SEC Proposes Rules on Disclosure of Incentive-Based Compensation Arrangements


As required by Section 956 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Securities and Exchange Commission has announced that it is proposing a rule applicable to broker-dealers and investment advisers with $1 billion or more in assets that would (1) require them to file annual reports with the SEC related to incentive-based compensation; (2) 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; (3) provide additional requirements for firms 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; and (4) require them to develop policies and procedures that ensure and monitor compliance with requirements related to incentive-based compensation.

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