The percent of a mutual fund's assets used to defray marketing and distribution expenses, such as advertising and commissions paid to dealers. 12b-1 fees are named for the corresponding SEC rule, passed in 1980. A fund's prospectus outlines 12b-1 fees, if applicable. A true "no load" fund has neither a sales charge nor a 12b-1 fee.
Effective July 7, 1993, NASD placed two caps on the level of 12b-1 fees:
(a) An annual limit of 0.75 percent of a fund's assets. A 0.25 percent service fee may be paid to brokers or other sales professionals in return for providing ongoing information and assistance to investors.
(b) A rolling cap on total sales charges, to be calculated at 6.25 percent of new sales plus interest for funds that pay a service fee, and 7.25 percent plus interest for funds that do not pay a service fee.