Fidelity COO Robert Reynolds called 12b-1 fees "fair" and necessary in order to cover distribution costs. He made the remarks last week at Reuters Fund Summit in Boston.

"Saying that 12b-1 fees are bad and should be done away with is an oversimplification of the system," Reynolds said. "There's no free lunch anywhere."

Reynolds also said that fund managers' pay is not shareholders' or anyone else's business. "People who read People may care about what someone makes, but they should care about what they pay for [their] investment vehicle," Reynolds said. Further, Reynolds went on to say, companies with a policy of disclosing their portfolio managers' pay, might have a hard time attracting top talent. But Massachusetts' top regulator William Galvin begged to differ. "Compensation is important. Investors are entitled to that information," he said.

Copyright 2004 Thomson Media Inc. All Rights Reserved.

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