Under the Investment Company Act of 1940, SEC Rule 12b-1 allows a fund to charge distribution and sales expenses to net assets as a percentage of the total assets. Normally, the cost of distribution of the shares is paid by the underwriter out of the sales load paid by the individual purchaser. For a fund to impose 12b-1 charges, which of the following conditions apply(ies)?
I. The board of directors has sole approval authority.
II. The majority of the outstanding shares has sole approval authority.
III. Both the board and the majority of outstanding shares must approve it.
IV. A distribution plan must be written.
A) III and IV.
B) I only.
C) I and III.
D) II and III.
Answer: A) III and IV.