The SEC took a step forward today to bring its rule book in compliance with the Dodd-Frank financial reform bill. Some financial sectors got off easier than others. Instead of relying on the credit-rating agencies who played a role in that little sub-prime kerfuffle you may remember, money-market funds will now rely on the "judgment" of the funds and the funds' board of directors to assess risk. Freewheeling finance, wheeeee! Large brokers and investment advisers, including hedge funds, didn't fare quite as well. On a 3-to-2 vote, The Wall Street Journal reports that SEC, like the FDIC, approved restrictions on bonuses for that sector from executives down on to lower-level employees.
Wednesday's proposal would require brokers and advisers with more than $1 billion in assets to disclose the bonus arrangements of their executives, directors and lower-level employees to the SEC annually. Bonus arrangements deemed by regulators to encourage inappropriate risks or that could cause financial loss would be banned. As with the FDIC plan, the SEC proposal would require firms with at least $50 billion in assets to hold half of the bonuses of top executives and others for three years or longer.
Transparency and considering about the consequences of high-risk investments? It's like they don't even understand Wall Street at all.