§5641 — Title 12 Banks and Banking | U.S. Code

Summary

Federal regulators must write joint rules within 9 months after July 21, 2010 that require covered financial institutions to tell the regulators how their incentive-based pay plans are set up. The reports must show whether a plan could give an executive, employee, director, or main shareholder excessive pay or could lead to a big financial loss. Banks and other firms do not have to report actual pay for specific people, and firms with no incentive pay plans do not have to report anything. The regulators must also, within the same 9 months, ban any kinds or features of incentive pay that they find encourage risky behavior by causing excessive pay or possible big losses. They must make these rules similar to the pay rules used for insured banks and consider the standards in section 1831p–1(c). Enforcement will be under section 505 of the Gramm-Leach-Bliley Act and treated as a violation of subtitle A of title V. "Appropriate Federal regulator" means the Federal Reserve Board, the Office of the Comptroller of the Currency, the FDIC Board, the Director of the Office of Thrift Supervision, the NCUA Board, the SEC, and the Federal Housing Finance Agency. "Covered financial institution" means depository institutions and their holding companies, registered broker-dealers, credit unions, investment advisers, the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, and any other firms the regulators add. The rules do not apply to covered institutions with less than $1,000,000,000 in assets.

Title 12, §5641

Banks and Banking — Source: USLM XML via OLRC

(a)(1)Not later than 9 months after July 21, 2010, the appropriate Federal regulators jointly shall prescribe regulations or guidelines to require each covered financial institution to disclose to the appropriate Federal regulator the structures of all incentive-based compensation arrangements offered by such covered financial institutions sufficient to determine whether the compensation structure—

(A)provides an executive officer, employee, director, or principal shareholder of the covered financial institution with excessive compensation, fees, or benefits; or

(B)could lead to material financial loss to the covered financial institution.

(2)Nothing in this section shall be construed as requiring the reporting of the actual compensation of particular individuals. Nothing in this section shall be construed to require a covered financial institution that does not have an incentive-based payment arrangement to make the disclosures required under this subsection.

(b)Not later than 9 months after July 21, 2010, the appropriate Federal regulators shall jointly prescribe regulations or guidelines that prohibit any types of incentive-based payment arrangement, or any feature of any such arrangement, that the regulators determine encourages inappropriate risks by covered financial institutions—

(1)by providing an executive officer, employee, director, or principal shareholder of the covered financial institution with excessive compensation, fees, or benefits; or

(2)that could lead to material financial loss to the covered financial institution.

(c)The appropriate Federal regulators shall—

(1)ensure that any standards for compensation established under subsections (a) or (b) are comparable to the standards established under section 1831p–1 11 See References in Text note below. of this title for insured depository institutions; and

(2)in establishing such standards under such subsections, take into consideration the compensation standards described in section 1831p–1(c) of this title.

(d)The provisions of this section and the regulations issued under this section shall be enforced under section 505 of the Gramm-Leach-Bliley Act [15 U.S.C. 6805] and, for purposes of such section, a violation of this section or such regulations shall be treated as a violation of subtitle A of title V of such Act [15 U.S.C. 6801 et seq.].

(e)As used in this section—

(1)the term “appropriate Federal regulator” means the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the Board of Directors of the Federal Deposit Insurance Corporation, the Director of the Office of Thrift Supervision, the National Credit Union Administration Board, the Securities and Exchange Commission, the Federal Housing Finance Agency; and

(2)the term “covered financial institution” means—

(A)a depository institution or depository institution holding company, as such terms are defined in section 1813 of this title;

(B)a broker-dealer registered under section 78o of title 15;

(C)a credit union, as described in section 461(b)(1)(A)(iv) of this title;

(D)an investment advisor, as such term is defined in section 80b–2(a)(11) of title 15;

(E)the Federal National Mortgage Association;

(F)the Federal Home Loan Mortgage Corporation; and

(G)any other financial institution that the appropriate Federal regulators, jointly, by rule, determine should be treated as a covered financial institution for purposes of this section.

(f)The requirements of this section shall not apply to covered financial institutions with assets of less than $1,000,000,000.

Notes & Related Subsidiaries

Editorial Notes

References in Text

section 1831p–1 of this title, referred to in subsec. (c)(1), was in the original “section of the Federal Deposit Insurance Act (12 U.S.C. 2 1831p–1)”, and was translated as reading “section 39 of the Federal Deposit Insurance Act”, which is classified to section 1831p–1 of this title, to reflect the probable intent of Congress. The Gramm-Leach-Bliley Act, referred to in subsec. (d), is Pub. L. 106–102, Nov. 12, 1999, 113 Stat. 1338. Subtitle A (§§ 501–510) of title V of the Act is classified principally to subchapter I (§ 6801 et seq.) of chapter 94 of Title 15, Commerce and Trade. For complete classification of this Act to the Code, see

Short Title

of 1999 Amendment note set out under section 1811 of this title and Tables.

Statutory Notes and Related Subsidiaries

Effective Date

Section effective 1 day after July 21, 2010, except as otherwise provided, see section 4 of Pub. L. 111–203, set out as a note under section 5301 of this title.

§5641 Enhanced Compensation Structure Reporting