CHAIRMAN BREEDEN IS ASKED TO REPORT TO CONGRESS ON ISSUES RAISED BY 12B-1 AND OTHER MUTUAL FUND FEES

April 2, 1992 TO: SEC RULES COMMITTEE NO. 18-92 AD HOC TASK FORCE ON RULE 12b-1 ISSUES RE: CHAIRMAN BREEDEN IS ASKED TO REPORT TO CONGRESS ON ISSUES RAISED BY 12b-1 AND OTHER MUTUAL FUND FEES __________________________________________________________ In a recent letter to SEC Chairman Richard Breeden, the Chairman of the House Committee on Energy and Commerce, John Dingell, requests that Mr. Breeden provide the Committee by April 24, 1992 with a report on "what action, if any, the Commission proposes to take to address the issues raised by run away mutual fund fees." A copy of the letter is attached. The letter notes that the Energy and Commerce Committee is looking into concerns that have been raised over "escalating" mutual fund fees. It refers to a 1986 inquiry by Mr. Dingell regarding industry practices and SEC staff positions with repect to Rule 12b-1, and the Commission's response that the staff at that time was considering proposing certain disclosure requirements and/or changes to Rule 12b-1 and Form N-1A. The letter further cites recent press reports indicating that (1) mutual fund fees have continued to increase over the past decade despite the achievement of economies of scale and (2) the staff has been studying the effects of 12b-1 fees for five years but has not yet recommended any changes to the Commission, nor has the Commission acted on the NASD's 1990 proposal to cap 12b-1 fees. We will keep you informed of developments. Frances M. Stadler Assistant General Counsel Attachment