Jenner & Block

Client Advisory: The SEC Proposes Enhanced Executive Compensation Reporting for Broker-Dealers and Investment Advisers and Eliminating References to Credit Ratings Under the Investment Company Act

On March 2, 2011, the Securities and Exchange Commission (“SEC”) proposed executive compensation rules primarily affecting broker-dealers and investment advisers (“Proposed Compensation Rules”) and credit rating rules primarily affecting money market funds and companies that register their securities under the Investment Company Act of 1940 (“Proposed Credit Rules”).  The Proposed Compensation Rules would require registered broker-dealers and investment advisers with assets of at least $1 billion to file annual reports with the SEC on its incentive-based compensation arrangements and prohibit them from providing incentive-based compensation that could encourage inappropriate risk taking.  The Proposed Credit Rules would eliminate the requirement that money market funds invest only in securities that receive certain credit ratings and also eliminate credit rating references from two rules and four forms under the Investment Company Act.