May 6, 2004
This rule, if adopted, would put the small investor well out on a limb. Currently, if a registered representative is contacted for service by a client who made a small mutual fund deposit several years ago, their portion of the 12b1 fees can at least provide them some compensation for serving that customer. Without that, why would any registered representative want to spend any time helping these smaller customers. If the registered representative who sold the mutual fund isnt interested in helping, who would be...another registered representative who is interested in moving the money to a new mutual fund so they can earn a brand new commission at the customers expense? Or, how about the representative who sold it originally moving it to another mutual fund just to generate a new commission to pay them for serving the customer. Is that in the customers best interests? Hardly, but you must agree that representatives have to be paid for the service they provide their customers.
The commission representatives earn up front, is compensation for working with the client, determining risk levels and financial goals, and then identifying appropriate investments. It does not compensate representatives for work done after that. In fact, there is no legal obligation for any representative to help any customer once the mutual fund has been purchased.
Doing away with the 12B1 fees will create worse problems than we have with it the way it is now.
If there are abuses with the 12b1 fee, then find ways to discourage the abuse, dont do away with the fee that compensates representatives for helping the smaller clients...that makes no sense at all.
Legislators and government officials are continuously accused of passing rules that make no sense. Here is your chance to refute that allegation.
Thanks