Congressman Barney Frank (D-MA) announced on Wednesday that he has introduced legislation that would prevent officers, directors and employees of financial firms from purchasing insurance to prevent them from having to pay a compensation “clawback” or a civil penalty when their actions harm their company.

The Executive Compensation Clawback Full Enforcement Act of 2012 would apply any officer, director, or employee of a financial firm who is required under a federal financial regulatory law to repay previously earned compensation or to pay a civil penalty to be personally liable for the amounts owed. It would prevent them from using insurance or other forms of hedging to protect their personal assets under these laws. Employers would also be prohibited from providing such insurance protection.

Compensation clawback provisions are included in both the Wall Street Reform and Consumer Protection Act of 2010 (the Dodd-Frank Act) and the Sarbanes Oxley Act.

The punitive measure has been bandied about lately in response to the still-emerging details of a trade that lost banking giant JPMorgan at least $3 billion. Some shareholders, including New York City Comptroller John Liu (NYC pension funds hold roughly  $400 million in JP Morgan stock) have called for a compensation clawback  from responsible executives, notably Chief Investment Officer Ina Drew.

Sen. Scott Brown (R-MA) also suggested a clawback action in a May 16 letter to JPMorgan Chairman and CEO Jamie Dimon.

"At your shareholding meeting you noted that the mistakes made were 'self-inflicted' and that a loss like this should have never happened,” h e wrote. “Given these circumstances, I would urge you to impose financial penalties against the responsible parties in your company by conducting a compensation clawback review."

 “The provision of the financial reform bill mandating that compensation systems for financial executives which include bonuses also make possible clawbacks is an important step forward in our efforts to avoid the terrible mistakes of the past,” Frank said in a statement announcing his newly proposed legislation. “The creation of insurance policies to insulate financial executives from clawbacks is one more effort by some in the industry to perpetuate a lack of accountability.”

“Executives who preside over billions of dollars in losses should not be protected from the results of their decisions, especially if those decisions run afoul of our securities laws or involve inappropriate risk-taking,” said Rep. Henry Waxman (D-Calif.), one of the bill's original co-sponsors.