SEC Details Abuses in Fund Sales Practices

The mutual fund scandal took yet another turn on Tuesday when the Securities and Exchange Commission announced it has found widespread abuse in how Wall Street brokerage firms sell mutual funds.

The SEC's nine-month investigation of 15 brokerage firms found that 14 of them received cash from funds' investment advisers. In return for these payments, 13 of the 15 firms appear to have favored the sale of the revenue-sharing funds over other funds by providing increased visibility for the funds in the broker-dealers' sales networks -- such as listings on firms' Web sites, access to sales staff, promotional materials sent to customers, inclusion on "preferred" lists and the like.

These revenue-sharing arrangements are commonly called "paying for shelf space" and aren't illegal. But while fund companies insist such payments are necessary to get brokers to notice their products, critics argue that these arrangements amount to little more than bribes intended to get brokers to push particular products. ...