If adopted, the Proposed Rule would have a significant impact on compensation practices at covered institutions.
On April 21, 2016, the National Credit Union Administration (the NCUA) issued a proposed rule regarding incentive-based compensation paid by certain financial institutions (the Proposed Rule) to implement Section 956 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Section 956).1 Section 956 requires various Federal agencies to issue regulations that limit certain incentive compensation practices at financial institutions. The Office of the Comptroller of the Currency (the OCC), the Federal Deposit Insurance Corporation (the FDIC) and the Federal Housing Finance Agency (the FHFA) released their respective versions of the proposed rule on April 26, 2016, and the Board of Governors of the Federal Reserve System (the Federal Reserve) released its version of the proposed rule on May 2, 2016. The Securities and Exchange Commission (the SEC) (collectively, with the NCUA, the OCC, the FDIC, the FHFA and the Federal Reserve, the Agencies) is expected to release its own substantially similar version of the Proposed Rule. The Proposed Rule significantly revises the proposed rule the Agencies jointly published in the Federal Register on April 14, 2011 (the 2011 Proposed Rule), described in our prior Client Alert, and would require major changes to incentive-based compensation programs at covered institutions (as defined below).
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