Groups File Petition to End SEC Crackdown on 12b-1 Fees

"When the stay-at-home orders are finally lifted, American businesses will need to know that the law is what is says, and not what the SEC, years later, decides unilaterally what it should have been," the groups said.

The groups maintain that the SEC has waged a "thirty-year effort to effectively outlaw Rule 12b-1 fees, and the amnesty program which followed. For decades, mutual funds have used 12b-1 fees to compensate financial advisers for ongoing sales and marketing assistance. And (despite the SEC's efforts to the contrary) no statute or rule changed the manner in which those fees were disclosed."

The SEC, the groups said, "has recently turned to 'guidance,' coupled with 'voluntary' self-reporting programs for those in 'violation' of the 'guidance,' and punitive enforcement actions for past conduct for those who didn't turn themselves in."

These measures have been undertaken without the notice or public participation that Congress requires for regulatory changes of this type, the groups argue.

Helgi Walker, a partner at Gibson Dunn and lead counsel on the petition, stated that "It is time for the SEC to follow the rulemaking procedures that the people's elected representatives in Congress have prescribed. Investment advisers, like all Americans, have a right to be bound only by duly enacted statutes and the regulations lawfully promulgated under them—and, most importantly, to know what the law is before the SEC brings its enormous enforcement arsenal to bear."

— Related on ThinkAdvisor:

• RBC to Pay $3.9M for Share Class Violations
• SEC Hits Merrill Over 12b-1 Fees
• SEC's Avakian Details Next 12b-1 Fee Crackdown