Setting redemption fees in compliance with the Securities and Exchange Commission's new Rule 22c-2 is going to cost the mutual fund industry $617.5 million over the next three years, a new report from TowerGroup shows.

Although it does not automatically require funds to establish redemption fees, Rule 22c-2 requires boards of all funds - except money market, exchange-traded and funds specifically designed for active trading - to at least vote on whether redemption fees of up to 2% for shares exchanged within seven days would deter market timing. Funds that decide to establish a redemption fee must then set up policies with intermediaries to obtain shareholder trading information on a regular, consistent basis.

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