The SEC recently released a no-action letter in which it allowed Capital Group’s American Funds to launch “clean shares,” an arrangement under which brokers, and not the fund itself, would set the commission rates on fund shares pursuant to certain conditions. Under the 1940 Act mutual funds, but not intermediaries that distribute fund shares, are permitted to set sales loads and distribution fees. A 1940 Act rule states that neither a fund, nor its underwriter, nor “dealers” may sell mutual fund shares at other than the current public offering price stated in the fund prospectus. Capital Group argued in its no-action request that a broker, acting solely in its capacity as agent for an investor, would not be acting as a “dealer” under the 1940 Act and therefore could charge transaction fees or commissions to its customers on clean shares without violating the 1940 Act provision. The SEC’s guidance gives five conditions that must be met for a broker to charge transaction fees on clean shares transactions. The no-action letter comes as the industry seeks solutions to allow continued sales of mutual fund shares under the DOL Fiduciary Rule. Certain funds are launching new share classes, including T shares which generally charge a sales load that is lower than other existing share classes and may charge Rule 12b-1 fees and sub-transfer agency or shareholder servicing fees. In contrast, the SEC’s no-action letter is clear that clean shares may not be sold with “any front-end load, deferred sales charge, or other asset-based fee for sales or distribution.”