12 B-1 Fee Meaning & Definition - Securities CE

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Definition of 12 B-1 Fee

A 12 B-1 fee is an asset-based distribution fee, which is assessed annually and paid out quarterly to cover advertising and distribution costs. All 12B1 fees must be reasonable. Because a 12B-1 fee reduces the return, it is a type of sales load. 12B-1 fees cover such things as the printing of prospectuses and certain sales commissions to agents.

Applying "12 B-1 Fee" to Securities Exams:

Mutual funds will charge a fee to the shares owned by the shareholders to cover the costs of distribution of the mutual fund. The 12b1 fee will cover things like printing of prospectuses, advertising and commissions to sales reps who sell the mutual funds to their clients. A 12b1 fee is considered a type of sales load as it reduces the investor’s return. A mutual fund that distributes its own shares and markets itself as a no-load fund may charge a 12B-1 fee that is no more than .25 percent. If the fund charges a 12B-1 fee that is greater than .25 percent, it may not be called a no-load fund. Other funds that do not call themselves a no-load fund are limited to .75 percent of assets, and the amount of the 12B-1 fee must be reasonably related to the anticipated level of expenses incurred for promotion and distribution. All 12B-1 fees are reviewed quarterly. Mutual fund charges, expenses and operations are heavily tested on most exams and this material should not be glossed over. Make sure you pass your exam with our money back GreenLight exam pass guarantee.

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The Securities Institute of America, Inc.

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