SEC Proposes Incentive-Based Compensation Rule

By: Donald P. Carleen, Jessica Forbes, Jeffrey Ross, Amy L. Blackman

On March 2 the Securities and Exchange Commission (the "SEC") announced a proposed rule (the "Proposed Rule") that would require "covered financial institutions," including certain investment advisers and broker-dealers, to disclose the structure of their incentive-based compensation practices to the SEC and prohibit these entities from maintaining compensation arrangements that encourage inappropriate risks.

The Proposed Rule is part of an inter-agency parallel rulemaking project mandated by Section 956 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Some of the other agencies involved include the Office of the Comptroller of the Currency, the Office of Thrift Supervision and the Federal Deposit Insurance Corporation. Each relevant agency will be issuing a rule that is substantially similar to the Proposed Rule. Once all of the relevant agencies approve their versions of the rule, a consolidated document will be jointly published in the Federal Register, followed by a 45-day comment period.

The details of the Proposed Rule discussed herein are taken from the FDIC version of the rule, available at

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