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compensation that petitioner paid in compensation for those years
fell within “industry standards”.4 By “industry standards”, Mr.
Matthews was referring to the group average percentages that
aggregate compensation represented of net revenues and pretax
income before payment of compensation (which, as discussed supra,
were 60.2 percent and 84.1 percent, respectively) that he
computed for the 27 broker-dealers he examined. He further
opined that petitioner’s 1996 fiscal year compensation
percentages of 36.3 percent and 39.6 percent were quite low by
industry standards.
Mr. Matthews also opined that the annual compensation
petitioner paid Mr. Wechsler for its 1997 and 1998 fiscal years
was reasonable. He explained that the higher compensation
percentage of 358.5 percent for 1997 was caused by that year’s
lower net revenue from lower market prices for petitioner’s
portfolio securities. He maintained that the compensation
percentage for 1997 should be analyzed by combining the financial
data for 1996 and 1997. He computed that the combined aggregate
compensation petitioner paid for those 2 years was 48.7 percent
of its combined 1996 and 1997 net revenues and 57.9 percent of
its combined 1996 and 1997 pretax income before payment of
4 We read this conclusion (and the similar conclusions for
1997 and 1998) in conjunction with Mr. Matthews’s conclusion that
Mr. Wechsler was entitled to a major share of the aggregate
compensation petitioner paid.
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