Distribution [and/or Service] (12b-1) Fees

{
  "id": "MLC-T-FIN-000122",
  "term": "Distribution [and/or Service] (12b-1) Fees",
  "field": "Finance and investing",
  "definition": "This category of fees is often simply called 12b-1 fees based on the SEC rule that authorizes a fund to charge them. The rule permits a fund to pay these fees out of fund assets only if the fund has adopted a plan (“12b-1 plan”) authorizing their payment.\n\nSo-called 12b-1 fees are paid out of fund assets to cover the costs of distribution and sometimes shareholder services. Typically, 12b-1 fees apply to mutual funds but not to ETFs.\n\nDistribution fees cover the marketing and selling of fund shares, such as compensating brokers and others who sell fund shares. These fees also pay for advertising, printing and mailing prospectuses to new investors, and for printing and mailing sales literature.\n\nShareholder service fees compensate individuals who respond to investor inquiries and provide investors with information about their investments. Shareholder service fees can also be paid outside of 12b-1 fees.",
  "references": [
    "SEC Investor.gov Glossary"
  ],
  "url": "https://mlchart.com/terminology/finance/distribution-and-or-service-12b-1-fees/"
}