[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4084 Introduced in House (IH)]
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118th CONGRESS
1st Session
H. R. 4084
To defer part of the compensation of senior employees of large
financial institutions (and their subsidiaries), to use such deferred
amounts to pay any civil or criminal fines that may be levied on the
institution (or subsidiary), and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
June 13, 2023
Ms. Tlaib introduced the following bill; which was referred to the
Committee on Financial Services
_______________________________________________________________________
A BILL
To defer part of the compensation of senior employees of large
financial institutions (and their subsidiaries), to use such deferred
amounts to pay any civil or criminal fines that may be levied on the
institution (or subsidiary), and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Fostering Accountability In
Remuneration Fund Act of 2023'' or the ``FAIR Fund Act of 2023''.
SEC. 2. FINDINGS.
Congress finds the following:
(1) Going back at least to the Wall Street crash of 1929,
improper pay structures have contributed to financial crises in
the United States.
(2) Widespread financial misconduct led to the 2008
financial crisis, which caused the Great Recession.
Compensation structures incentivized executives and employees
to pursue short-term profits without regard for long-term risks
to their firms or the broader financial system. While culpable
employees and executives continued to receive extraordinary
pay, homeowners, workers, and communities paid the price for
their greed and recklessness.
(3) As seen in the 2023 banking failures, misaligned
incentives within the financial sector continue to fail to hold
executives and their senior employees accountable for their
actions. Silicon Valley Bank CEO Greg Becker enjoyed millions
of dollars in incentive-based bonuses, while his bank
mismanaged risks and failed to respond to regulator's warnings.
In the hours before the failure of Silicon Valley Bank,
managers paid themselves millions of dollars for what they
deemed to be superior performance.
(4) Employees in the financial sector continue to walk away
with generous bonuses while their firms break the law and
undermine the stability of the financial system. Compensation
incentives that promote inappropriate risk-taking are a threat
to economic security.
SEC. 3. DEFERMENT OF SENIOR EMPLOYEE COMPENSATION.
(a) Deferment Fund.--Each covered financial institution and each
subsidiary of a covered financial institution shall establish a
deferment fund, which shall--
(1) only contain compensation deferred under subsection
(b); and
(2) only be used as permitted by this section.
(b) Deferment of Compensation.--Each covered financial institution
and each subsidiary of a covered financial institution shall--
(1) each year, defer the compensation of each senior
employee of the covered financial institution or subsidiary in
an amount equal to at least 50 percent of the amount that the
employee's total compensation for the year exceeds 7 times the
compensation of the median paid employee of the consolidated
financial institution for the year;
(2) place all compensation deferred under paragraph (1)
into the deferment fund of the covered financial institution or
subsidiary; and
(3) after the end of the covered deferment period, if
sufficient funds remain in the deferment fund, pay the senior
employee the amount of compensation deferred and for which the
covered deferment period ended.
(c) Use of Deferment Fund.--
(1) Use of fund to pay fines.--If a covered financial
institution or subsidiary of a covered financial institution is
subject to a civil or criminal fine, the covered financial
institution or subsidiary shall first pay such fine out of
amounts contained in the deferment fund of the covered
financial institution or subsidiary.
(2) Use of funds to make depositors whole.--If a covered
financial institution is a depository institution or a credit
union and the depository institution or credit union fails, the
depository institution or credit union shall use amounts in the
deferment fund of the depository institution or credit union to
ensure depositors do not lose any of their deposits. All
amounts in the deferment fund shall be used before any amounts
are paid from the Deposit Insurance Fund or the National Credit
Union Share Insurance Fund, as applicable, for such purpose.
(d) Cancellation of Compensation That Cannot Be Paid From Deferment
Fund.--Each covered financial institution or subsidiary shall have in
place a policy that cancels any compensation deferred under subsection
(b) that cannot be repaid as described under subsection (b)(3), due to
the deferment fund lacking sufficient funds.
(e) Treatment of Deferred Compensation of Ex-Employees.--With
respect to an individual that has compensation deferred pursuant to
subsection (b), but is no longer employed by the applicable covered
financial institution or subsidiary, if the covered financial
institution or subsidiary is required to pay a fine from its deferment
fund for misconduct that occurred after the individual was no longer
employed by the covered financial institution or subsidiary, the
covered financial institution or subsidiary shall segregate the
individual's deferred compensation from other amounts in the deferment
fund and shall not use such segregated amounts for any purpose other
than repaying the individual pursuant to subsection (b)(3) or for the
payment of another fine for misconduct that occurred while the
individual was still employed by the covered financial institution or
subsidiary.
(f) Rulemaking.--The Board of Governors of the Federal Reserve
System, the Comptroller of the Currency, the Federal Deposit Insurance
Corporation, the Federal Housing Finance Agency, the National Credit
Union Administration, and the Securities and Exchange Commission may
each issue such rules as may be necessary to carry out this section
with respect to covered financial institutions and subsidiaries subject
to supervision by the agency.
(g) Definitions.--In this section:
(1) Appropriate federal regulator.--The term ``appropriate
Federal regulator'' means--
(A) the appropriate Federal banking agency, as
defined under section 3 of the Federal Deposit
Insurance Act;
(B) the Federal Housing Finance Agency, in the case
of the Federal National Mortgage Association or the
Federal Home Loan Mortgage Corporation;
(C) the National Credit Union Administration, in
the case of a credit union described under paragraph
(6)(C); and
(D) the Securities and Exchange Commission, in the
case of a person described under subparagraph (B) or
(D) of paragraph 6).
(2) Compensation.--With respect to an employee, the term
``compensation'' means any financial remuneration, including
salary, bonuses, incentives, benefits, severance, deferred
compensation, or golden parachute benefits, and any profits
that would be realized from the sale of the securities of the
company employing the employee.
(3) Consolidated financial institution.--With respect to a
financial institution, the term ``consolidated financial
institution'' means the financial institution and all
subsidiaries of the financial institution.
(4) Covered deferment period.--The term ``covered deferment
period'' means--
(A) with respect to a covered financial institution
with less than $10,000,000,000 in consolidated assets,
a number of years, to be determined by the appropriate
Federal regulator if determined necessary by such
appropriate Federal regulator, beginning on the date
the compensation is deferred;
(B) with respect to a covered financial institution
with $10,000,000,000 or more, but less than
$50,000,000, in consolidated assets, 2 years beginning
on the date the compensation is deferred;
(C) with respect to a covered financial institution
with $50,000,000,000 or more, but less than
$250,000,000, in consolidated assets, 6 years beginning
on the date the compensation is deferred; and
(D) with respect to a covered financial institution
with $250,000,000,000 or more in consolidated assets, 8
years beginning on the date the compensation is
deferred.
(5) Covered financial institution.--The term ``covered
financial institution'' means a financial institution with more
than $1,000,000,000 in consolidated assets.
(6) Financial institution.--The term ``financial
institution'' means--
(A) a depository institution or depository
institution holding company, as such terms are defined,
respectively, in section 3 of the Federal Deposit
Insurance Act (12 U.S.C. 1813);
(B) a broker or a dealer registered under section
15 of the Securities Exchange Act of 1934 (15 U.S.C.
78o);
(C) a credit union, as described in section
19(b)(1)(A)(iv) of the Federal Reserve Act;
(D) an investment adviser, as defined in section
202(a) of the Investment Advisers Act of 1940 (15
U.S.C. 80b-2(a));
(E) the Federal National Mortgage Association; and
(F) the Federal Home Loan Mortgage Corporation.
(7) Senior employee.--The term ``senior employee'' means an
employee of a covered financial institution or a subsidiary of
the covered financial institution who--
(A) is a senior executive officer;
(B) has total annual compensation of more than
$1,000,000;
(C) with respect to a covered financial institution
with $50,000,000,000 or more, but less than
$250,000,000--
(i) is in the top 2 percent of the most
highly compensated employees in the
consolidated financial institution; or
(ii) has the authority to commit or expose
0.5 percent or more of the capital of the
consolidated financial institution; or
(D) with respect to a covered financial institution
with $250,000,000,000 or more in consolidated assets--
(i) is in the top 5 percent of the most
highly compensated employees in the
consolidated financial institution; or
(ii) has the authority to commit or expose
0.5 percent or more of the capital of the
consolidated financial institution.
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