WASHINGTON — Rep. Barney Frank has introduced a bill that would prohibit financial executives from purchasing insurance to protect themselves from compensation clawback penalties.
Frank said in a press release Wednesday that the bill would require that any officer, director or employee of a financial firm who is ordered to repay any previously earned compensation or pay a civil penalty must be personally liable for the amounts owed. It would also prevent them from using insurance or other forms of hedging to protect their personal assets, and would prohibit employers from purchasing the protection on their behalf.
Several financial laws, including the Dodd-Frank Act and Sarbanes Oxley Act, either direct or allow regulators to clawback compensation if an individual's actions result in violations of law, or unsafe or unsound conduct.
"The provision of the financial reform bill mandating that compensation systems for financial executives which include bonuses also make possible clawbacks is an important step forward in our efforts to avoid the terrible mistakes of the past," Frank, the top Democrat on the Financial Services Committee, said in the release. "The creation of insurance policies to insulate financial executives from clawbacks is one more effort by some in the industry to perpetuate a lack of accountability."
