Thursday, July 16, 2009

SEC to Review Rule on Mutual Fund Distribution Expenses

In her July 14, 2009, testimony before a U.S. House of Representatives Financial Services subcommittee, SEC Chairman Mary Schapiro outlined the SEC agenda for addressing the financial crisis.

The agenda includes, amongst other things, a review of Rule 12b-1 under the Investment Company Act of 1940, which permits registered open-end management investment companies to use fund assets to finance expenses connected to the distribution of mutual fund units to investors. These expenses, which include broker-dealer and intermediary service fees, amounted to more than $13 billion in 2008.

The SEC plans to examine the impact Rule 12b-1 has on investor interests in practice, and is expected to consider the need for adjustments to current regulation.

In her testimony, Ms. Schapiro also reiterated her support for the Obama Administration's recommendation that advisers to hedge funds and other private investment funds be required to register with the SEC under the Investment Advisers Act of 1940.