SEC Issues Proposals to Implement Dodd-Frank Act Compensation Committee Requirements

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The SEC recently issued rule proposals relating to compensation committee independence and compensation advisers. The proposals are in response to the Dodd-Frank Wall Street Reform and Consumer Protection Act enacted last year, which added new Section 10C to the Securities Exchange Act of 1934 requiring the SEC to adopt rules directing the national securities exchanges and national securities associations to adopt listing standards relating to (i) the independence of the members of a compensation committee, (ii) the committee’s authority to retain compensation consultants and other advisers and (iii) the committee’s responsibility for the appointment, compensation and work of any consultant or adviser. In addition, Section 10C requires each company to disclose in its annual meeting proxy statement whether its compensation committee retained or obtained the advice of a compensation consultant and to disclose information about compensation consultant conflicts of interest. Comments on the SEC’s proposals were due by April 29, 2011.

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