(by Peter Van Bruggen)

On Wednesday U.S. Securities and Exchange Commission blocked U.S. mutual funds from channelling brokerage commissions toward Wall Street firms based on their promotion of the funds’ shares.

The aim of this measure is to stem widespread trading abuses involving mutual fund managers, hedge funds and intermediaries.

Five members of SEC voted to approve the proposal as a conflict of interest was about to occur making investors pay inflated costs and compromise best executions for shareholders.

Earlier officials investigated that some fund managers had been allowing improper market timing and illegal late trading in their funds by managers of hedge funds, often in return for investments by the hedge funds in other areas.

The bar on directed brokerage fees is one of reforms of SEC aimed at a conflict of interest that increases costs for investors, assumed amid scandals in the $7.5 trillion U.S. mutual fund industry.