A special FINRA committee completed a 7-month investigation into demands and assertions by a FINRA member firm pertaining to investment losses incurred by FINRA in 2008, and any "excessive" compensation paid to FINRA senior management in 2007, 2008, and 2009.  Amerivet Securities, Inc., had submitted a letter to FINRA's Board on 12/4/2009, demanding that FINRA assert legal claims to recover some or all of these amounts from members of FINRA's Board and relevant committees, senior management, outside investment and compensation advisors and counsel. 

    Amerivet's Assertions re: FINRA Investments.   The Demand Letter asserts that those responsible for making decisions concerning FINRA's investments "knew or should have known" that the investments were "highly risky" and "unjustified."  The Demand Letter further asserts that such persons were "reckless" in making the investments.  The committee has determined that these assertions are not correct.

The Committee found that the 2008 investment losses stemmed from the investment of FINRA's available funds in the manner of a diversified college endowment - and included investments in equities, fixed income securities and alternatives, including hedge funds, private equity and real assets.  They found the 2008 losses were similar to those incurred during the same time period by other endowments and foundations.

In making and reaffirming the endowment decision, the relevant Board or committee based its decisions both upon the substantial collective experience of its members and relevant information provided by FINRA's management and investment advisors.  FINRA's decision to invest in the manner of a diversified endowment was neither unusual nor unreasonable.  In fact, during the years before and after 2008 the returns on the portfolio  was positive and exceeded the returns on alternatives, such as the S&P 500 and T-Bills.  

    Amerivet's Assertions re: FINRA Investments.   The Demand Letter also asserts that those responsible for making compensation decisions for FINRA approved compensation paid to senior executives in 2007 - 2009 that was "wholly inconsistent" with compensation paid by government agencies and not-for-profits.  The Letter focused on "performance bonuses" and a "going away gift" to Mary Schapiro that was valued as high as $25 million.   The committee determined these assertions are also misplaced.

The Committee found that compensation paid to senior executives and the CEO was competitive with the compensation paid by the employers with whom FINRA competes most directly for employees.  Upon her departure from FINRA, Ms. Schapiro did not receive a $25mn gift - she rather received about $9mn, most of which consisted of the lump sum payment of the retirement benefits that had accrued during her 13-years with FINRA.  Most of the remainder consisted of incentive compensation for 2008 to which she was contractually entitled. 

To access the complete report, click onto:   [ FINRA's Amerivet Committee Report, dated 9/13/10, Released 10/5 ]