An Idea Whose Time Has Come: Should the SEC Rid Mutual Fund Investors of 12b-1 Fees?

Journal of Indexes, Vol. 11, No. 3, pp. 42-45, March/April 2008

5 Pages Posted: 22 Jun 2009 Last revised: 2 Mar 2017

See all articles by John A. Haslem

John A. Haslem

University of Maryland - Robert H. Smith School of Business; University of Maryland - Robert H. Smith School of Business

Date Written: May 20, 2015

Abstract

The stated and objective empirical findings in this study (and others) are generally consistent. There is no evidence that mutual fund shareholders benefit from Rule 12b-1 plans, which provide a serious conflict of interest.

The promise that 12b-1 fees would be used to increase mutual fund assets and thereby lower fund shareholder expenses appears to have been a cynical industry effort to gain SEC approval, while the intended beneficiary was (and is) fund management - and what a bonanza it has been.

The opportunity to prohibit 12b-1 fees, as both abusive and costly conflicts of interest to mutual fund shareholders, will never be better than now. The major question is not whether Chairman Cox is determined to prohibit or drastically change 12b-1 fees for the better, but, rather, if he will be able to prevail over the opposition of the industry and its Washington supporters.

Keywords: mutual funds, 12b-1 fees, expenses, conflicts, regulation, Cox, fund industry

JEL Classification: G2, G23, G28

Suggested Citation

Haslem, John A. and Haslem, John A., An Idea Whose Time Has Come: Should the SEC Rid Mutual Fund Investors of 12b-1 Fees? (May 20, 2015). Journal of Indexes, Vol. 11, No. 3, pp. 42-45, March/April 2008, Available at SSRN: https://ssrn.com/abstract=1422245

John A. Haslem (Contact Author)

University of Maryland - Robert H. Smith School of Business ( email )

5901 MacArthur Blvd NW 124
Washington, DC DC 20016
United States
202-236 3172 (Phone)

University of Maryland - Robert H. Smith School of Business ( email )

College Park, MD 20742
United States
202-387 2025 (Phone)

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