Press Releases

Release Date: June 19, 2007
Contact:
Melissa Buden, 917-456-2360, Mbuden@sifma.org

SIFMA Provides White Paper for SEC Roundtable on Rule 12B-1

New York, NY, June 19, 2007 – The Securities Industry and Financial Markets Association (SIFMA) has prepared a white paper on the history and purpose of Rule 12b-1 under the Investment Company Act of 1940.  Rule 12b-1 permits mutual funds to use fund assets to finance the distribution of their shares.  The white paper has been provided to the Securities Exchange Commission (SEC) as background material for panelists participating in a roundtable event on Rule 12b-1 being held today in Washington D.C. by the SEC.

“While we appreciate the SEC’s efforts to undertake a review of Rule 12b-1, we ultimately believe that the rule is important to both firms and investors,” points out Ira Hammerman, senior managing director and general counsel for SIFMA.  “For broker-dealers and other intermediaries, 12b-1 plans support important marketing, advertising, and administrative and shareholder servicing functions.”

“Since its inception,” Hammerman explains, “the rule has been instrumental in helping open the financial markets to millions of investors, who today hold many varieties of well-diversified and reasonably priced mutual funds.”

Hammerman adds, “The fees provided for under Rule 12b-1 are both warranted and critical, and the safeguards provided pursuant to the rule ensure that these fees are reasonable, thereby protecting investors from any potential abuse.  We hope that this panel, and subsequently the SEC, will conclude that this important rule needs to be preserved.”

The Roundtable panels intend to cover the following topics:

• The historical circumstances that led to the promulgation of Rule 12b-1, and the original intended purpose of the rule;
• The evolution of the uses of Rule 12b-1 and the rule's current role in fund distribution practices;
• The costs and benefits of the current use of Rule 12b-1; and
• The options for reform or rescission of Rule 12b-1.

Roundtable panelists affiliated with SIFMA member firms include Martin Byrne of Merrill Lynch, John Morris from Charles Schwab and Michael Sharp from Citigroup.

Dialogue on this topic will continue, and comment letters can be submitted to the SEC on the issue until July 19^th, 2007. 

The full content of the white paper can be found at the following link: http://www.sifma.org/regulatory/pdf/12b-1MFWhitePaper6-13-07.pdf. 

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The Securities Industry and Financial Markets Association brings together the shared interests of more than 650 securities firms, banks and asset managers. SIFMA's mission is to promote policies and practices that work to expand and perfect markets, foster the development of new products and services and create efficiencies for member firms, while preserving and enhancing the public's trust and confidence in the markets and the industry. SIFMA works to represent its members’ interests locally and globally. It has offices in New York, Washington D.C., and London and its associated firm, the Asia Securities Industry and Financial Markets Association, is based in Hong Kong.