SECURITIES FIRM MANAGEMENT
Information to Retail Client, Securities Firm Management, Registered Representative Training and Compensation Practices were issued on April 10, 1995 by a committee established by Securities and Exchange Commission Chairman Arthur Levitt, Jr. The panel studied how management practices, including compensation, affect client-broker relationships. Daniel Tully, Chairman of Merrill Lynch & Co., served as the committee's chairman. Other members were: Warren Buffett, Chairman of Berkshire-Hathaway, Inc.; Samuel Hayes, a Professor at the Harvard Business School; Raymond A. Mason, Chairman of Legg Mason, Inc. and former SIA Chairman; and, Thomas O'Hara, President of the National Association of Investors Corp.
- Through recruiting, promotions and policies, senior management should develop a corporate culture of placing client interests first.
- Employees who fail to meet a firm's standard of placing client interests before their self-interest should be disciplined.
- Branch managers should have the appropriate resources to supervise the RRs for whom they are responsible.
- Branch managers should be charged the compliance costs of monitoring those RRs.
- Compliance departments should be involved in new product development.
- Compliance departments should be involved when recruiting experienced RRs.
- Information systems should be able to match client transactions against client objectives.
- "Risky" investments should be treated differently from other investments before a client presentation is made.
- RRs should not be pressured to sell particular investments.
- RRs should not be pressured to sell securities from a firm's inventory.
For more information on Best Practices, please contact Don Kittell.
