The Securities and Exchange Commission has proposed eliminating 12(b)-1 fees as they currently exist.
The proposal would mean that funds would be able to create a class of shares under which broker/dealers would determine the pricing
According to Andrew Donohue, director of the SEC's Division of Investment Management, "Mutual funds currently set the sales charge under a 70-year-old provision. This new approach is intended to increase competition of the sale of mutual fund shares."
Under the proposal, firms could charge a marketing and service fee of up to 0.25 percent. Anything over this amount would be considered an "ongoing sales charge" and would be limited to the highest fee charged by the fund for shares that have no ongoing sales charge.
Last year, 12(b)-1 fees generated $9.5 billion for fund firms.
According to SEC chairman Mary Schapiro, the term "12(b)-1 would cease to exist. In addition, mutual fund companies would be required to disclose the marketing and service fees, as well as ongoing sales charges in every prospectus, shareholder report and investor transaction.