The Securities and Exchange Commission on Wednesday proposed a raft of ideas aimed at fixing the scandal-wracked mutual fund industry. None of the proposals are new ideas, but this is the closest the SEC has come to regulating the behavior and independence of fund directors. The SEC proposed three rules aimed at lessening the bias of fund directors. Each fund has a board that determines the management of the fund's portfolio, sets fees and is generally responsible for the overall management and administration of the fund. The boards are expected to act in the shareholders' best interest, but they have recently been lambasted for not preventing much of the unethical and illegal behavior that fund companies have been engaging in. Chief among the proposals is the requirement that each mutual fund would need a board of directors that is 75% independent. (Under current rules, just 60% of a fund's board must be independent; the remaining directors can work for the fund family the fund is associated with.) The board would also be required to name an independent chairman, and the independent directors would have to hold their own meetings, to which company-affiliated directors would not be allowed. (And if you think that sounds oddly secretive, another proposal mandates that independent directors also hire their own staff.) The SEC also proposed a rule that would require registered investment advisers to adopt and enforce a code of ethics. The code would have to include standards of conduct, compliance with federal securities law and preapproval of individual transactions, and would require the reporting of any violations. Also, in conjunction with a report the SEC made on Tuesday regarding the questionable ethics of how some fund companies pay broker-dealers to give their funds preferential treatment, the SEC proposed two new rules that would improve the disclosure of such arrangements. The rules would require broker-dealers to inform customers of the costs and potential conflicts of interest that would arise from these sales. Disclosure would take place at the point of sale and when the transaction is completed. The Investment Company Institute, the lobbying arm of the mutual fund industry, was tentatively approving of the SEC proposals. "When we review the proposals in more detail, we may not agree that every change will achieve the benefits that are hoped for," ICI president Matthew Fink said in a statement. "Nevertheless, the mutual fund industry is confident the reforms the SEC ultimately enacts will greatly strengthen mutual funds and make them better guardians of middle America's long-term investments." All proposed rules will go through the standard 60-day comment period before any further action is taken.