SEC Proposes Rule on Disclosure of Incentive-Based Pay

“Our staff has worked closely with other federal regulators and the proposal reflects a series of carefully considered compromises,” said SEC Chairman Mary Schapiro (left) in a statement. “As with any such undertaking, there’s a challenge in finding common means to appropriately address Congress’s mandate, so we look forward to hearing public comment on the proposed rules.”

The SEC’s proposed rules for certain financial institutions would:

• Require reports related to incentive-based compensation that they would file annually with SEC.
• Prohibit incentive-based compensation arrangements that encourage inappropriate risk-taking by providing excessive compensation or that could lead to material 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 job functions give them the ability to expose the firm to a substantial amount of risk.
• Require them to develop policies and procedures that ensure and monitor compliance with requirements related to incentive-based compensation.

Public comments on the rule proposal should be received within 45 days after it is published in the Federal Register.