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Rating:SEC Proposes to Limit Ongoing Fund Sales Charges Not Rated 5.0 Email Routing List Email & Route  Print Print
Wednesday, July 21, 2010

SEC Proposes to Limit Ongoing Fund Sales Charges

Reported by Armie Margaret Lee

SEC commissioners on Wednesday unanimously agreed to propose changes that, among others, would limit the amount of asset-based sales charges paid by investors. [SEC Fact Sheet, doc format]

Mary Schapiro
The proposal (download pdf here) would cap the ongoing sales charges to the highest fee charged by the fund for shares without an ongoing sales charge.

Meanwhile, funds could continue to pay 0.25 percent a year for distribution as "marketing and service" fees. The phrase "12b-1 fees" will be eliminated from prospectuses. Marketing and service fees would be laid out in a separate table.

The SEC also proposed to allow funds to sell shares through broker-dealers who set their own sales charges.

"As a result, broker-dealers could establish their own sales charges, tailor them to different levels of shareholder service, and charge shareholders directly, similar to how commissions are charged on securities auch as common stock," according to an SEC fact sheet.

In her opening remarks, SEC chair Mary Schapiro said the proposals "are intended to provide clarity and fairness to a mutual fund distribution system that has become confusing and potentially anti-competitive."

"At the same time, they are designed to preserve investor choice in selecting distribution methods and to minimize operational disruptions and expensive systems changes," she added.

There will be a 90-day comment period after the proposal is published in the Federal Register. 

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