From the May 2009 issue of Investment Advisor • Subscribe!

B/D News & Products

The U.S. House of Representatives approved legislation in early April that would tie pay to performance at companies that have received direct capital investments under the Troubled Asset Relief Program (TARP). The bill, called the Grayson-Himes Pay for Performance Act, was introduced by Rep. Alan Grayson (D-Florida) and Rep. Jim Himes (D-Connecticut), and it would prohibit certain compensation at these institutions to better align the public's interest with the health of the financial institutions. The bill also repeals a controversial provision in the American Recovery and Reinvestment Act that exempts bonuses due under employment contracts entered into on or before February 11, 2009, says Patrick Burns, in his eponymous Beverly Hills law firm's Breakaway Broker Alert newsletter. The Grayson-Himes act, Burns writes "seems to threaten bonus and retention payments made to wirehouse representatives regardless of when their employing firm entered into such compensation payment arrangements." He continues: "TARP recipients who have yet to repay a direct capital investment under TARP would be prohibited from paying any executive or employee (i.e., wirehouse representatives) any compensation that is unreasonable or excessive, as defined in standards established by the Treasury Secretary and paying any bonus or other supplemental payment that is not directly based on performance-based standards set by the Treasury Secretary."

The Securities and Exchange Commission in March charged the auditors of Bernard Madoff's broker/dealer firm with committing securities fraud by representing that they had conducted legitimate audits, when in fact they had not. In its complaint filed in federal court in Manhattan, the SEC alleges that from 1991 through 2008, certified public accountant David Friehling and his firm, Friehling & Horowitz, CPAs, purported to audit financial statements and disclosures of Bernard L. Madoff Investment Securities LLC (BMIS). The SEC previously charged Madoff and BMIS with committing securities fraud through a multibillion dollar Ponzi scheme perpetrated on advisory and brokerage customers of his firm. SEC Chairman Mary Schapiro said that "As the new Chairman, I will ensure that we continue this investigation and hold accountable all those who helped to facilitate this massive fraud."

To help its broker/dealer clients meet the Securities and Exchange Commission's recently approved summary prospectus rule, the Investor Communication Solutions division of Broadridge Financial Solutions, Inc. (NYSE:BR), a global provider of technology-based outsourcing solutions to the financial services industry, and NewRiver, Inc.--creators of a central repository of mutual fund documents and data for financial services firms--recently announced an agreement under which Broadridge will exclusively offer NewRiver's Prospectus Express and Virtual Document Warehouse products for pre-sales and first-dollar deliveries in the brokerage market. With Prospectus Express, Broadridge says it can now offer a solution that not only makes the summary prospectus available online, but also links directly to the statutory prospectus in support of the SEC's requirement for layered disclosure. Prospectus Express is a Web-based data warehouse, and Virtual Document Warehouse a database of PDF-format prospectus and supplement documents. Both products are sourced daily from EDGAR--the SEC's securities filing database. NewRiver says Prospectus Express is currently used by nearly 100 brokerage firms servicing more than 50 million investors.

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