According to the article below, money managers and other financial firms will be required to disclose incentive-based compensation arrangements to federal regulators. The new law mandates that regulations be instituted to ban incentive-based compensation arrangements that encourage inappropriate risks. That seems to be pretty broad and could be open to interpretation. This is such a widely-used practice.
June
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Regulators given broad powers over managers' pay
By Doug Halonen September 5, 2010 6:01 am ET
Investment News: "Money managers are jittery about a provision in the financial-reform law that gives the Securities and Exchange Commission and other federal regulators authority to decide whether their compensation is “excessive.”
The SEC, the Federal Reserve, the Federal Deposit Insurance Corp. and other key federal agencies with financial industry oversight must jointly come up with compensation rules under Section 956 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
By April, the new law mandates that regulations be instituted to ban “incentive-based compensation arrangements” that encourage “inappropriate risks” — either because those arrangements result in payment of “excessive compensation, fees or benefits” or could lead to “material financial loss” to the firm.
Money managers and other financial firms also will be required to disclose incentive-based compensation arrangements to federal regulators.
Incentive- or performance-based bonuses are widely used by money managers, according to David Tittsworth, executive director of the Investment Adviser Association. “The bonus structure is in play,” he said.
“It's a big deal,” said Timothy Bartl, senior vice president and general counsel for the Center on Executive Compensation, a lobbying group that opposes mandatory say-on-pay proposals. “It has prohibitions and controls over private-sector compensation.”
The new regulation “could hurt the [money management] industry by increasing costs and uncertainty,” said Alan Johnson, managing director of the executive compensation firm Johnson & Associates Inc.
Some money managers declined to comment on the record, contending that they want to reserve judgment until they see what form the SEC's regulations take.
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