A new report released today by the SEC Inspector General David Kotz shows that the "Commission did not always have adequate justification to support approved compensation that was awarded to senior officers."
For example, the Inspector General's office looked at bonuses: "One senior officer received a $24,657 merit increase, another received a $55,720 merit increase, and five received $65,082 in merit increases." But auditors found these bonuses did not have the required justification because the SEC employees "reported directly to the Chairman," meaning former SEC Chairman Christopher Cox.
The Inspector General notes that there was no fraud in the payments. No staff at the SEC were allowed to make more than $215,700 for calendar year 2007 and $221,100 for calendar year 2008. That's a far cry from the skyrocketing salaries of those the SEC was regulating on Wall Street.
The report recommends that due to the bonuses and merit pay in some cases as high as $85,000 the "Chairman's office should provide justification to support awarding senior officers merit pay increases of $20,000 or more, or bonuses of $20,000 or more."
SEC officials responded to the IG's report agreeing that justification should be provided for raises of over $20,000 in the future. But officials indicated that these raises were a unique situation and unlikely to be repeated. The agency had a cost overrun in 2005 of $50 million and had to make cutbacks the following year in salaries. Once the overage was made up, the salaries of the senior SEC officials went back to the normal level, thus showing high raises.
Starting salaries at the SEC for full time jobs often command six figures. And while commissioners at the SEC make a modest $162,000, many attorneys and senior career staff at the Commission make more than the Commissioners.
A recent idea floated? Pay bonuses to SEC staff based on the amount of fraud they uncover - but sources at the SEC say that idea is unlikely to be implemented. Current SEC Chairman Mary Schapiro has called for a fraud bounty structure whereby whistleblowers or complainants like Harry Markopolos who identified the Bernard Madoff scam could recoup a percentage of the fraud they identify.
Watch an SEC recruitment video here.