap Programs, Carries No Loads, No 12b-1 Fees
So-called 12b-1 fees are paid by a mutual fund out of a fund's assets to cover distribution expenses and sometimes shareholder service expenses.
For example, any 12b-1 fees a broker/dealer receives should be disclosed upfront as indirect compensation under the rule, and a failure to do so can result in a prohibited transaction.