Alert September 11, 2012

Mutual Funds Should Consider Accelerating Filings in Advance of Substantial Increase in SEC Registration Fee Rate

Securities registration fee rates for mutual funds registered under the Investment Company Act of 1940 (the “1940 Act”) will be increasing more than 19%, effective October 1, 2012.  The Dodd-Frank Act created new annual collection targets for the SEC’s fiscal year 2012 and thereafter (the statutory target for fiscal year 2013 is $455 million).  It also changed the date by which the SEC must announce a new fiscal year’s fee rate (August 31) and the date on which the new rate takes effect (October 1).  Because mutual fund registration fees are calculated based on the rate that is in effect on the date of their annual fee filing, funds may be able to achieve significant cost savings by filing before 5:30 p.m. ET on Friday, September 28, 2012.

Securities Registration Fees for Investment Companies. Section 6(b) of the Securities Act of 1933 (the “1933 Act”) requires the SEC to collect fees from issuers registering their securities offerings.  Normal operating companies are generally permitted to register only a fixed number of shares and pay fees at the time of registration.  In contrast, mutual funds may register an indefinite number of securities because they offer shares on a continuous basis.

Section 24(f)(2) of the 1940 Act permits mutual funds to pay their registration fees once annually based on the net sales price of the securities sold during the previous fiscal year (i.e., net of redemptions).  Pursuant to Rule 24f-2 under the 1940 Act, a mutual fund is required to file a Form 24F-2 accompanied by the registration fee within 90 days after its fiscal year end. The fee rate in effect at the time of filing Form 24F-2 applies to all securities sold during the fiscal year.

Under changes made by the Dodd-Frank Act, the annual rate changes for fees paid under Section 6(b) of the 1933 Act must take effect on the first day of the SEC’s next fiscal year, which is October 1.  Accordingly, under SEC filing rules, Form 24F-2 filings submitted to the SEC before 5:30 p.m. ET on Friday, September 28, 2012 will be subject to the current fee rate of $114.60 per million dollars.  Filings submitted after that time will be subject to the new fee rate of $136.40 per million dollars.

Accelerating Form 24F-2 Filings. In light of the more than 19% increase in the fee rate, a mutual fund that by virtue of the timing of its fiscal year-end is in a position to pay its registration fees should consider making its Form 24F-2 filing in advance of the effectiveness of the new fee rate.

Additional information on the fee rate increase is available on the SEC website at http://www.sec.gov/news/press/2012/2012-174.htm.