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Share Class Conversions Underway, Could Mean Lower Fees for Advisers

InvestmentNews and Barron’s are reporting that fund advisers, including BlackRock, Morgan Stanley and Fidelity, over the coming months will convert some funds’ Class C shares to Class A shares, which tend to be more economical for investors. The move is likely tied to the SEC’s recent share class disclosure initiative and efforts to avoid liability amid increased scrutiny of disclosures of fund fees and compensation arrangements. The migration to Class A shares could result in reduced fee revenues for fund advisers since Class A shares carry lower Rule 12b-1 fees than Class C shares. The reports say the conversion plans affect Class A shares with waived sales loads and Class C Shares of the same fund held seven to ten years with high 12b-1 fees and no upfront sales loads.

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