Conclusion. (The Mutual Fund Distribution Expense Mess‪)‬

Rule 12b-1 stands as a monument to the law of unintended consequences. The benefits that 12b-1 fees supposedly would confer remain unrealized, yet the revenues generated under the rule have grown impressively over the years. Any objective analysis of winners and losers under the SEC's 12b-1 regime will show that fund sponsors are doing very well. The distribution system they administer consumes huge sums of money to generate new sales, thereby enriching fund sponsors, but offers no net pecuniary gains to shareholders who pay much of the tab. As the game's big winners, fund sponsors have a vested interest in keeping the game going. The value of the status quo to others, like fund shareholders, is more dubious. There is no reason to assume prompt action will be forthcoming. Self-congratulation, not self-criticism, is the order of the day in the fund industry and at the SEC. Consider the following recent colloquy between two former SEC Investment Management Division Directors, both of whom currently represent mutual fund industry clients: