If a fund's 12b-1 fee exceeds 0.25%, which term may not be used?

• A. No-Load Fund
• B. Load Fund
• C. Balanced Fund
• D. Index Fund

Answer: (A)

The labeling of a mutual fund hinges on its ongoing distribution costs. No-load funds are allowed to advertise zero front-end charges and only minimal ongoing distribution fees, specifically a 12b-1 fee at or below 0.25%. When a fund’s 12b-1 fee exceeds 0.25%, that no-load designation becomes inaccurate, because there are ongoing costs tied to selling or distributing shares that investors would incur. Therefore, the term no-load fund may not be used in this situation. The fund would be described by its actual pricing amid distribution costs, rather than as a no-load option. The other terms relate to the fund’s investment strategy or category and don’t govern the no-load labeling in this context.