Mutual fund firms are taking steps to honor the Securities and Exchange Commission’s pending rule that will make it illegal to use commission money to pay brokerage firms for promoting their funds, Dow Jones Newswires reports.

Firms have until Dec. 13 to comply with the new ban on directed brokerage, as well as a sister mandate requiring them to have a formal policy against such actions. And the Commission says it will be checking everyone’s homework.

"The SEC will be looking for policies in place to ensure an information barrier between traders and distributors," Jennifer B. McHugh, advisor to the director at the Commission’s investment management division, told Dow Jones. "We will be testing for evidence of any quid pro quo under which a broker might be getting more commissions from a fund because of the big role it plays in distributing fund shares."

Alliance , for one, relies on many of the same brokers to purchase stocks and to distribute its mutual funds, but has a policy that states its commission dollars cannot reflect fund distribution. It also will not allow its distribution executives to speak to its traders.

Consumer advocates, including Barbara Roper of the Consumer Federation of America, believe the new rule will help investors. "These hidden payments not only drive up costs to shareholders, but they also encourage brokers to recommend mutual funds based on factors other than those which are in their best interests," Roper said.

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