WASHINGTON, D.C. -- Regulation of mutual fund distribution practices "can't be left to stand'' as it is, Securities and Exchange Commission chairman Mary L. Schapiro said Friday.

"I continue to believe the regulatory regime surrounding mutual fund distribution in general and 12b-1 in particular really can't be left to stand. We need to tackle this issue,'' she told mutual fund executives gathered for the General Membership Meeting of the Investment Company Institute.

The SEC received 2,400 comment letters, she acknowledged, on its proposal to replace rule 12b-1, created originally under the Investment Company Act in 1940.

"Not all of them supportive,'' noted ICI president and CEO Paul Schott Stevens.

"But we're used to that," said Schapiro.

The comment letters, she said, "have raised some important issues for us to be looking at with respect to 401K plans, the ability to preserve for investors options in how they pay for their services, disclosure issues and a desire to create competitive pricing in a way that really benefits investors."

The 12b-1 rule has permitted mutual funds to use fund assets to pay for the cost of promoting sales of fund shares.

The new rule and amendments would continue to allow funds to bear promotional costs within certain limits, and would also preserve the ability of funds to provide investors with alternatives for paying sales charges (e.g., at the time of purchase, at the time of redemption, or through a continuing fee charged to fund assets).

But, unlike the current rule 12b-1 framework, the proposed rules would limit the cumulative sales charges each investor pays, no matter how they are imposed.

"We did get a lot of comment letters. A lot of them were not wholly endorsing our approach,'' said Schapiro.

 But, she said, no further action by the SEC is going to take place until at least this summer, "once we get through the large bulk of the 100 rule-makings" that it is working on as part of its responsibilities to carry out terms of the Dodd-Frank Wall Street Reform Act, passed last July.

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