The proposals suggest letting brokerages decide how much to charge for upfront sales loads in the hope of creating price competition, and would limit ongoing sales charges to the equivalent of the upfront sales charges, rather than let funds charge them for as long as an investor holds a fund's shares.

They would also cap 12b-1 fees at 0.25% of assets, and rename the fees as marketing and service fees.

But the plans do not cover revenue sharing-when a fund pays a percentage of its fees to a broker as part of the sales agreement. The details of such agreements are often very hard, if not impossible, to find beyond a general footnote in fund documents. The problem, say critics, is that if 12b-1 fees and sales loads are capped, then revenue-sharing agreements might be used to make up the difference.

"This issue reminds me of the game Whac-A-Mole," said Andy Rachleff, chief executive of kaChing, a Web site that matches investors with fund managers. "If they're going to cap 12b-1 fees, it's only going to mean [those charges] appear somewhere else."

Rachleff and others question why the SEC is taking steps to limit some fees and make them clearer to investors, but is leaving untouched one of the murkiest parts of fund fee charges.

The SEC isn't blind to the issue. In a footnote to its July 21 proposals, the agency admits that revenue sharing is a problem and that it's continuing to consider further rule amendments related to revenue sharing.

"Regulators are playing catch-up [with responsibilities imposed by the new rules] and they're trying to figure out how they can deal with them," said Barbash.

The result of this uncertainty is a set of proposals that attempts to improve the fee situation for investors, but which some argue doesn't do enough.

"This reform seems to approach the issue through the back door," Blaine Aikin, chief executive of Fiduciary360, said of the SEC's proposals.

Aikin said he would like to see full transparency and simplification of all types of fund fees. But even if the SEC had such a vision, he believes that the investment-management industry is too set against such a change.
Copyright © 2010 Dow Jones & Co. Inc.

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