Definition: A fee that is charged by some mutual funds, which is used to pay marketing, distribution, and service costs, and is paid to the broker. The Financial Industry Regulation Authority (FINRA) allows funds to charge as much as 1.00% annually as a 12b-1 fee.
Also Known As: trailing commissions, hidden fees
Examples:
Class B and C share mutual funds generally charge the maximum 1.00% 12b-1 fee, while no-loads typically do not charge a 12b-1 fee. Since the fee is deducted from the NAV of the fund, many investors consider it a hidden fee.
Read more about mutual fund fees: Understanding Mutual Fund Fees