Schapiro reprimands broker-dealers over remuneration

Daily news headlines

Brokerage executives have been sent an open letter on compensation from the SEC chairman

WASHINGTON, DC - The chairman of the Securities and Exchange Commission (SEC), Mary Schapiro, has sent an open letter to US-regulated broker-dealers reminding them of their obligations to prevent abuses in sales practices fuelled by inappropriate bonus structures.

Schapiro's letter is in response to media reports that some broker-dealers have been engaging in recruitment programmes promising large bonuses and enhanced commissions.

"Recent press articles have reported that some broker-dealer firms may be engaging in a vigorous recruiting programme for broker-dealer registered representatives, including large up-front bonuses and enhanced commissions for sales of investment products," wrote Schapiro in the letter, noting chief executives have an obligation to police their policies for conflicts. "Certain forms of potential compensation may carry with them enhanced risks to customers," the letter continued.

Schapiro warns such compensation structures could lead representatives to believe they need to sell securities at a "sufficiently high level" to justify special arrangements they have received and that pressure could "create incentives to engage in conduct that may violate obligations to investors and lead to the sale of unsuitable investment products".

Click here to read the letter.

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact info@risk.net to find out more.

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here