Lavish Wall Street bonuses, long the scorn of lawmakers and shareholders, have met a new foe: the Securities and Exchange Commission.
The agency on Wednesday proposed a crackdown on hefty compensation awarded at big banks, brokerage firms and hedge funds -- a move intended to rein in pay packages that encouraged excessive risk-taking before the financial crisis.
The proposal would for the first time require Wall Street firms to file detailed accounts of their bonuses with the SEC, which could then ban any awards it deemed excessive. The rules would be aimed at top executives and hundreds of rank-and-file employees who receive incentive-based pay.
The move by regulators to have more say on Wall Street pay highlights the huge role financial institutions play in the economy. Although it would be highly unusual for the government to review the compensation of executives in most other industries, big banks pose a systemic risk to the system and in 2008 pushed the economy to the brink.
The SEC's plan, which closely resembles regulations already floated by the Federal Deposit Insurance Corp., is mandated by the Dodd-Frank financial regulatory law. The proposed curbs on compensation ultimately will span seven federal agencies that regulate a wide range of financial firms.
The SEC's three Democratic commissioners voted Wednesday to move forward with the rules. Their decision came over the objection of the SEC's two Republican commissioners, who contended the agency was overstepping its authority.
The party-line vote is noteworthy in that it mirrors a similar partisan battle playing out on Capitol Hill. Republican lawmakers have threatened to slash the SEC's budget to keep it from enforcing the Dodd-Frank act, a product of the previous Democrat-controlled Congress.
The plan would require brokerage firms and investment advisers that manage more than $1 billion to file annual reports about incentive-based pay.
