Finra execs got $11.6M in 2009 amid pay criticism

Oct 4, 2010 @ 1:00 pm

By Bloomberg News

The Financial Industry Regulatory Authority paid its top 10 executives a combined $11.6 million last year amid criticism from member firms that the brokerage industry watchdog's managers are overpaid.

Chief Executive Officer Richard Ketchum received salary, incentive pay and retirement benefits of $2.24 million, the industry-funded regulator said today in its annual report. Vice Chairman Stephen Luparello received $1.26 million and Chief Financial Officer Todd Diganci got $1.18 million, Finra said.

Finra, which previously disclosed the information only in tax documents filed with the Internal Revenue Service, listed management pay in the report after member firms in August approved a non-binding measure seeking increased transparency.

The regulator's pay practices drew scrutiny from members after Finra lost $568 million on its investment portfolio during the 2008 financial crisis. Amerivet Securities, a brokerage based in Moreno Valley, California, sued Finra in August 2009, questioning why executives got so much compensation at a time when the watchdog was losing money.

The amount paid to executives last year is 52 percent less than the $24 million the 10 highest-paid managers got in 2008. The 2008 figure included more than $7 million of retirement payouts to employees who left Finra that year, including Elisse Walter, who was appointed to the U.S. Securities and Exchange Commission, and Douglas Shulman, who left to head the IRS. Former CEO Mary Schapiro, now SEC chairman, received the biggest payout, $3.26 million.

Reject Pay Packages

At Finra's annual meeting in August, brokerage firms also approved a proposal that would have given members the ability to reject pay packages through a non-binding vote. Finra's board declined to adopt the measure.

“The board believed that it raised serious problems for Finra because of its potential to create the perception that regulated entities had the power to improperly intimidate regulatory staff,” Ketchum wrote to brokerages on Sept. 28.

Under the Dodd-Frank regulatory overhaul enacted in July, all U.S. publicly traded companies are required to give investors a say-on-pay vote. Finra, which is overseen by the SEC, is funded by the 5,000 U.S. brokerages it regulates.

Finra said it bases compensation on pay for executives at brokerage firms, banks, insurers and other regulators. Grace Vogel, Finra's executive vice president of member regulation, received $1.12 million in 2009 and Howard Schloss, executive vice president of corporate communications, got $977,075.

Ketchum's salary will increase 26 percent to $1 million in this year, and Luparello will get a 4.2 percent raise to $600,000, according to the report. Diganci's salary will be cut 3.6 percent to $500,000. The document doesn't disclose expected bonuses and retirement benefits for 2010.

Fines collected from brokerages that violated Finra rules rose 84 percent to $47.6 million in 2009, according to the annual report. The number of penalties increased 12 percent to 644, Finra said.

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