More On Legal & Compliance
from The Advisor's Professional Library- Differences Between State and SEC Regulation of Investment Advisors States may impose licensing or registration requirements on IARs doing business in their jurisdiction, even if the IAR works for an SEC-registered firm. States may investigate and prosecute fraud by any IAR in their jurisdiction, even if the individual works for an SEC-registered firm.
- Client Communication and Miscommunication RIA policies and procedures must specify what type of communications should be retained. The safest course of action is for RIAs to retain all communications—to clients, from clients, and about client accounts. To comply with fiduciary obligations, communications must be thorough and not mislead.
The House Committee on Financial Services got input on Friday from two panels regarding the issue of executive compensation oversight.
The Dodd-Frank Wall Street Reform and Consumer Protection Act specified a number of provisions regarding executive compensation and risk-taking. Testimony at the hearing touched on several of these as witnesses provided suggestions and information.
Testifying on the first panel were Scott Alvarez, general counsel of the Board of Governors of the Federal Reserve System; Meredith Cross, director of the Division of Corporation Finance, U.S. Securities and Exchange Commission; and Marc Steckel, associate director of the Division of Insurance and Research, Federal Deposit Insurance Corporation. Martin Baily, senior fellow at The Brookings Institution; and Darla Stuckey, senior vice president for policy and advocacy at the Society of Corporate Secretaries and Governance Professionals, made up the second panel.
Alvarez testified in part about the guidance on incentive compensation proposed by the Fed in 2009, and also detailed the review requirements for companies to evaluate their own incentive compensation structures.
Cross mentioned that the SEC has instituted e-mail boxes on the SEC's website to allow "interested parties" to make preliminary comments prior to the start of the official comments period.
Issues raised in Steckel's testimony included the difficulty of creating regulations for a wide variety of companies, and also for employees who may formerly not have been included in compensation oversight because of their lower level within the companies for which they work, as well as the importance of ensuring that incentive compensation programs align employees' interests with those of the insured depository institution (IDI) for which they work.
Stuckey's testimony addressed, among other issues, the logistics of voting on "say-on-pay" votes (considering the influence of proxy advisory firms on voting) and the frequency of votes on "say-when-on-pay" rules (according to Stuckey's testimony, "companies must . . . ask shareholders to cast a nonbinding vote on whether the company should hold shareholder advisory votes on executive compensation every one, two, or three years")
Baily's testimony suggested that there be put in place no limits on the amount of executive compensation, but that strictures on the method and time of payout would be appropriate. He also spoke out against "claw-back" efforts, calling them a "mistake because they are unworkable."
While much has already been done to implement the provisions of the Dodd-Frank Act, much still remains to be done.
