FDIC Proposes Rules for the Recoupment of Compensation from Executives of Failed Financial Institutions I hope this does not apply to any of you, but on Tuesday, the Board of Directors of the Federal Deposit Insurance Corporation (FDIC) approved a Notice of Proposed Rulemaking (NPR) to clarify application of the orderly liquidation authority contained in Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act, "Orderly Liquidation Authority" (OLA). The NPR clarifies issues important to the implementation of the OLA, including how compensation will be recouped from senior executives and directors who are substantially responsible for the failure of the firm.
The NPR proposes a comprehensive framework for the priority payment of creditors and for the procedures for filing a claim with the receiver and, if dissatisfied, pursuing the claim in court. The NPR also would define the ability of the receiver to recoup compensation from persons who are substantially responsible for the financial condition of the company under Section 210(s) of the Dodd-Frank Act. Under the NPR, before seeking to recoup compensation, the receiver must consider whether the senior executive performed his or her responsibilities with the requisite degree of skill and care, and whether the individual caused a loss that materially contributed to the failure of the financial company. However, for the most senior executives, including those performing the duties of CEO, COO, CFO, as well as the Chairman of the Board, the NPR creates a presumption that they are substantially responsible and thus subject to recoupment of up to two years of compensation. The NPR provides an exception for executives recently hired by the financial company specifically for improving its condition.
On March 16, 1751, James Madison was born in Port Conway, Va. (d. June 28, 1836). Madison was a political philosopher, one of the Founding Fathers of the United States and fourth President of the United States (1809–1817). He was the principal author of and considered to be the "Father of the Constitution." He also wrote more than 1/3 of the Federalist Papers, by far the most influential commentary on the Constitution. He also was responsible for the first ten amendments to the Constitution and, thus, is also known as the "Father of the Bill of Rights." Not a bad career.