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Dodd-Frank Rules on Bank Pay, More on SEC Agenda

Melissa Klein Aguilar | February 24, 2011

The Securities and Exchange Commission is set to take up four of the items on its Dodd-Frank Act rulemaking agenda next week, including a proposal to limit risky incentive pay practices by financial firms.


The Commission has scheduled an open meeting on March 2, where it plans to consider whether to propose rules governing incentive-based pay practices at certain financial institutions in accordance with Section 956 of the Dodd-Frank Act. The board of the Federal Deposit Insurance Corp. voted earlier this month to publish such a rule proposal for public comment. Most notably, the proposal would require the largest firms—those with $50 billion or more in assets—to defer at least 50 percent of incentive-based payments for designated executives for at least three years. The SEC and the other agencies involved in the joint rulemaking—the five federal members of the Federal Financial Institutions Examination Council and the Federal Housing Finance Agency—must each approve the proposal before it's published in the Federal Register.


At the same meeting, the Commission is also slated to vote on whether to propose rules for the operation and governance of clearing agencies as part of its required rulemaking to bring oversight to the nearly $600 trillion over-the-counter derivatives market.


The SEC will consider whether to reopen the comment period for Regulation MC. The rule, proposed back in October pursuant to Section 765 of the Dodd-Frank Act, aims to mitigate conflicts of interest at security-based swap clearing agencies, security-based swap execution facilities, and national security exchanges that post or make available for trading security-based swaps.


The agenda also includes more rulemaking proposals to eliminate references in SEC forms and rules to credit ratings, as required under Section 939A of Dodd-Frank. The Act requires the SEC and other federal agencies to eliminate references in their rules requiring the use of credit ratings as an assessment of a security's creditworthiness and replace them with other standards. Earlier this month, the SEC proposed rule amendments that would remove credit ratings as conditions for companies seeking to use short-form registration when registering securities for public sale.