If you ask Bernie Madoff, Wall Street has a major pay problem on its hands.
In a letter to CNBC from prison, the infamous Ponzi schemer wrote that signing bonuses, which Wall Street firms use to capture top staffers, are only a symptom of a larger compensation problem in the financial industry.
“The real problem with the signing bonuses is that pressure that the new firms put on their bonus babies to generate large commissions by promoting special products of the new firm to pay off those bonus costs,” he wrote in his letter last week.
The signing bonuses proved controversial in the years following the financial crisis as brokers failed to deliver the goods after being lured to competitors with six- and seven-figure salaries, according to a 2010 Wall Street Journal report. During that year, cases of Wall Street firms going to FINRA demanding the signing bonuses back represented the largest percentage of FINRA cases in a decade.
This is the second time in as many months that Madoff, who in 2009 was sentenced to 150 years in prison for the largest Ponzi scheme in U.S. history, has waxed poetic about the financial industry to the business network from his jail cell. Madoff penned a Christmas Eve letter to CNBC in which he derided the increasingly secretive nature of financial markets.
The Financial Industry Regulatory Authority, the financial industry’s self-regulating body, is proposing a new rule that would require Wall Street brokers pulled to a new firm with a signing bonus of more than $50,000 to disclose it to clients, according to Bloomberg. The brokers would have to tell their clients how much they were paid to come to a new firm before they could try to convince them to follow.
If FINRA goes through with the signing bonus measure it would be just one of many ways Wall Street staffers may see their pay curbed this year. Wall Street bonuses will likely be the lowest in years, this year, the New York Post reported earlier this month. And banks, including Citigroup and Morgan Stanley, have announced that they’re slashing thousands of jobs.