Federal Register: Incentive-Based Compensation Arrangements

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Gavel.png FINAL RULE: This page refers to the joint proposed rule on Incentive-Based Compensation Agreements. For the reproposed rule of May 2016, click HERE.
Dodd-Frank Timeline, Incentive-Based Compensation Arrangements, SEC
Proposal Date Re-proposed Rule Comment Deadline
April 14, 2011 May 6, 2016 July 22, 2016

On March 2, 2011, the SEC held an open meeting concerning incentive-based compensation arrangements under the Dodd-Frank Act. Among the topics at this meeting were the definition of "covered financial institution," annual reports by these financial institutions regarding incentive-based compensation, and the prohibition of excessive incentive-based compensation that would encourage inappropriate risk-taking on the part of executives and/or result in material losses for the institution.<ref>SEC Proposes Rules on Disclosure of Incentive-Based Compensation Arrangements at Financial Institutions. SEC. Retrieved on March 2, 2011.</ref> Final rules were added to the Federal Register on April 14, 2011.

Proposed Rules

  • Incentive-based compensation annual reports would be required of qualifying institutions.
  • Excessive compensation encouraging inappropriate risk-taking on the part of executives and/or resulting in losses by the institution would be prohibited.
  • An additional threshold of $50 billion for certain institutions would be added, and requirements such as the "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" would be enforced.
  • Compliance policies and procedures regarding incentive-based compensation would be created and enforced.

Annual reports would include the following information:

  1. "A narrative description of the components of the firm’s incentive-based compensation arrangements;
  2. A succinct description of the firm’s policies and procedures governing its incentive-based compensation arrangements; and
  3. A statement of the specific reasons as to why the firm believes the structure of its incentive-based compensation arrangement will help prevent it from suffering a material financial loss or does not provide covered persons with excessive compensation."



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