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Strategies & Market Trends : The Final Frontier - Online Remote Trading

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To: TFF who started this subject	8/18/2004 11:53:06 AM
From: TFF	of 12617

SEC voting to restrict 'directed brokerage' Dow Jones News Aug. 18, 2004 12:00 AM WASHINGTON - The Securities and Exchange Commission is poised to curb fund companies from steering stock trades to brokerage firms that agree to sell their funds. The vote scheduled today would end a 24-year-old practice that encouraged brokerage firms to recommend some mutual funds instead of others. It would mark the latest in a wave of rules to follow revelations of widespread trading abuses in the $7.6 trillion industry. "It's very important as this industry approaches the anniversary of the scandals that we demonstrate a commitment to addressing potential conflicts," said Elizabeth Krentzman, general counsel of the Investment Company Institute, the fund trade group. The looming vote has already prompted some mutual funds to change how they sell their funds. Earlier this year, Massachusetts Financial Services Co. stopped steering stock trades to brokerage firms as a reward for their sales of fund shares. Mutual funds pay commissions to brokerage firms when stock is traded. Since 1980, funds have been free to use those payments to reward brokerage firms that promote their funds. That is when an SEC ruling first permitted the practice of "directed brokerage." Since New York Attorney General Eliot Spitzer first uncovered fund-trading abuses last September, SEC regulators have developed concerns, warning that steering stock trades to brokerage firms that favor funds can raise transaction costs and improperly influence recommendations. The mutual-fund and securities industries have supported the SEC.

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