From the May 2009 issue of Boomer Market Advisor • Subscribe!

12b-1 fee reform dead (for now)

"As far as 12b-1 fees are concerned, it will go a long way if we just call them what they are, which are a fee for advice," OppenheimerFunds Chairman and CEO John Murphy told us last year. "They give people access to professional services that they could not otherwise afford. I don't think it will help anyone if we completely do away with them."

Looks like we won't have to worry, at least this year. On March 23, Andrew "Buddy" Donahue, director of the Securities and Exchange Commission's Division of Investment Management, announced the SEC would no longer actively pursue the repeal of or modifications to Rule 12b-1. Donahue told attendees at a recent Investment Company Institute gathering, "I believe that it would be wise in the current market environment, for us to defer consideration of rule 12b-1 reform for this year."

The Financial Services Institute has long held the position that Rule 12b-1 -- which authorizes mutual funds to use their assets to pay for marketing and distribution expenses -- provides fair compensation to financial advisors for providing middle-class Americans with critical support and guidance in planning to achieve important financial goals ranging from retirement to college funding for children to caring for aging parents. The organization has advocated for the retention of 12b-1 fees as an essential way of aligning the interests of financial advisors with the interests of their fund shareholder clients.

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