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U.S. Securities and Exchange Commission

Speech by SEC Commissioner:
Opening Remarks Regarding Incentive-Based Compensation Arrangements


Commissioner Elisse B. Walter

U.S. Securities and Exchange Commission

Washington, D.C.
March 2, 2011

I, too, would like to thank the staff for your tireless efforts in preparing the proposed rules before us today. My thanks go especially to the staff of the Division of Trading and Markets for all the time you spent with me and my counsel. Thank you for your thoughtful consideration of my questions and concerns.

I would also like to welcome Eileen Rominger, our new Director of Investment Management, and Mark Cahn, to your first open meeting as General Counsel.

It was Ben Franklin who said, “Remember that time is money.” So, let me be brief and highlight just a few things about this proposal that are of interest to me.

As the release before us today notes, “flawed incentive compensation practices in the financial industry were one of many factors contributing to the financial crisis that began in 2007.” To me, it is simply common sense that a financial institution — and thus its shareholders — can be negatively affected if incentives drive behavior that is not consistent with the institution's overall interests.

To address these flawed compensation practices, Congress adopted Section 956 as part of the Dodd-Frank Act to require the Commission to jointly prescribe with other regulators the proposed rules before us today.

Given the critical role that financial institutions played in the financial crisis and the role that they are continuing to play in our economy’s recovery, I ask that you carefully consider our proposal and our requests for comment. Specifically, I ask that you think about whether the proposed definition of incentive-based compensation is sufficiently broad to include all types of compensation that should be covered under the rule.

Also, are the deferral arrangements required for executive officers appropriate (including the three-year and 50 percent minimums)? And, are there additional considerations that the Commission ought to consider in designing this provision, such as tax or accounting considerations that may affect the ability of larger covered financial institutions to comply with the proposed deferral arrangements?

When you submit your comments, please provide constructive suggestions as to how the Commission can best carry out the language and intent of Section 956. You will note that, as a joint release, this release looks a bit different from the typical Commission release and does not contain the number of requests for comments you would typically see in a Commission proposing release. Please don’t let that dissuade you from sending us your typical, thoughtful comment letters. We encourage you to comment on any aspect of this proposal and especially on the issues noted in the preamble.

Thanks again to the Commission staff for your hard work, and I have no questions.



Modified: 03/02/2011