WASHINGTON — Four former Financial Industry Regulatory Authority officials who left the agency in 2008 each received between $2.74 million and $4.43 million in reportable compensation and benefits that year, according to the latest form the nonprofit self-regulator filed with the Internal Revenue Service.

Salary Table

The compensation levels, which included hefty retirement benefits, were the highest among the top current and former officials of 22 regulatory, industry and other municipal-market related groups whose most recent Form 990s were analyzed by The Bond Buyer for its annual salary survey.

The most highly compensated former FINRA employee, Michael Jones, received $4.43 million — $3.86 million of reportable compensation and $567,051 of deferred compensation and nontaxable benefits. Jones, FINRA’s former senior executive vice president and chief administrative officer, retired from the agency after more than 10 years and in November 2008 was appointed chief operating officer of the Public Broadcasting Service.

Elisse Walter received $3.77 million — $3.73 million of reportable compensation and $39,854 of deferred compensation and nontaxable benefits. She was FINRA’s senior executive vice president for regulatory policy and programs, but became an SEC commissioner in July 2008.

Salvatore Sodano, the former chairman and chief executive officer of the American Stock ­Exchange, received $3 million in compensation in 2008 even though a Securities and Exchange Commission enforcement action was pending against him for failing to ensure the ASE complied with certain order-holding rules and record-keeping obligations.

The exchange merged with the National Association of Securities Dealers in 1998 and remained with it until 2003. It is now part of NYSE Euronext. The SEC action against Sodano was not resolved until this year, when he reached a settlement and agreed that “without reasonable justification or excuse” he “failed to enforce compliance” with federal securities laws and rules, as well as the exchange’s rules.

Douglas Shulman, former vice chairman of FINRA who became Internal Revenue Service commissioner in March 2008, received $2.74 million — $2.73 million of compensation and $15,186 of deferred compensation and nontaxable benefits.

But the compensation levels of those four individuals are far less than the almost $9 million that Mary Schapiro, FINRA’s former chief executive officer, received when she left after 12 years to become SEC chairman. About $8 million was in the form of retirement benefits.

The figures were disclosed in a recent report released by a FINRA committee that concluded the agency should not pursue a demand made by one of its members — Moreno Valley, Calif.-based Amerivet Securities Inc. — that FINRA begin legal proceedings to recover “excessive” compensation paid to senior management.

Amerivet made the demand in a letter sent to FINRA’s board on Dec. 4, 2009. But the three-member internal committee that investigated the matter, with ­assistance from compensation consultant ­Mercer Human Resource Consulting, found Shapiro’s compensation was reasonable compared with those of investment banks and brokerage firms with annual revenue of between $250 million and $5.6 billion.

The committee and Mercer concluded that because FINRA competes “primarily with the financial services industry for talent, the financial services industry, including broker-dealers, global investment banks, Federal Reserve banks, commercial banks and insurance companies, [broker-dealers] provide the best benchmarks for senior management compensation.”


The panel noted in its report that all senior FINRA officials are paid a base salary, incentive compensation and retirement benefits. Senior officials like Shapiro qualified for both the employee retirement program and the supplemental executive retirement program.

The SERP, modified in 2005 for new participants, provided annual retirement benefits to senior management of up to 60% of their base salary and one third of their incentive compensation during the five years before their retirement. The money could be received as an annuity or as a lump sum.

Because the committee compared Schapiro’s salary to those of investment bankers, it’s not surprising that FINRA’s compensation levels are far higher than those of other major nonprofits, other self-regulatory agencies, and federal regulators.

In all, FINRA paid each of nine current or former executives between $1.2 million and $4.43 million in reportable compensation and benefits for calendar year 2008, far surpassing other industry nonprofits such as the Securities Industry and Financial Markets Association, the American Bankers Association, and the Investment Company Institute, which together paid each of only four executives more than $1 million during the latest fiscal years for which the groups filed their Form 990s.

The FINRA committee and Mercer claimed, “nonprofit organizations and governmental agencies were inadequate comparables for compensation purposes because FINRA required of its executives a different skill set and knowledge base than many such organizations.”

FINRA spokeswoman Nancy Condon declined to comment on the pay packages or the Amerivet complaint. An SEC spokesman deferred to FINRA.

FINRA’s compensation levels are much higher than those at the Municipal Securities Rulemaking Board, which regulates muni securities dealers and financial advisers. The highest compensation level reported by the MSRB for its fiscal year ending Sept. 30, 2009, was $973,552 for Diane Klinke, the board’s former general counsel who left in September 2008.

Of that amount, $906,867 was listed as base compensation and $66,685 as deferred compensation and nontaxable benefits. The next highest was $629,683 for executive director Lynnette Hotchkiss, which includes $570,864 of base and other compensation as well as $58,819 in deferred compensation and benefits.

The FINRA retirement packages are much richer than those at the MSRB. Christopher Taylor, who was the board’s executive director for 29 years, was terminated in June 2007 in part because of concerns he was paid too much.

He received a salary of $635,000, six months of severance pay, and part of a $1.56 million supplemental executive retirement plan for the board’s fiscal year ending Sept. 30, 2007. The total $2.44 million in compensation reported for Taylor, while high, is still lower than the levels of executives who left FINRA in 2008 after fewer years.

FINRA’s compensation levels are much higher than those of the top SEC officials. As chairman, Schapiro is expected to receive a salary of $165,300 in 2010. Walter and the other SEC commissioners are expected to receive salaries of about $155,000, according to the U.S. Office of Personnel Management.

The executives at industry groups who received more than $1 million but less than FINRA’s top compensation levels included SIFMA president and chief executive officer Timothy Ryan, SIFMA executive vice president Randy Snook, American Bankers Association president Edward ­Yingling, and Investment Company ­Institute president Paul Schott ­Stevens.

Ryan received $2.43 million in compensation plus $38,820 in benefits, while Snook got $1.04 million and $47,920. Yingling received $1.02 million in compensation, a $350,000 bonus, and $1.16 million in benefits. Stevens got $816,077, $600,000 in bonus or incentive pay, and $233,047 in benefits.

For the first time this year the Form 990s detail the perks of FINRA and MSRB executives’ contracts, including health clubs, drivers and first-class air travel. The disclosure is part of the IRS’ revamped 990 requirements for large nonprofits. Beginning with the fiscal 2008 reporting period, organizations must include more information about compensation, lobbying and contract expenses.

At the same time, the IRS lowered the requirements for smaller nonprofits. For fiscal 2008, organizations with gross receipts of less than $1 million or total assets of less than $2.5 million can file a 990-EZ form, an abbreviated 990 that does not necessarily include compensation figures. Consequently, some organizations in this year’s survey do not include compensation information because they filed a 990-EZ. However, some of these groups provided compensation figures voluntarily.

FINRA and the MSRB both detailed the perks received by their executives in their Form 990s.

Schapiro’s contract at FINRA included up to $20,000 each calendar year for membership fees and dues for a club in each of the New York and Washington, D.C., metropolitan areas. The contract also provided for the business use of cars and drivers in the two cities, which could be used by other FINRA officials, as well as up to $20,000 for financial and tax counseling.

SIFMA reported that Leslie Norwood, managing director, associate general counsel and co-head of its muni securities unit, received $391,29 — $261,297 in compensation and a $130,000 bonus — as well as $42,209 in benefits.


Both SIFMA and the MSRB said they established committees to recommend compensation levels based in part on data provided by outside salary consultants.

SIFMA also paid four law firms more than $2.4 million for legal work and  paid Washington Council Ernst & Young $302,000 for lobbying. Clearly Gottlieb Steen & Hamilton LLP received $1 million, WilmerHale got $586,159, Willkie Farr & Gallagher LLP took in $515,233 and Thacher Proffitt & Wood LLP was paid $322,708.

The MSRB disclosed that it reimbursed its executive director and board members for coach-class flights under three hours and business-class flights longer than three hours. The board also reported that 16 of its members received a total of $543,750, with Frank Chin — the chairman for the first nine months of the year — the highest at $56,250 followed by Donald O’Brien, its vice chairman, at $45,000.

Five members did not report any compensation. The 15-member board listed more members that year because the financial crisis led investment banks to change their status or merge with banks. As a result, some members had to be replaced so that the MSRB maintained five representatives each from securities firms, banks and the public.

In contrast to the SIFMA executives, the two co-CEOs of the Regional Bond Dealers Association, now the Bond Dealers of America, made around $300,000 for its fiscal year ending Feb. 29, 2010. Michael Decker who left the group last October to return to SIFMA as a managing director and co-head of its municipal securities group, received $282,187 in compensation and $43,922 in benefits. Michael Nicholas, now CEO of the BDA, received $252,391 in compensation and the same amount of benefits.


The MSRB’s Form 990 disclosed some of its costs associated with the development of its Electronic Municipal Market Access, or EMMA, system. The board reported paying four vendors $2.8 million for software development, with the lion’s share of that, $2.1 million, going to CC Pace Systems Inc. in Fairfax, Va.

In 2009 the EMMA site became the sole official repository for continuing disclosures from municipal issuers. The board also launched its long-awaited access-equals-delivery system, which allowed dealers to send electronic copies of bond documents to investors in lieu of paper copies, as well as the initial phases of its transparency system for short-term debt. Under that system, it collects and displays basic interest-rate reset information for auction-rate securities and variable-rate demand obligations. 

The MSRB reported receiving $18.62 million in membership dues and fees as well as $441,392 in subscription fees.

Meanwhile, the top staff officials for several state and local groups were earning well over $300,000 for fiscal years ­ending in 2009. The top earner was Jeffrey Esser, executive director and the CEO of the ­Government Finance Officers ­Association. He received a total of $417,900 — $357,855 in reportable compensation and $60,045 in deferred compensation and nontaxable benefits. Susan Gaffney, director of the GFOA’s federal liaison center here, got $184,892 — $150,554 in compensation and $34,388 in benefits.

Raymond Scheppach, executive director and CEO of the National Governors Association got $307,354, a combination of $266,087 in reportable compensation and $41,267 in benefits. Don Borut, executive director of the National League of Cities received $386,126 — $349,476 in compensation and $36,650 in benefits.

Ken Luurs, executive director of the National Association of Bond Lawyers received $200,864 in compensation and $28,444 in benefits while Elizabeth ­Wagner, former director of governmental affairs who left the group in the middle of the year to become senior counsel to the Internal Revenue Service’s large and mid-size business division’s commissioner, received $140,728 amd $21,361 in ­benefits.


The Form 990s reveal just how hard-hit organizations were by the financial crisis — from fees to investment portfolios.

FINRA’s program service revenue, a ­category that includes its activity ­assessment fees and transparency ­service fees, ­tumbled 35% to $231.9 million. FINRA also reported a loss of $88.3 ­million in investment income for fiscal 2008, ­compared with a gain of $242.2 million in fiscal 2007. Total revenue for the self-regulator plummeted by 48% to $405.1 million.

The ABA’s program service revenue, which includes membership dues and conference revenue, fell by 22% to $60.7 million. The ABA reported a loss of $9.2 million in investment income, and its total revenue fell by 24% to $64 million.

At SIFMA, program service revenue — which includes membership dues and conference revenue among other sources — fell 18.4% to $80.5 million.

The MSRB’s total revenue fell 9.2% to $19.7 million. For 2008, the board booked a loss of $1.5 million from a gain of $3.3 million in 2007.

Conditions were dramatically different for some issuer organizations. Total revenue at the GFOA increased by 2.0% to $14.5 million and revenues at NACo increased 4.0% to $17.3 million.

But the NCSHA’s revenues dropped 6.0% to $4.8 million. Revenue at the NGA fell 47% to $9.6 million as its investment income swung to a negative $1.3 million from a profit of $1.2 million the year ­before.

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