The Securities and Exchange Commission Wednesday banned directed-brokerage arrangements as a means for mutual funds to promote or sell fund shares.

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.

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