Large broker-dealers and investment advisers would face new restrictions on their incentive-based compensation under a proposal floated by U.S. securities regulators Wednesday.
The plan, approved in a 3-2 vote to be issued for public comment, is substantially similar to one that was proposed by the Federal Deposit Insurance Corp last month. The proposal would place new disclosure requirements and restrictions on incentive-based compensation on firms with assets over $1 billion. It would require the SEC along with all the banking regulators to jointly adopt rules on executive compensation.
The plan would ban compensation that might encourage excessive risk-taking. It would also require some executives at larger firms with $50 billion in assets or more to have at least half of their incentive-based compensation deferred for three years.
Several SEC commissioners and staffers, however, were careful to note that they may have some reservations about whether the deferred compensation structure is appropriate for private investment advisers.
SEC Chairman Schapiro said she hopes to hear from the public on the issue, noting the SEC must be "very attuned to unintended consequences."
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