Investment industry CEOs warned against high executive compensations

In an open letter to broker-dealer chief executives SEC Chairman Mary Schapiro warned broker-dealer firms about creating incentives that may lead their brokers to engage in questionable conduct such as recommending unsuitable investment products. She said that some forms of executive pays may implicate high risks to customers.

Schapiro believes that some compensation practices may make brokers think that they should do their best and sell securities at a sufficiently high level to justify their earnings. Citing news reports that suggested some firms are offering enhanced commission for sales of investment products, Schapiro said she wanted to remind broker-dealer firms of their duty to oversee their employees' sales practices.

The chief of Securities and Exchange Commission warned broker-dealer firm CEOs to stay "particularly vigilant" in ensuring that investor interests are carefully considered in the sale of any security or other investment product.

The SEC letter comes amid a push to clamp down on runaway executive compensation and ensure that pay packages don't lead employees to take on excessive risk.