SEC Proposes to Alter 12b-1 Fees
A release entitled "SEC Proposes Measures to Improve Regulation of Fund Distribution Fees and Provide Better Disclosure for Investors" was posted yesterday. It says, "The Securities and Exchange Commission today voted unanimously to propose measures aimed to improve the regulation of mutual fund distribution fees and provide better disclosure for investors. The marketing and selling costs involved with running a mutual fund are commonly referred to as a fund's distribution costs. To cover these costs, the companies that run mutual funds are permitted to charge fees known as 12b-1 fees. These fees are deducted from a mutual fund to compensate securities professionals for sales efforts and services provided to the fund's investors.... These fees amounted to an aggregate of just a few million dollars in 1980 when they were first permitted, but that total has ballooned as the use of 12b-1 fees has evolved. These fees amounted to $9.5 billion in 2009." Crane Data estimates that money market mutual funds accounted for approximately $2.0 billion of this total. Temporary partial fee waivers on money fund expenses have hit 12b-1 fees and shareholder service fees particularly hard, likely accounting for as much as $1 billion in fee waivers over the past year. In other news, Northern Trust released earnings and showed more evidence that money fund fee waivers peaked in the first quarter of 2010 and began declining in Q2.
