SEC Is Set to Vote on ‘Pay to Play’ Issue
The Securities and Exchange Commission today is poised to take on one of the “pay to play” issues that have sparked controversy in the mutual fund and brokerage industries.
The panel is scheduled to vote on a measure to bar a practice known as directed brokerage, by which fund companies send stock trades to brokerages as a reward for the brokerages’ efforts to market the companies’ funds to investors.
Critics say the practice can raise fund operating costs and improperly influence broker recommendations.
It would be the latest in a wave of rules to follow revelations over the last year of widespread trading abuses in the $7.6-trillion fund industry.
A number of major fund companies already have said they will abandon the practice of directed brokerage.
Separately, the SEC is expected to decide whether to impose new disclosure rules on fund managers, covering information on other accounts they manage, the structure of their compensation and personal ownership of securities held in a fund.
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