Top officials from the Securities and Exchange Commission and the New York attorney general’s office told mutual fund representatives Thursday that fund companies that step forward and acknowledgeviolations of securities laws will fare better than those that do not.

At a conference on mutual fund reform, SEC Commissioner Paul Atkins spoke bluntly about the industry’s failures to police itself, resulting in charges of illegal trading to inflate fund prices, unethical payments to brokers to promote certain funds and unfair fee structures.

“The abuses that we’ve seen were clear, systemic violations of SEC rules and the fiduciary obligation companies have to investors,” Atkins said. “Worse, many CEOs who knew about these abuses showed an appalling lack of personal and business ethics.”

In separate speeches, both Atkins and David Brown, chief of the New York Attorney General’s Investment Protection Bureau, said many fund companies have not been forthcoming in the state’s investigation of illegal trading, broker relationships and unfair fees.

“I’m very disappointed in the lack of proactivity,” Brown told the audience of more than 200 fund company representatives gathered at a New York hotel. “We’re finding many companies are waiting in the weeds, hoping we overlook them as we conduct our investigation.”

Despite concerns by some in the audience that companies would be heavily penalized even if they came forward, Brown said firms would get credit for disclosing violations, earning leniency in any penalties sought by his office.

Brown said his investigation of mutual fund practices could spread beyond fund companies to banks and law firms that aided in illegal trades.

The SEC has proposed a number of new rules to curtail the abuses, including a “hard close” rule to prevent late trades that illegally alter fund prices. The SEC has also proposed banning compensation to brokers for promoting funds with investors, additional disclosure of fees to investors and instituting a 2 percent fee on investors who cash in shares within five days of purchase.

Atkins, who also praised fund companies who responded quickly to the mutual fund abuses, urged companies to send comments to the SEC before the rules are finalized.

New York Attorney General Eliot Spitzer supports curtailing inflated fund fees, Brown said, noting that individual investors are often charged widely varying fees for similar products, and that institutional investors often pay less for mutual funds than individuals.

“People don’t do a lot of research. They’re lead to funds by a broker,” Brown said, noting that some fund companies paid brokers to push particular funds even though fees on another fund may have been lower.

The attorney general’s investigation of the mutual fund industry is continuing in cooperating with the SEC, Brown said.

The conference was sponsored by the Securities Industry Association, an industry group.

In Washington, Vanguard Group founder and former CEO John Bogle told a Senate hearing that the revelations of fund industry abuse that have surfaced to date are merely “the tip of the iceberg.”

“We need to strengthen governance, so that funds put the interests of their shareholders ahead of the interests of managers,” Bogle said in testimony to the Senate Banking Committee, which is weighing legislation to overhaul the $7 trillion fund industry.

But David Pottruck, chief executive officer of Charles Schwab Corp., told the panel: “I don’t think we have to dismantle the governance structure of mutual funds. … Mutual funds have stood the test of time.”

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AP Business Writer Marcy Gordon in Washington, D.C., contributed to this report.