The
In a unanimous 5-0 vote, the SEC put to an end to the longstanding practice of fund companies channeling brokerage commissions to broker/dealers as a reward for pitching their funds under the guise of rule 12b-1. These informal arrangements spurred a conflict of interest that caused investors to pay excessive fees and compromised best execution of fund trades, the SEC charged.
"Directed brokerage [practices] are far from the benign arrangements originally approved under rule 12b-1," said Penelope Saltzman, a member of the SECs division of investment management.
The SEC expects the
The SEC also voted unanimously to enhance disclosure regarding portfolio managers including compensation structure, ownership of fund shares and the identification of other portfolio management team members.
The moves are part of a larger effort by regulators to curb abuse in the $7.5 trillion mutual fund industry in the wake of a widespread trading scandal that slapped a number of major fund houses with fraud charges.