Number: RL32477
Title: Social Security: The Public Servant Retirement Protection Act (H.R. 2772/S. 1647)
Authors: Laura Haltzel, Domestic Social Policy Division 
Abstract: In a February 2004 proposal, the SEC asked for public comment on the need for additional changes to Rule 12b-1. Among other things, it proposed requiring distribution-related costs to be directly deducted from individual shareholder accounts rather than from aggregate fund assets, potentially benefitting investors by giving them a more direct and thus a better understanding of sales charges. But critics say the proposal would result in investor's accounts eventually paying smaller nominal amounts as they age, giving broker-dealers added incentive to churn the accounts. There are additional concerns that the proposal might result in complicated record-keeping burdens and added tax liabilities for investors. The 2004 proposal, also asked for public comment on whether Rule 12b-1 should be repealed. But critics responded that the plans are ingrained in the financial system and repeal could mean reduced service for small investors by brokers and a shift to front-end loads, which do have the benefit of greater visibility relative to 12b-1 fees. In the spring of 2007, SEC Chairman Cox announced that due to the perception that 12b-1 fees had strayed beyond their original intent, the agency would be reexamining 12b-1 during the year. To help in its deliberations, the agency sponsored a 12b-1 roundtable during June 2007 in which a variety of differing perspectives were voiced on the fees' merits.
Pages: 24
Date: July 9, 2007