Many critics of Reed's plan had urged such a separation, but it falls far short of all that they had wanted, including significant investor representation on the reconstituted NYSE board of directors and a separation of the exchange's business and regulatory functions.

Several had been publicly urging the Securities and Exchange Commission to reject the plan unless such changes were made, and reiterated yesterday that they want the SEC to pursue more changes going forward.

SEC Chairman William Donaldson, himself a former chairman and CEO of the NYSE, said he was "pleased" that Reed had agreed to separate those positions, saying, "The New York Stock Exchange's governance structure allowed too great a consolidation of executive authority in the chairman and CEO, with unfortunate results."

Republican Commissioner Paul Atkins, however, said separation is "certainly no panacea and has proven of dubious effectiveness in other contexts."

Under Reed's system, the NYSE's board is reduced to eight members, all independent from the industry, from 27.

Excluded from the new board are members of the trading floor and the securities industry, and executives of firms listed on the exchange. They made up a majority of the old board, which was criticized for perceived conflicts of interest after the disclosure of former NYSE Chairman Richard Grasso's vast pay package.

The new board will oversee regulation and executive compensation. It will be advised by a roughly 20-member executive board, including investors, members of the securities industry and officials from listed companies.

The revamped structure is the most significant overhaul of NYSE governance since the early 1970s. The NYSE incorporated as a not-for-profit corporation in 1971. The next year, it replaced its 33-member board of governors with a somewhat smaller board of directors and hired its first full-time, salaried chairman, James Needham.

The SEC approved Reed's plan unanimously. Donaldson called it "a significant step forward in meaningful reform," but some members said they weren't satisfied.

Democratic Commissioner Harvey Goldschmid said the plan "is a fine first step, although I underline the word 'first.' I'm not sure these changes will be enough."

Donaldson and other commissioners promised that the SEC will review broader issues on the structure and practices of self-regulatory organizations such as the NYSE and consider potential changes next year.

"For me, everything is on the table," Goldschmid said.

Many large investors were unhappy with the vote. The National Coalition for Corporate Reform, a group of state officials and some large institutional investors, said it was "very disappointed that the SEC has voted to approve the Reed plan without seeking further changes besides splitting the chair and CEO positions. We urge the SEC to continue to reform and strengthen the NYSE."

At yesterday's meeting, commissioners also formally proposed rules to require mutual funds to provide more information about sales load "breakpoints," in which larger investors can receive discounts on upfront fees when they purchase funds.

The SEC has proposed having funds describe breakpoint arrangements, including how investors can qualify for them.

A recent investigation by regulators had found that about a third of investors eligible for such discounts failed to receive the full amount.

In discussing the plan, Donaldson responded to criticism from state regulators that SEC enforcement actions in the mutual fund scandal have not required firms to cut fees across the board.

He said it's appropriate for the SEC to ensure investors have sufficient information about fees and receive restitution from any wrongdoing.

"I do not, however, think the government should serve as a fee setter in enforcement actions or otherwise," he said. "I strongly believe that any monetary benefits of a settlement in a law enforcement case should go to benefit the victims."

In addition, the SEC agreed to seek public feedback on ways to require separate disclosure of transaction costs incurred by mutual funds.