Thursday, March 30, 2023 | Back issues
Courthouse News Service Courthouse News Service

SEC Offers Rule on Incentive-Based Pay

WASHINGTON (CN) - The SEC on Wednesday proposed a rule that would require some financial institutions to disclose the structure of their incentive-based pay, and prohibit them from basing pay on arrangements that encourage inappropriate risks. The SEC-regulated financial institutions affected by the rule include broker-dealers and investment advisers with $1 billion or more in assets.

The proposed rule stems from Section 956 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which requires the SEC and other agencies to write such rules and guidelines.

The rules would require reports on incentive-based compensation to be filed annually with SEC;

Prohibit incentive-based compensation that encourages inappropriate risk-taking through excessive compensation or that could lead to financial loss to the firm;

Provide additional requirements for financial institutions with $50 billion or more in assets, including deferral of incentive-based compensation of executive officers and approval of compensation for people whose jobs give them the ability to expose the firm to a substantial amount of risk; and

Require them to develop policies and procedures that ensure and monitor compliance.

The SEC announced the rule in a statement on Wednesday. Public comments on it must be received within 45 days after it is published in the Federal Register.

Read the Top 8

Sign up for the Top 8, a roundup of the day's top stories delivered directly to your inbox Monday through Friday.