In 2009, investors paid $9.5 billion in 12b-1 fees, according to a July
21 WSJ article. In 2007, the fees brought in over $13 billion.
here, the SEC has repeatedly voiced concerns about investors' understanding
of these fees. In a July 21 Press Release detailing an SEC proposal to
limit funds' 12b-1 fees by improving regulation and disclosures to
investors, SEC Chairman Mary L. Schapiro focuses again on the problem:
"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. Our proposals would replace rule 12b-1 with new rules designed
to enhance clarity, fairness and competition when investors buy
12b-1 fees are distribution and/or service fees that are considered an
annual marketing expense of a mutual fund. The fees, normally 0.25-1%
of a fund's net assets, are used (in part) to compensate brokers and
others who sell fund shares.
According to the SEC, the proposed rules would protect investors in four
ways, including: by limiting fund sales charges, by improving transparency
of fees, by encouraging retail price competition, and by revising fund
director oversight duties.
The SEC's proposal provides for a transition period for the new rules
and a 90-day public comment period, according to the press release.
Read about other areas of SEC concern