Q:
12b-1 fees in mutual funds, are known as “asset-based distribution charges,” and sometimes called “Class C” shares. These are fees that are taken from all investor assets on a quarterly basis. Which of the following must approve these fees initially?
I. A majority of the non-affiliated board members
II. A majority of the outstanding shareholders
III. A majority of the fund’s board of directors
IV. A majority of the fund’s board of directors, including a majority of the non-affiliated board members
a) I, III, IV
b) II, III
c) I, II, IV
d) II, IV
A:

The correct answer is b.
To initiate 12b-1 fee charges in a mutual fund, there must be a majority vote by the full board of directors and a majority vote of the outstanding shares (shareholders cast the votes--the shares vote). It is not necessary to have a majority of the non-affiliated board members approve the initiation of these fees. Side note: to continue 12b-1 fees, the charter of the fund may stipulate that either a majority vote of the board or the shareholders is all that is required.


RELATED FAQS

  1. Is a financial advisor required to have a degree?

    Discover the minimum educational requirements and financial licenses needed to become a financial advisor in the modern corporate ...
  2. If I have only a limited amount of time to study for the Series 6, what should I ...

    Learn what to focus on when studying for the Series 6 while reviewing important aspects of the exam, including its content ...
  3. What role does the 'chip cycle' play in the electronics sector?

    Read about some of the best and most popular test prep classes for the Series 6 FINRA securities licensing exam, including ...
  4. What does passing the Series 6 enable me to do?

    Learn more about the Series 6, what the examination and license are and what the license enables an individual to buy, sell ...
RELATED TERMS
  1. Series 6

    A securities license entitling the holder to register as a limited ...
  2. Series 79

    A examination to ensure a candidate is qualified to become a ...
  3. Research Analyst

    A person who prepares investigative reports on equity securities. ...
  4. Series 34

    An exam required for individuals seeking to engage in off-exchange ...
  5. Financial Advisor

    One who provides financial advice or guidance to customers for ...
  6. Series 23

    An exam offered by the Financial Industry Regulatory Authority ...
Hot Definitions
  1. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  2. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  3. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  4. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
  5. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net ...
Trading Center