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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

12b-1 fee

A type of mutual fund expense in which the fund's operators use a portion of the firm's assets to pay for costs of distributing the fund. The fee is included in the fee table of a fund's prospectus. National Association of Securities Dealers' rules establish an annual limit on the size of the fee. The name is derived from the SEC rule that describes the fee. Also called distribution fee.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

12b-1 fee.

A number of load and no-load mutual funds levy 12b-1 fees on the value of your mutual fund account to offset the fund's promotional and marketing expenses.

These asset-based fees, which get their name from the Securities and Exchange Commission (SEC) ruling that describes them, typically amount to somewhere between 0.5% and 1% annually of the net assets in the fund.

A fund that charges 12b-1 fees must detail those expenses, along with other fees it imposes, in its prospectus.

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References in periodicals archive ?
This category essentially captures the costs of fund administration that are not captured in the management fee or the 12b-1 fee. According to the SEC, some examples of costs included in the other expenses category include custodial expenses, legal expenses, and shareholder service expenses.
As an example, he cited firms that invest clients' money in a mutual fund share class that charges a 12b-1 fee when a lower-cost share class of the same fund is available, "or advisors may improperly choose to use fund assets to pay expenses that should be paid by the firm." Customers, he added, "may be deceived if brokers charge fees that are designed to cover the costs of services provided, while also marking up the prices of securities to earn a profit that is not disclosed."
Compared to the same period last year, operating revenues declined 12% due to a combination of lower average assets under management and reduced Rule 12b-1 fee revenues in our broker-dealer advisory programs related to a share conversion of load-waived Class A shares to Class I shares in July 2016.
* Higher 12b-1 fees. B shares may charge the maximum 12b-1 fee of 1% per year.
B share funds also carry a 12b-1 marketing fee that is typically higher than the 12b-1 fee of A shares.
A 12b-1 fee is an annual fee that a fund, or underlying investment option in a variable annuity subaccount, can use to cover expenses such as promotion, distribution and, in some cases, broker commissions.
The SEC is currently looking at changes to 12b-1 fee disclosures.
We also examine the effect of marketing efforts on fund flows based on funds' 12b-1 fee.
The article concludes that 12b-1 fee payments are out of control and that major changes are needed to eliminate shareholder abuses.
* Some mutual funds charge a 12b-1 fee. This fee, which can be as high as 1.25 percent of the fund's value, is used by the company to advertise the fund to the public.
The 12b-1 fee was intended as a temporary measure to allow funds to recoup marketing and advertising costs associated with launching the new share class.
A load mutual fund normally can impose three major fees: a commission (load), a 12b-1 fee and a management fee.