12b-1 fees are applied to pay for distribution and servicing-related expenses of the mutual fund, and are subject to an annual limit on their size under Financial Industry and Regulatory Authority (FINRA) rules. 12b-1 fees are required to be disclosed to investors in the fee table of the fund’s prospectus.

In 2010, the SEC proposed new rules and disclosure requirements that, if adopted, would significantly change the existing regulatory framework governing distribution and servicing fees, and ongoing sales charges. The proposal has widespread implications not only for the mutual fund industry, but also for broker-dealers and other financial intermediaries that sell fund shares or service fund shareholder accounts.