# 12B-1 Fee By [Jacqueline](https://paragraph.com/@jacqueline-18) ยท 2022-07-28 --- 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](https://www.investopedia.com/terms/e/expenseratio.asp). 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](https://www.investopedia.com/terms/i/investmentcompanyact.asp). 0 seconds of 0 secondsVolume 75% 1:33 #### 12b-1 Fee Understanding 12B-1 Fees ------------------------ Back in the early days of the [mutual fund](https://www.investopedia.com/terms/m/mutualfund.asp) 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](https://www.investopedia.com/terms/e/economiesofscale.asp). 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](https://www.investopedia.com/terms/s/sec.asp) (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 Down --------------------- The 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 Shares ---------------------------------- [Class B](https://www.investopedia.com/terms/c/classbshares.asp) and [class C](https://www.investopedia.com/terms/c/cshare.asp) shares of broker-sold funds typically have 12b-1 fees, but they may also be charged on [no-load mutual fund](https://www.investopedia.com/terms/n/no-loadfund.asp) shares and class A broker-sold shares. [Class A shares](https://www.investopedia.com/terms/c/classashares.asp), which usually charge a [front-end load](https://www.investopedia.com/terms/f/front-endload.asp) but no [back-end load](https://www.investopedia.com/terms/b/back-end-load.asp), 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. --- *Originally published on [Jacqueline](https://paragraph.com/@jacqueline-18/12b-1-fee)*