Fees paid to registered representatives for ongoing service to clients are a legitimate use of mutual fund assets and should not be prohibited, says the National Association of Insurance and Financial Advisors.
In comments filed with the Securities and Exchange Commission, NAIFA says elimination of certain brokerage commissions, called 12b-1 fees, would not only have a detrimental effect on the earnings of registered representatives, but would cause funds and their distribution channels to change their ways of doing business to the detriment of fund investors.
The issue involves an SEC proposal to prohibit the payment of 12b-1 fees as a means to combat directed brokerage abuses. 12b-1 fees are paid to registered representatives to finance distribution of mutual fund shares.
But NAIFA Senior Counsel Gary A. Sanders says that while NAIFA supports efforts to eliminate conflicts of interest, 12b-1 fees constitute legitimate and appropriate compensation for providing ongoing services to mutual fund owners.
Sanders notes that more than half of NAIFAs members are registered representatives who service mutual funds. They provide ongoing service to mutual fund investors beyond the commissions paid for the sale of fund shares, he says.