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.

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.

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.

References in periodicals archive ?
The Encompass Fund is a no-load mutual fund with no 12b-1 fee.
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 violations.
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").