SEC Aims for Transparency in Incentive-Based Pay Packages

March 10, 2011Articles Westlaw News & Insights

In accordance with rulemaking required under the Dodd-Frank Act, the SEC recently voted to propose rules for incentive based pay at broker-dealers and investment advisers. The fundamental purpose of these proposed rules is to promote enhanced disclosure of incentive-based compensation practices at firms with over $1 billion in assets. The proposed rulemaking would also impose additional obligations on broker-dealers and investment advisers with $50 billion in assets. The SEC proposal is also focused on barring pay practices that promote inappropriate risk taking. In short, the SEC is seeking to foster transparency and, at the same time, protect investors from compensation practices that would reward high risk at the potential expense of the client.

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