SEC Schapiro Sends Warning Letter to Broker-Dealers On Pay
Down)
SEC Chairman Mary L. Schapiro issued an open letter to broker-dealer CEOs following reports that special recruitment programs at some firms are premised on enhanced compensation arrangements, such as large up-front bonuses and enhanced commissions for sales of investment products.
Schapiro states that some enhanced compensation arrangements could induce brokers to engage in conduct that is not in investors' best interest and she reminded CEOs that they have an obligation to police for such conflicts. In the letter to the CEOs, Schapiro sated, "some types of enhanced compensation practices may lead registered representatives to believe that they must sell securities at a sufficiently high level to justify special alTangements that they have been given. Those pressures may in tum create incentives to engage in conduct that may violate obligations to investors. For example, if a registered representative is aware that he or she will receive enhanced compensation for hitting increased commission targets, the registered representative could be motivated to chum customer accounts, recommend unsuitable investment products or otherwise engage in activity that generates commission revenue but i's not in investors' interest."
Related Stocks:
Goldman Sachs (NYSE: GS)
Morgan Stanley (NYSE: MS)
Banc of America (NYSE: BAC)
Raymond James (NYSE: RJF)
Citigroup (NYSE: C)
Schapiro states that some enhanced compensation arrangements could induce brokers to engage in conduct that is not in investors' best interest and she reminded CEOs that they have an obligation to police for such conflicts. In the letter to the CEOs, Schapiro sated, "some types of enhanced compensation practices may lead registered representatives to believe that they must sell securities at a sufficiently high level to justify special alTangements that they have been given. Those pressures may in tum create incentives to engage in conduct that may violate obligations to investors. For example, if a registered representative is aware that he or she will receive enhanced compensation for hitting increased commission targets, the registered representative could be motivated to chum customer accounts, recommend unsuitable investment products or otherwise engage in activity that generates commission revenue but i's not in investors' interest."
Related Stocks:
Goldman Sachs (NYSE: GS)
Morgan Stanley (NYSE: MS)
Banc of America (NYSE: BAC)
Raymond James (NYSE: RJF)
Citigroup (NYSE: C)
You May Also Be Interested In
Create E-mail Alert Related Categories
General NewsRelated Entities
Citi, Raymond James, Morgan Stanley, Bank of America, Mary SchapiroSign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!
