Yesterday, the Chairman of the SEC, Mary Schapiro, issued an open letter to remind broker-dealer firms and their chief executive officers of their supervisory responsibilities.

The letter comes in response to recent reports that, in an effort to attract registered representatives in a newly competitive market, certain broker-dealer firms may be offering “substantial inducements.” Such arrangements, Chairman Schapiro cautioned, may lead to registered representatives believing that they must sell securities at a sufficiently high level to justify their compensation. Such incentives, according to Chairman Schapiro, may conflict with a registered representative’s obligations to his or her clients. Additionally, the letter warned that as a firm’s sales force increases, the CEOs of broker-dealers must ensure that the size of their supervisory and compliance infrastructure remains appropriate.