June 17, 2007
In late 2005 or early 2006 when my Broker was being combined with another, a shareholder proxy vote was held for the money market sweep vehicle in my portfolio. One of the items was an increase in the 12b-1 fee to 0.45%. I voted no and a month or so later, I got a phone call saying I didn't vote and would I vote again which I did over the phone. The appropriate N-PX filing of 8/23/06 posted on the Internet does not mention the vote. (I complained to the SEC about this as I felt fraud had occurred but, to date, have not received a reply.)
The reason given for the increase was that the funds were needed for marketing. Why a very large 12b-1 fee would be needed for a money market fund used primarily as a sweep vehicle escapes me. Also, I don't think most shareholders would vote for such a proposal. I strongly suspect that the revenues raised are not used for marketing but are there to increase the Brokerage's bottom line.
For many reasons, too numerous to mention, I urge elimination of 12b-1 fees. If they are retained, the company should document how they were spent and any money not appropriately spent be returned to the Mutual Funds.