12b-1 fee defrays the cost of advertising and marketing a mutual fund and ETF paid to brokers who sell shares.
A 12b-1 fee is a fee paid from a mutual fund or ETF assets that covers distribution costs (marketing and selling mutual fund shares) and, in some cases, the cost of servicing shareholders. gets its name from SEC regulations authorizing the fund to collect them.
12b-1 Fees cover the marketing and distribution costs of the fund and other unitholder services that mutual funds provide to investors. These are the fees you charge. These fees can often be used to pay a commission to the broker who sells the fund.
Although the SEC does not limit the number of 12b-1 fees that a fund can pay, under FINRA rules, 12b-1 fees (not shareholder service fees) May be used to pay for marketing and distribution costs. Not to exceed 0.75% of the Fund's annual average net assets.
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