SEC Won’t Pursue 12b-1 Reform 

• Melanie Waddell

The Securities and Exchange Commission has decided to no longer pursue this year repealing or modifying Rule 12b-1. At the Investment Company Institute’s 4^th Annual Mutual Fund Leadership conference March 23 in Palm Desert, California, Andrew “Buddy” Donohue, director of the SEC’s Division of Investment Management, said he believes that it would be “wise…in the current market environment, for us to defer consideration of rule 12b-1 reform for this year.”

Rather, Donohue said, the Commission “should address a few fundamental matters that directly impact investor protection concerns. For example, we urgently need to reconcile the diverse regulatory regimes governing investment advisors and broker/dealers, and alleviate the uncertainty in the industry emanating from this unresolved matter.”

The Financial Services Institute (FSI) said in a statement that it applauds the SEC’s decision to forego 12b-1 repeal or modifications under the moniker of “reform.” “FSI has long held the position that Rule 12b-1--which authorizes mutual funds to use their assets to pay for marketing and distribution expenses--provides fair compensation to financial advisors for providing middle-class Americans with critical support and guidance in planning to achieve important financial goals ranging from retirement, to college funding for children, to caring for aging parents. At FSI, we have always vigorously advocated for the retention of 12b-1 fees as an essential way of aligning the interests of financial advisors with the interests of their fund shareholder clients.”

FSI said it will continue to diligently monitor any future efforts to modify or repeal Rule 12b-1.

• • 3/27/2009 3:38:37 PM
  • Ralph Mitchell
  • We Need a UNION !!!
  • As an Independent Financial Advisor I am always seeing "unseen" hands that try and pick our pockets by either creating additional Fees that we must pay, inflating the costs of E&O coverage, or by trying to reduce our stream of sales commissions. The more that I look at the Financial Services Industry, the more than I think it may be time for us rise up and unionize. If workers in other industries had to undergo so much scrutiny for so little direct compensation, there would be strikes and lawsuits galore! Maybe it is time that we formed our own union and directly confronted our B/D firms, FINRA , the SEC and maybe even Capital Hill so that they all show us more respect and better compensation. Only an organized union will truly protect the interests of individual producers while others are trying to "pick our pockets".
• • 3/28/2009 10:39:38 AM
  • Todd Bright
  • 12b-1
  • The SEC should consider expanding the use of 12b-1fees in Class C Shares and consider eliminating all other classes, especially the transaction minded Class A class which many compliance offices deem the "best" option for the consumer. Class C shares with breakpoints determined at the B/D level would be an option. The mutual fund industry would then merely "manufacture" a fund and eliminate its role in the class of shares.