SEC Proposes Incentive Compensation Restrictions

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By Rob Tricchinelli

May 6 — The Securities and Exchange Commission proposed May 6 its version of Dodd-Frank Act incentive compensation prohibitions, designed to curb excessive risk-taking by financial institutions (RIN:3235-AL06).

Under the proposal, firms' executives face at least a four-year wait to receive most bonus pay and would have to give money back if companies experience large losses.

The agency is the last to propose the rule, following the Office of the Comptroller of the Currency, Federal Reserve Board, Federal Deposit Insurance Corporation, Federal Housing Finance Agency and National Credit Union Administration. Commissioner Michael Piwowar voted against the proposal.

Risk Thresholds

The proposal would most strongly affect companies with $250 billion or more in assets.

Companies could claw back bonuses, even if they have already vested, from employees who take inappropriate risks, face enforcement actions or surpass company risk thresholds and sustain losses. Those clawbacks would loom for seven years and could even be sought from employees after they leave the company.

The rule was first proposed in 2011 (42 SLD, 3/3/11).

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To contact the editor responsible for this story: Phyllis Diamond at

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