Yesterday seven federal agencies jointly finalized a proposed rule under Section 956 of the Dodd-Frank Wall Street Reform and Consumer Protection Act that would subject financial institutions with $1 billion of assets to substantive and procedural requirements relating to incentive-based compensation. Financial institutions with $50 billion of assets would be subject to additional substantive requirements, including mandatory deferral of such compensation. These requirements would apply to a wide array of financial institutions, including banks, broker-dealers and investment advisers. Other institutions also may be affected.
The proposed rule is substantially the same as the version of the rule issued by the Securities and Exchange Commission on March 3, which we summarized in our client memorandum of that date. The other six agencies that are participating in the joint rulemaking are the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, the National Credit Union Association and the Federal Housing Finance Agency.
Once the proposed rule is published in the Federal Register, which is expected to occur very shortly, it will trigger a 45-day comment period. Appendix C of our March 3 memorandum includes selected questions and topics on which the agencies have requested comment, along with additional topics that may be worth commenting on. The proposed rule states that the agencies propose to make the rule’s requirements effective six months after publication of the final rule in the Federal Register. Therefore, assuming that the rulemaking proceeds according to the anticipated timeline, the rule’s requirements would become effective in late 2011 or early 2012.
Click here for the proposed rule.
Click here for the joint press release announcing the issuance of the proposed rule.
Click here for our client memorandum of March 3.