SEC Chairman Christopher Cox is continuing his public campaign of decrying the misuse of mutual fund 12b-1 fees and calling for their overhaul or repeal. The Wall Street Journal's Fund Track
column reports that the SEC will convene a round table to explore the mutual fund 12b-1 fee issue on June 19. The round table will review the fees and their benefits and look at ways to reform rule 12b-1. The SEC estimates that mutual funds collected $11 billion in 12b-1 fees last year.
The rule was initially implemented in 1980 near the end of the 1974-1982 bear market as fund firms argued that additional marketing would bring new assets into the fund industry and ultimately lower shareholder costs as a percentage of fund assets. Critics of the fees, though, argue that they are not being used for their original purpose and that many shareholders have not benefited from lower fees even as assets in the fund industry have exploded.
"Today's uses of 12b-1 fees have strayed from the original purposes underlying the rule, and it is time for a thorough re-evaluation," Cox said, according to the paper.
Sean Hanna, Editor in Chief
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