Series 7 practice questioneasyPackaged Products — Mutual Funds
12b-1 fees are used to cover which of the following?
- AFund manager compensation only
- BLegal and auditing costs
- CCustodial fees for holding securities
- DMarketing and distribution expenses of the fund✓ Correct answer
Explanation
Why D — Marketing and distribution expenses of the fund
12b-1 fees, named after the SEC rule that authorizes them, are annual charges deducted from fund assets to pay for marketing, distribution, and sometimes shareholder servicing expenses. Under FINRA rules, 12b-1 fees cannot exceed 0.75% for distribution and 0.25% for shareholder services, for a combined maximum of 1.00%.
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