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Archive for December, 2014

Wells Fargo Steps Right Up in Compensation ‘Carnival Game’

Wells Fargo is latest to tweak 2015 awards for advisors, making them more complex

Financial advisors at the wirehouse firms are facing more complex compensation plans in 2015, compensation experts say.

“It is becoming close to being like a carnival game – you have to knock down three cans to get the top-shelf prize,” said Andy Tasnady of Tasnady Associates in Port Washington, New York, in an interview.

“Overall, the [wirehouse] plans are getting more complex, especially around deferred bonuses,” Tasnady explained. “There are sharply designed combinations for shaping awards and associated behaviors – with lots of curves and combinations.”

In general, the core pay grids are not being tweaked very much, he notes.

New for 2015 are adjustments to the hurdles. Advisors can lower the 22% compensation hurdle they have to jump over by achieving other objectives, such as revenue growth of 15% or $150,000.

Also, advisors can boost their client-experience results by having 60% of client assets in fee-based advisory accounts or 80% of their monthly fees and commissions tied to fee-based advisory accounts. In addition, lending credits of $6,000 and up will give them higher client-experience results.

As for deferred compensation, Wells Fargo says it has eliminated the rule that advisors have to hit two of three or three of three best-practice goals in order to qualify for best-practice awards. However, advisors can get a bigger best-practice award if they meet all three targets.

Advisors in the $350,000-$499,000 production tier, for instance, can earn $5,000 when they bring in $5 million in net new fee-based advisory flows. They can also receive $5,000 for hitting $6,000 in lending credits and $5,000 for net new assets of $5 million and up. But if reps achieves all three of these best-practice goals, their best-practice award jumps to $25,000.


City of Harvey Agrees to Settle Charges Stemming from Fraudulent Bond Offering Scheme

The Securities and Exchange Commission announced today that on December 4, 2014, the City of Harvey, Illinois agreed to settle charges stemming from an enforcement action filed in June 2014. The city has consented to the entry of a final judgment which includes undertakings designed to provide significant protections for bond investors.

On June 25, 2014, the SEC obtained an emergency court order in the U.S. District Court for the Northern District of Illinois against the Chicago suburb and its comptroller, Joseph T. Letke, to stop a fraudulent bond offering that the city had been marketing to potential investors. The complaint alleged that the city and Letke had been engaged in a scheme for the past several years to divert bond proceeds from prior bond offerings for improper, undisclosed uses. While investigating Harvey’s past bond offerings, the SEC learned that the city intended to issue new limited obligation bonds. The SEC also learned that the city had drafted offering documents that made materially misleading statements about the purpose and risks of those bonds, while omitting that past bond proceeds had been misused.

The city has agreed to the entry of a final judgment which will enjoin it from committing future violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. In addition, Harvey has agreed to retain an independent consultant and an independent audit firm, and will be prohibited from engaging in the offer or sale of any municipal securities for three years unless it retains independent disclosure counsel. These measures are designed to prevent future securities fraud by Harvey and to enhance transparency into Harvey’s financial condition for future bond investors. The litigation against Letke is pending.

For additional information, see Release No. 2014-122 (June 25, 2014).

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