The Securities and Exchange Commission (search) pushed ahead on Wednesday with reforms of the $7.5-trillion mutual fund industry amid scandals that have shaken fund investors' confidence.

The SEC's five commissioners voted to bar mutual funds from channeling brokerage commissions toward Wall Street firms based on their promotion and sale of the funds' shares.

The commission also voted unanimously to shed more light on the roles played by fund portfolio managers, their pay levels and their possible conflicts of interest.

"The two proposals the commission approved today will help to further eliminate conflicts of interest that can compromise best execution decisions in fund portfolio transactions," SEC Chairman William Donaldson (search) said at an open meeting.

Targeting a conflict of interest that critics say inflates costs for investors, the ban on so-called "directed brokerage" is meant to stop funds from choosing brokers based on their performance at flogging the funds' shares.

Funds should choose brokers based on the fees they charge for handling transactions, with an eye toward reducing costs for fund investors, say investors activists.

Donaldson said it has become clear recently that directing fund brokerage to a broker as compensation for distribution of fund shares "presents opportunities for abuse."

The panel also ordered that a fund disclose other accounts managed by a fund's portfolio manager, identify portfolio team members and their roles, their pay structures and any shares held by the managers.

"Portfolio managers play a central role in the operation of mutual funds," said Paul Roye, director of the SEC's Investment Management Division. "We believe these improved disclosures regarding portfolio managers will facilitate more informed decision-making on the part of mutual fund investors."

The two measures were proposed earlier this year by the SEC amid revelations of widespread trading abuses involving mutual fund managers, hedge funds and intermediaries.

Government investigators accused some fund managers of 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 Securities Industry Association (search), a lobbying group for Wall Street brokerages, endorsed the SEC's action. "The new rule will help to eliminate potential conflicts of interest in mutual-fund sales," the group said in a statement.