Tuesday, September 1, 2009


SEC Chairman Mary Schapiro issued an order yesterday to broker-dealer firms addressing concerns regarding the recruiting methods for broker-dealer registered representatives. Ms. Schapiro noted that some types of recruiting methods, such as enhanced compensation practices wherein firms provide large up-front bonuses and enhanced commissions for sales of investment products, may in turn lead to greater risks for investors. In particular, recruiting methods based on these types of financial rewards create the risk that broker-dealer registered representatives will act in their own interest when selecting investment products for their customers, thereby violating their obligations to investors.

As such, Ms. Chapiro issued the order to remind broker-dealer firms, and in particular their CEOs, of the “significant supervisory responsibilities [they] have under the federal securities laws to oversee broker-dealer activities, particularly with respect to sales practices.”

A copy of the order can be found here.

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