September 12, 2014
During a Senate Banking Committee hearing this week on the status of financial reform and regulation, Senator Robert Menendez, author of the Dodd-Frank pay ratio requirement, urged SEC Chair Mary Jo White to finalize the rule as proposed, noting that the proposal "accurately reflects the legislative intent that I and others intended." In response to Senator Menendez’s question about the timing of a final rule, Chair White indicated it was her "hope and expectation" that the Commission would approve a pay ratio rule before the end of 2014, to which the Senator responded he wanted “more expectation and less hope” that the rules would be completed this year. However, Chair White cautioned that the SEC staff is still working through the more than 128,000 comment letters on the proposal which must occur before the staff provides the Commission with a final recommendation. Chair White also noted that she expected the Commission would act on the Dodd-Frank clawback, pay for performance, and hedging rules in the "near future." Chair White's comments align with the SEC's regulatory schedule published on a semiannual basis which estimates the pay ratio as well as the proposed clawbacks and pay for performance disclosure rules will be approved this fall. It is worth noting that the regulatory agenda is non-binding and the SEC has regularly missed the published deadlines. However, White's comments reinforce the fact that final pay ratio rules are still contemplated this year despite the fact the Commission is currently working several other much more substantial rulemakings including over the counter derivative regulations, asset-backed securities, and clearing agencies.