[Photo: Chris Dodd and Barney Frank have a 'victory lap', courtesy of President Obama]

by Howard Haykin

Following the mandates of the Dodd-Frank Act, six federal regulators jointly proposed in 2016 a rule that would impose significant restrictions on incentive-based compensation arrangements at large financial institutions - including banks, investment advisors, broker-dealers and credit unions.

The 6 regulators were: (i) National Credit Union Administration; (ii) Office of the Comptroller of the Currency; (iii) Federal Deposit Insurance Corporation; (iv) Federal Housing Financing Agency; (v) the Federal Reserve System; and, (vi) the SEC.

Among other things, the proposed rule would:

• require all incentive-based compensation payable to a “senior executive officer” or “significant-risk taker” at a Level 1 or Level 2 covered institution to be subject to a 7-year claw-back requirement;
• require a substantial portion of incentive-based compensation payable to a “senior executive officer” or “significant-risk taker” at a Level 1 or Level 2 covered institution to be deferred and subject to the risk of forfeiture;
• expand the group of executives considered “senior executive officers” under the rule;
• prohibit Level 1 and Level 2 covered institutions from accelerating the incentive-based compensation that is required to be deferred, other than in the event of death or disability.

SO MUCH FOR THE BEST INTENTIONS OF GOVERNMENT.   On Thursday, the White House released its bi-annual regulatory agenda on regulation and, to no one’s surprise, the proposed rule was listed under the heading “Long-Term Action” - rather than "Pending." The LTA designation, in Washington-speak, means the federal government has halted work on the proposed rule and it's basically 'dead in the water."  

[For the record, the law was supposed to be completed by 2011.]