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
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.