What are the 12b-1 fees?

What are the 12b-1 fees?

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.

Do all funds have 12b-1 fees?

Class B and class C shares of broker-sold funds typically have 12b-1 fees, but they may also be charged on no-load mutual fund shares and class A broker-sold shares.

What is the highest 12b-1 fee a finra member can charge?

The SEC does not limit the size of 12b-1 fees that funds may pay, but under FINRA rules, 12b-1 fees that are used to pay marketing and distribution expenses (as opposed to shareholder service expenses) cannot exceed 0.75% of a fund’s average net assets per year.

What is a fee charged by a mutual fund company when selling a mutual fund?

Funds may do this by imposing a fee on investors, known as a sales load (or sales charge), which is paid to the selling brokers. In this respect, a sales load is like a commission investors pay when they purchase any type of security from a broker.

Are 12b-1 fees going away?

“The SEC Enforcement Division has effectively outlawed [12b-1 fees],” Lundy said. An SEC spokesperson declined to comment. For more than two years, the SEC has been targeting firms that make inadequate disclosures relating to 12b-1 fee payments.

How do 12b-1 fees affect mutual fund investors?

12b-1 fees lower your investment return from the mutual fund. The SEC regulates 12b-1 fees and FINRA caps them at 1% of a mutual fund’s net assets. A 12b-1 fee covers the expenses a fund incurs to assist shareholders and pay fees to brokers who sell shares of a mutual fund.

How often are 12b-1 fees charged?

annually
Loads are a fixed amount charged at the account level, and each investor pays only for his costs. On the other hand, 12b-1 fees are charged annually at the fund level, and investors may pay for other investors’ costs.

Who collects 12b-1 fees?

12b-1 fees are paid to the salespeople who distribute mutual funds and are paid from the fund’s assets.

Who receives 12b-1 fees?

Do actively managed ETFs have low fees?

Lower costs One of the biggest selling points of ETFs over mutual funds is cost, and active ETFs are no exception. Typically, ETFs are less expensive than mutual funds, averaging 0.62% in fees, according to Morningstar, compared to 0.71% for an active stock mutual fund, the Investment Company Institute reports.