what is a 12b 1 fee 
a 12b 1 fee is an annual marketing or distribution fee on a mutual fund the 12b 1 fee is considered to be an operational expense and as such is included in a fund s expense ratio it is generally between 0 25 and 0 75 the maximum allowed of a fund s net assets the fee gets its name from a section of the investment company act of 1940 understanding 12b 1 feesback in the early days of the mutual fund business the 12b 1 fee was thought to help investors it was believed that by marketing a mutual fund its assets would increase and management could lower expenses because of economies of scale this has yet to be proven with mutual fund assets passing the 10 trillion mark and growing steadily critics of this fee are seriously questioning the justification for using it today the 12b 1 fee is mainly used to reward intermediaries for selling a fund s shares as a commission paid to salespersons it is currently believed to do nothing to enhance the performance of a fund in 2015 the securities and exchange commission sec began examining the use of 12b 1 fees to determine if the rules for charging these fees are being adhered to and the presence of such fees is being properly disclosed 12b 1 fee broken downthe 12b 1 fee can be broken down into two distinct charges the distribution and marketing fee and the service fee total 12b 1 fees charged by a fund are limited to 1 annually the distribution and marketing piece of the fee is capped at 0 75 annually while the service fee portion of the fee can be up to 0 25 use of 12b 1 in broker sold sharesclass b and class c shares of broker sold funds typically have 12b 1 fees but they may also be charged on no load mutual fund shares and class a broker sold shares class a shares which usually charge a front end load but no back end load may come with a reduced 12b 1 expense but normally don t come with the maximum 1 fee class b shares which typically carry no front end but charge a back end load that decreases as time passes often come with a 12b 1 fee class c shares usually have the greatest likelihood of carrying the maximum 1 12b 1 fee the presence of a 12b 1 fee frequently pushes the overall expense ratio on a fund to above 2 the calamos growth fund is an example of a fund that carries a smaller 0 25 12b 1 fee on its class a shares and charges the maximum 1 12b 1 fee on its class c shares 