Recovering Losses caused by Investment Misconduct

SEC Says 12(b)-1 Fees Not Forgotten as Revision Gets Pushed Back Once Again

The SEC's long history of voicing concern over 12(b)-1 mutual fund fees while neglecting to actually do anything to revise them has continued unabated this year. In July of 2010, the SEC cited concerns over investor awareness and understanding of the fees as cause for change.

"Despite paying billions of dollars, many investors do not understand what 12b-1 fees are, and it's likely that some don't even know that these fees are being deducted from their funds or who they are ultimately compensating," said Mary Schapiro (as quoted by the Washington Post).

The fees, which can range from 0.25 to 1 percent of a fund's net assets are considered operating expenses but are often used to compensate brokers and others who sell fund shares. The proposal, which InvestmentNews said garnered more than 2,400 comment letters, included a requirement for clearer disclosures. It also included a change that would treat any 12(b)-1 fees over 0.25 percent as assets that must be paid over time.

As of May 2011, the proposal has not yet been enacted. But, according to a May 6 InvestmentNews article, Mary Schapiro says the commission remains focused on the fees and expects to revisit the issue of revision some time this summer. Ms. Schapiro also said that the commission plans to take the comment letters into account in its decisions over reform. She did not comment on whether the 2010 proposal would be re-issued.

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