SEC proposes prohibition of risky incentive-based compensation arrangements
On March 2, the U.S. Securities and Exchange Commission proposed a rule that would prohibit certain institutions with consolidated assets of $1 billion or more from establishing or maintaining incentive-based compensation arrangements that encourage executive officers, employees, directors or principal shareholders to expose the institution to inappropriate risks by providing excessive compensation, or that encourage inappropriate risks that could lead to material financial loss. The proposals would apply to institutions with consolidated assets of $1 billion or more and include brokers and dealers registered under Section 15 of the Securities Exchange Act of 1934 and investment advisers as defined under section 202(a)(11) of the Investment Advisers Act of 1940.
The proposal, which responds to a requirement by Dodd-Frank to prohibit such compensation arrangements, would also require the covered institutions to disclose information about their incentive-based compensation arrangements. The proposal will be open for a 45-day comment period once it is published in the Federal Register.
