Discuss Finra Series-6 Exam Topic 8 Question 20

A fund's 12b-1 fees may not be used to pay which of the following?

Aprinting prospectuses

Bcompensating brokers who sell shares of the fund

Cmailing sales literature to existing and prospective customers

Dadministrative expenses of the fund's investment adviser

Suggested Answer: D

A fund's 12b-1 fees may not be used to pay the administrative expense of the fund's investment adviser. This would be part of the fund's management fees. SEC rule 12b-1 authorizes a fund to pay for distribution costs out of a fund's assets only if the fund has adopted a 12b-1 plan. The SEC defines these distribution costs to include the costs of marketing and selling the fund shares, including compensating brokers who help to sell the shares, and printing and mailing prospectuses and sales literature to existing and prospective customers.

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11 comments · newest first

Sophia 1 year ago

They definitely can’t pay brokers, that’s a no-go!

Jade 1 year ago

I thought 12b-1 fees were more flexible than that.

Louisa 1 year ago

Wait, can they really not pay for printing prospectuses?

Curt 1 year ago

Totally agree, it's all about marketing costs!

Barb 1 year ago

12b-1 fees can't cover administrative expenses.

Penney 1 year ago

I practiced a question similar to this, and I think printing prospectuses is definitely not covered by 12b-1 fees.

Octavio 1 year ago

I remember something about not using 12b-1 fees for administrative expenses, but I can't recall the specifics.

Venita 1 year ago

I think 12b-1 fees can be used for compensating brokers, but I'm not sure about the other options.

Penney 1 year ago

I’m a bit confused; I thought mailing sales literature was allowed, but now I’m questioning that.

Emily 1 year ago

I feel pretty confident about this one. The question is asking about the ad size, and the code snippet specifies "BANNER", so the correct answer is likely one of the banner-related options provided.

Shenika 1 year ago

Easy peasy! Environmental laws are all about controlling and eliminating pollution and environmental damage. Option D covers it all, so that's my pick.

Finra Series-6 Exam - Topic 8 Question 20 Discussion