Question of the Week

When an investor reads that a mutual fund charges 12(b)-1 fees, he/she should be aware that:

I. All investors in the fund pay these fees, based on their assets, on a quarterly basis.
II. New investors pay these fees as Class "A" share fees.
III. 12(b)-1 fees are asset-based distribution fees and may only be used to pay for costs of distributing mutual fund shares and are characterized as "level load."
IV. The money collected from 12(b)-1 fees may be used to pay for the fund's management expenses.

a) I, III
b) II, IV
c) II,III
d) I,IV


Answer:

The correct answer is a.

Statement III describes the nature of 12(b)-1 fees. They are named after the SEC regulation that created them in 1980. These fees must be reasonable and may only be used for distribution costs. They are not intended to pay management costs.



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  1.

    Where can I look for a financial planner?

    References from trusted friends or family members can help you find a financial planner; however, keep in mind that your friends' financial situations and goals may differ from yours and, therefore, their planners won't necessarily be the best fit for you.The Certified Financial Planner (CFP) Board of Standards certifies financial planners and maintains an online list of certified financial planners on its CFP Board of Standards website.
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    Where do most fund managers get their market information?

    Many fund managers, whether they manage a mutual fund, trust fund, pension or hedge fund, have access to resources that the "average Joe" investor does not, but the type and quality of information generally remains the same for all investors. The information that managers use comes from publicly available information in the form of news releases, annual reports and filings with pertinent exchanges.