The Securities and Exchange Commission (SEC) has made a point in cracking down on 12(b)-1 fees in mutual funds and exchange traded funds (ETFs), but the fight against the fees has been dealt a major setback.
The U.S. District Court for the Northern District of California has ruled to dismiss claims made against Franklin Templeton, writes Beagan Wilcox Volz for Ignites. Eaton Vance and Oppenheimer, both with similar cases, are in earlier stages of litigation.
The plaintiffs claim the fund firms’ affiliated distributors are making improper 12(b)-1 payments to broker-dealers, arguing that this violates federal securities law and a 2007 D.C. circuit ruling in Financial Planning Association vs. SEC – the ruling states that asset-based compensation cannot be received by brokers from mutual fund shares placed in non-advisory accounts. [What Are 12(b)-1 Fees?]
Additionally, plaintiffs are trying to convince the courts that the 12(b)-1 payments are in violation of SEC compliance rules. [The SEC Takes Aim at 12(b)-1 Fees in ETFs.]