Compliance May 29, 2007

SEC to hold Rule 12b-1 Roundtable

May 29, 2007 (PLANSPONSOR.com) - The Securities and Exchange Commission (SEC) has announced plans to host a June 19 roundtable discussion about Rule 12b-1 under the Investment Company Act of 1940, which allows mutual funds to use fund assets to finance the distribution of their shares.
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According to an SEC  news release , the discussion will cover:

  • the historical circumstances that led to the promulgation of Rule 12b-1 and the original intended purpose of the rule;
  • the evolution of the uses of Rule 12b-1 and the rule’s current role in fund distribution practices;
  • the costs and benefits of the current use of Rule 12b-1; and
  • the options for reform or rescission of Rule 12b-1.

A final agenda and list of participants and moderators will be published closer to the date of the roundtable. The roundtable will begin at 9:00 a.m., e.d.t., and will be held in the auditorium at the Commission’s headquarters. The roundtable will be open to the public with seating on a first-come, first-served basis. Doors will open at 8:30 a.m., and visitors will be subject to security checks. The roundtable discussion also will be available via Web cast on the Commission’s Web site at www.sec.gov .

“When the Commission adopted Rule 12b-1 more than a quarter century ago, the idea was that 12b-1 fees would be a temporary solution to address specific distribution problems, as they arose. But today’s uses of 12b-1 fees have strayed from the original purposes underlying the rule, and it is time for a thorough re-evaluation,” said SEC Chairman Christopher Cox. “This roundtable will help us review current uses of 12b-1 fees, how those fees impact retail investors, and the interests and concerns of independent directors, who must approve 12b-1 plans. The roundtable also will help us identify and evaluate the possibilities for reforming Rule 12b-1.”

According to the SEC, members of the public interested in submitting their input can use:

Send paper submissions in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, N.E., Washington, DC 20549-1090.

All submissions should refer to File Number 4-538. This file number should be included on the subject line if e-mail is used. To help process and review your submissions more efficiently, please use only one method.

SEC officials signalled the discussion about fees in comments made earlier this year. (See “ SEC Turning its Attention to 12b-1, 401(k) Disclosures .”)

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