Change in mutual fund fees in works

The staff of the Securities and Exchange Commission is working on a proposal that would change the way that mutual funds use and disclose fees paid by funds to market their shares, an SEC official said Thursday.

So-called 12b-1 fees are taken out of a fund’s assets, reducing the value of its shares, and are used to pay brokers to promote the fund. Critics say the fees no longer serve their original purpose, which included creating economies of scale to reduce expenses paid by shareholders.

The SEC, which began reviewing 12b-1 fees this year, has received more than 1,400 comments. Most urge the agency not to repeal the fees, saying doing so would harm investors who need financial advice from those who sell fund shares.

Andrew Donahue, director of the SEC’s investment management office, called the review of fund fees a high priority but said he couldn’t say whether the SEC staff’s proposal would be ready by the end of the year.