The Securities and Exchange Commission proposed a rule on Wednesday that would require certain financial institutions to disclose the structure of their incentive-based compensation practices, and prohibit the institutions from instituting pay arrangements that encourage unnecessary and inappropriate risk.
The proposed rule stems from Section 956 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which requires the SEC and several other agencies to jointly write rules and guidelines.
The SEC-regulated financial institutions affected by the rulemaking include broker-dealers and investment advisors with $1 billion or more in assets.