What are 12b-1 rules?
What are 12b-1 rules?
In 1980, the Securities and Exchange Commission (SEC) adopted Rule 12b-1 under the Investment Company Act of 1940. This rule permits funds to compensate brokers and other financial intermediaries out of fund assets for services they provide shareholders related to the distribution of fund shares.
What does Rule 12b-1 enable mutual funds to do?
Understanding 12b-1 Funds The name 12b-1 comes from the Investment Company Act of 1940’s Rule 12b-1, which allows fund companies to act as distributors of their own shares. Rule 12b-1 further states that a mutual fund’s own assets can be used to pay distribution charges.
What can 12b-1 fees be used to pay for?
What 12b-1 Fees Are Used For. The distribution fee covers marketing and paying brokers who sell shares. They also go toward advertising the fund and mailing fund literature and prospectuses to clients.
Is it good or bad for investors that this fund charges no 12b-1 fees?
Bottom line. Some mutual funds charge 12b-1 fees. While they’re relatively low, they still can have a significant impact on your net returns. If you’re looking for your money to grow as much as possible, avoiding 12b-1 fees can improve your investment returns over time.
What is a 12b?
So-called “12b-1 fees” are fees paid out of mutual fund or ETF assets to cover the costs of distribution – marketing and selling mutual fund shares – and sometimes to cover the costs of providing shareholder services. 12b-1 fees get their name from the SEC rule that authorizes a fund to charge them.
Does Fidelity have 12b-1 fees?
The rate at which this fee will decline will be disclosed in the fund’s prospectus. A fund or class with a contingent deferred sales load typically will also have an annual 12b-1 fee.
What is a 12b-1 conflict?
12b-1 fees get their name from the SEC rule that authorizes a fund to charge them. When an investment adviser receives 12b-1 fees or revenue sharing in connection with investments they recommend, a significant conflict of interest arises.
What is Rule 12b-1 of the Investment Company Act?
In 1980, the Securities and Exchange Commission (SEC) adopted Rule 12b-1 under the Investment Company Act of 1940. This rule permits funds to compensate brokers and other financial intermediaries out of fund assets for services they provide shareholders related to the distribution of fund shares.
What is a 12b-1 distribution company?
The name 12b-1 comes from the Investment Company Act of 1940 ‘s Rule 12b-1, which allows fund companies to act as distributors of their own shares. Rule 12b-1 further states that a mutual fund’s own assets can be used to pay distribution charges.
What are 12b-1 funds and should you invest?
Once popular, 12b-1 funds have lost investor interest in recent years, particularly amid the rise of exchange-traded funds (ETFs) and low-cost mutual funds. The name 12b-1 comes from the Investment Company Act of 1940 ‘s Rule 12b-1, which allows fund companies to act as distributors of their own shares.
What is the SEC Act of 1940?
AGENCY: Securities and Exchange Commission. ACTION: Final rule. SUMMARY: The Securities and Exchange Commission is adopting amendments to the rule under the Investment Company Act of 1940 that governs the use of assets of open-end management investment companies (“funds”) to distribute their shares.
