The top Democrat overseeing financial markets pushed the Securities and Exchange Commission to finalize an executive pay “clawback” regulation in the wake of the massive Equifax data breach.
Sens. Sherrod Brown (D-Ohio) prodded SEC Chair Jay Clayton on Tuesday to finish the rulemaking process, which was initially ordered more than seven years ago by Dodd-Frank financial reform.
“I intend to finish the mandate. There is a prioritization,” Clayton told Brown, the vice chair of the Senate Banking Committee.
“I am going to be very open with this committee and the American people in the regulatory flexibility agenda about our priorities,” Clayton added.
Section 954 of Dodd-Frank forces publicly-listed companies to develop policies to reclaim “incentive-based compensation.” The law allows for clawbacks when a company issues an accounting restatement caused by “material noncompliance…with any financial reporting requirement.”
Clayton said Tuesday that there should be rules to allow companies to get money back “if executives have profited from a high stock price that’s the result of a failure to disclose or other acts that are clearly violations of our securities laws.”
Before the hearing, Equifax announced that CEO Richard Smith was retiring without a 2017 bonus or a severance. The terms of the deal did, however, grant Smith but an $18 million pension—though that is subject to change, according to MarketWatch.
On September 7, Equifax disclosed it had been the victim of a massive hack over the course of months in the summer. The cyber-attack threatened 143 million Americans’ highly-sensitive information.
Three executives sold $1.8 million worth of shares in the company, days after it learned about the data breach. Smith is not among the trio.
Citing agency policy, Clayton on Tuesday wouldn’t confirm or deny an ongoing insider trading inquiry. Last week, Bloomberg reported the existence of an SEC investigation, when US attorneys in Atlanta revealed that the Justice Department had opened criminal probes looking into the stock trades.
The Equifax breach is the second major crisis in confidence to strike the financial industry in a 12-month span.
Last year, Wells Fargo disclosed that its sales targeting led to millions of unauthorized account openings over the span of a half-decade. The number of victims and the scope of the damage done by aggressive company practices has only grown since Wells first settled with federal regulators in a deal worth $185 million.
Despite the recent malfeasance—and despite efforts by both companies to use fineprint to insulate themselves from class action lawsuits—Senate Republican leaders are reportedly whipping for votes to repeal a Consumer Financial Protection Bureau rule prohibiting forced arbitration by banks.
“House Republicans already voted to reverse the rule, and now Senate Republicans are gearing up to follow suit,” Sen. Elizabeth Warren (D-Mass.) said Monday night, in a floor speech.
Brown echoed Warren in a similar speech after Tuesday’s Senate Banking Committee hearing.
“It’s despicable that Congress is trying to cover for big corporations looking to cheat consumers and overturn this rule,” he said.
Senate Majority Leader Mitch McConnell (R-Ky.) recently said he wants to take up the House-passed rule repeal, according to The Intercept, but he still isn’t sure if he has the votes. The publication reported Monday that McConnell made the declaration to “financial industry lobbyists at a dinner in Washington.”
