The Smith Barney appearance at the meeting of the $100-million Delray Beach municipal pension fund came after a consultant questioned the fact that Smith Barney performed both consulting and brokerage services and was getting paid for both, the South Florida Sun-Sentinel reported. The second consultant was Ocean Ridge, Florida-based Benchmark Financial Services Inc.
Bonnie Baker, director of institutional services at Smith Barney, acknowledged the company accepted commission payments for trades, in addition to a flat consulting fee, but argued that the commission payments were disclosed to the board, according to the newspaper.
Stephen Cypen, the fund’s attorney, said in a separate report that even if the commission fees had been disclosed, Smith Barney still may owe the fund money because the commission fees were not part of the fund’s contract. He said Smith Barney could end up owing money or credit for future service.
Since Smith Barney started working for the fund in 2000, the company received on average $54,000 a year in consulting and commission fees. The contract Smith Barney has with the fund states the fund will pay $15,000 a year for consulting services.
Baker agreed to reinstate language into the contract that would hold them accountable to the highest standard of care in handling pension assets, and agreed to review its compensation fees to determine whether there had been any overpayment.
The Benchmark report by author Edward Siedle also stated that Smith Barney could be issuing quarterly reviews with figures that don’t include fees – possibly making it appear as if the retirement accounts are performing better than they are.