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12B-1 Plan

12B-1 Plan

What Is a 12B-1 Plan?

A 12B-1 plan is a plan structured by mutual fund companies for the distribution of funds through mediators. 12B-1 plans give planning to the partnerships among merchants and go-betweens who help to guarantee the sale of a fund. Sales commission schedules and 12B-1 distribution expenses are the primary parts driving a 12B-1 plan.

Grasping the 12B-1 Plan

12B-1 plans work with the partnerships among wholesalers and intermediaries offering mutual fund shares. 12B-1 plans are basically centered around open-end mutual funds, which have numerous class structures for sales charges and distribution expenses. Mutual fund companies consider two types of 12B-1 charges in their 12B-1 plans, sales commissions, and 12B-1 expenses.

Sales Commissions

Sales commission schedules are structured to give compensation to delegates to executing mutual funds. These partnerships can assist with expanding demand for funds by being marketed from a full-service broker-dealer who works with the transaction for a sales load fee. These fees are paid to the broker and are not associated with annual fund operating expenses.

Sales loads are structured to fluctuate across share classes. Share classes can incorporate front-end, back-end, and level-load sales charges. These sales charges are associated with individual retail share classes which normally incorporate Class A, B, and C shares.

12B-1 Expenses

12B-1 expenses paid from the mutual fund to merchants and middle people are likewise a key part of a 12B-1 plan. To market and convey open-end mutual fund shares, mutual fund companies work with wholesalers to get their funds listed with discount brokerages and financial advisor platforms. Wholesalers assist with funding companies partner with the full-service brokers that execute their funds at the settled upon sales load schedule.

Mutual fund companies will pay 12B-1 fees from a mutual fund to remunerate wholesalers. At times, funds may likewise be structured with a low-level load that is paid to financial advisors annually over the span of a financial backer's holding period.

Financial industry legislation commonly confines 12B-1 fees to 1% of the current value of the investment on an annual basis, however fees generally fall somewhere close to 0.25% and 1%. Much of the time, fund companies will have higher 12B-1 fees on share classes paying a lower sales charge, and lower 12B-1 fees on share classes with higher sales charges. This assists with offsetting the compensation paid to intermediary brokers while additionally accommodating payment to distribution partners.


Mutual fund companies are required to give full disclosure on their sales load schedules and 12B-1 annual fund expenses in the fund's prospectus. The prospectus is one part of documentation required for the mutual fund's registration and is additionally the key offering document giving data on the fund to investors. 12B-1 plans and any changes to their expense organizing must be approved by the fund's board of directors and amended in its prospectus documented with the Securities and Exchange Commission.