WASHINGTON – U.S. Senators Peter G. Fitzgerald (R- Illinois), Carl Levin (D-Michigan), and Susan Collins (R-Maine) introduced a bill on Feb. 9 that could do away with 12b-1 fees, which permit mutual funds to debit shareholders' account to pay distribution expenses. The Mutual Fund Reform Act of 2004 would repeal SEC Rule 12b-1, which has been in place since 1980. The Senators say the original theory behind Rule 12b-1 was that it would help funds to increase their size so that cost savings from economies of scale could be passed along to investors. Testimony at various subcommittee's hearings showed, however, that Rule 12b-1 has been "a bonanza for brokers and advisors but has not succeeded in lowering fund costs for shareholders," said the bill's sponsors. Further testimony revealed that nearly two-thirds of 12b-1 fees are paid to brokers and some are as high as 1 percentage point per year. The bill does not prohibit distribution expenses or sales charges, the sponsors said. "There's nothing wrong with an honest load, but funds should call a load a load, make it account-based, and not disguise it as a permanent asset- based distribution fee," said the sponsors in a statement.