Compliance June 2, 2009

Schapiro Asks Staff to Recommend Changes to 12b-1 Fees

Mary Schapiro, Securities and Exchange Commission (SEC) chairman, told the Senate Appropriations Committee’s Subcommittee on Financial Services and General Government today that she has asked the SEC staff to prepare a recommendation to change Rule 12b-1.

Reported by

Alison Cooke

“These fees, with their bureaucratic sounding name and sometimes unclear purpose, are not well understood by investors. Yet in 2008, Rule 12b-1 was used to collect over $13 billion in investors’ funds out of fund assets,” she told the subcommittee in her testimony.

“It is essential, therefore, that the SEC engage in a comprehensive re-examination of Rule 12b-1 and the fees collected pursuant to the rule,” Schapiro continued. “If issues relating to these fees undermine investor interests, then we at the SEC have an obligation to step in and adjust our regulations.”

Target-Date Funds

Schapiro also reiterated earlier comments that the SEC, along with the Department of Labor, will be reviewing target-date funds and their disclosures and asset allocations (see “12b-1 Fees, Target-Date Funds to Get SEC Attention“).

“Among other issues, we will consider whether the use of a particular target-date in a fund’s name may be misleading or confusing to investors and whether there are additional controls the SEC should impose to govern the use of a target date in a fund’s name,” she said.