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Brokerage Firms Are Not Following Best Hiring and Compensation
In 1995 the SEC formed a panel to recommend changes that would benefit investors. It even selected then Merrill Lynch CEO David Tully to lead the panel. The so-called Tully Commission made several recommendations, all having the potential to dramatically alter hiring and compensation practices at brokerage firms. That report urged firms to:
Eliminate up-front bonuses (or bonuses paid over several years);
Pay identical commissions to brokers for selling in-house, proprietary products (such as mutual funds) and external products;
Prohibit sales contests;
Defer portion of broker's compensation for several years, and condition payment upon a clean compliance record; and
Make special efforts to inform investors of their rights.
Fast forward to 2000. Brokerage firms have adopted not one of these recommendations. In fact, citing stiff competition and a strong desire to gather client assets, brokerage firms actually have increased their offerings of up-front bonuses. While they have deferred compensation in many cases, they have not conditioned that upon a clean compliance record, instead using the deferred compensation as a kind of "golden handcuff".
Source: Wall Street Journal, March 28, 2000
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Sponsored by James J. Eccleston, an attorney representing stockbrokers, financial planners and
investors nationwide in arbitration, litigation and regulatory matters, and a shareholder with the law firm
Shaheen, Novoselsky, Staat, Filipowski & Eccleston
P.C.(www.snsfe-law.com). This Web site contains material
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Always consult an attorney and/or investment advisor when building and protecting your wealth.
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