FAIR Fund Act of 2023

I 118TH CONGRESS 1ST SESSION H. R. 4200 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 16, 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 sub- sidiary), and for other purposes. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Fostering Account- 4 ability In Remuneration Fund Act of 2023’’ or the ‘‘FAIR 5 Fund Act of 2023’’. 6 VerDate Sep 11 2014 01:48 Jul 11, 2023 Jkt 039200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H4200.IH H4200 pbinns on DSKJLVW7X2PROD with $$_JOB 2 •HR 4200 IH SEC. 2. FINDINGS. 1 Congress finds the following: 2 (1) Going back at least to the Wall Street crash 3 of 1929, improper pay structures have contributed 4 to financial crises in the United States. 5 (2) Widespread financial misconduct led to the 6 2008 financial crisis, which caused the Great Reces- 7 sion. Compensation structures incentivized execu- 8 tives and employees to pursue short-term profits 9 without regard for long-term risks to their firms or 10 the broader financial system. While culpable employ- 11 ees and executives continued to receive extraordinary 12 pay, homeowners, workers, and communities paid 13 the price for their greed and recklessness. 14 (3) As seen in the 2023 banking failures, mis- 15 aligned incentives within the financial sector con- 16 tinue to fail to hold executives and their senior em- 17 ployees accountable for their actions. Silicon Valley 18 Bank CEO Greg Becker enjoyed millions of dollars 19 in incentive-based bonuses, while his bank mis- 20 managed risks and failed to respond to regulator’s 21 warnings. In the hours before the failure of Silicon 22 Valley Bank, managers paid themselves millions of 23 dollars for what they deemed to be superior perform- 24 ance. 25 VerDate Sep 11 2014 01:48 Jul 11, 2023 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H4200.IH H4200 pbinns on DSKJLVW7X2PROD with $$_JOB 3 •HR 4200 IH (4) Employees in the financial sector continue 1 to walk away with generous bonuses while their 2 firms break the law and undermine the stability of 3 the financial system. Compensation incentives that 4 promote inappropriate risk-taking are a threat to 5 economic security. 6 SEC. 3. DEFERMENT OF SENIOR EMPLOYEE COMPENSA- 7 TION. 8 (a) DEFERMENT FUND.—Each covered financial in- 9 stitution and each subsidiary of a covered financial institu- 10 tion shall establish a deferment fund, which shall— 11 (1) only contain compensation deferred under 12 subsection (b); and 13 (2) only be used as permitted by this section. 14 (b) DEFERMENT OF COMPENSATION.—Each covered 15 financial institution and each subsidiary of a covered fi- 16 nancial institution shall— 17 (1) each year, defer the compensation of each 18 senior employee of the covered financial institution 19 or subsidiary in an amount equal to at least 50 per- 20 cent of the amount that the employee’s total com- 21 pensation for the year exceeds 7 times the com- 22 pensation of the median paid employee of the con- 23 solidated financial institution for the year; 24 VerDate Sep 11 2014 01:48 Jul 11, 2023 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H4200.IH H4200 pbinns on DSKJLVW7X2PROD with $$_JOB 4 •HR 4200 IH (2) place all compensation deferred under para- 1 graph (1) into the deferment fund of the covered fi- 2 nancial institution or subsidiary; and 3 (3) after the end of the covered deferment pe- 4 riod, if sufficient funds remain in the deferment 5 fund, pay the senior employee the amount of com- 6 pensation deferred and for which the covered 7 deferment period ended. 8 (c) USE OF DEFERMENT FUND.— 9 (1) USE OF FUND TO PAY FINES.—If a covered 10 financial institution or subsidiary of a covered finan- 11 cial institution is subject to a civil or criminal fine, 12 the covered financial institution or subsidiary shall 13 first pay such fine out of amounts contained in the 14 deferment fund of the covered financial institution 15 or subsidiary. 16 (2) USE OF FUNDS TO MAKE DEPOSITORS 17 WHOLE.—If a covered financial institution is a de- 18 pository institution or a credit union and the deposi- 19 tory institution or credit union fails, the depository 20 institution or credit union shall use amounts in the 21 deferment fund of the depository institution or cred- 22 it union to ensure depositors do not lose any of their 23 deposits. All amounts in the deferment fund shall be 24 used before any amounts are paid from the Deposit 25 VerDate Sep 11 2014 01:48 Jul 11, 2023 Jkt 039200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H4200.IH H4200 pbinns on DSKJLVW7X2PROD with $$_JOB 5 •HR 4200 IH Insurance Fund or the National Credit Union Share 1 Insurance Fund, as applicable, for such purpose. 2 (d) CANCELLATION OF COMPENSATION THAT CAN- 3 NOT BE PAID FROM DEFERMENT FUND.—Each covered 4 financial institution or subsidiary shall have in place a pol- 5 icy that cancels any compensation deferred under sub- 6 section (b) that cannot be repaid as described under sub- 7 section (b)(3), due to the deferment fund lacking sufficient 8 funds. 9 (e) TREATMENT OF DEFERRED COMPENSATION OF 10 EX-EMPLOYEES.—With respect to an individual that has 11 compensation deferred pursuant to subsection (b), but is 12 no longer employed by the applicable covered financial in- 13 stitution or subsidiary, if the covered financial institution 14 or subsidiary is required to pay a fine from its deferment 15 fund for misconduct that occurred after the individual was 16 no longer employed by the covered financial institution or 17 subsidiary, the covered financial institution or subsidiary 18 shall segregate the individual’s deferred compensation 19 from other amounts in the deferment fund and shall not 20 use such segregated amounts for any purpose other than 21 repaying the individual pursuant to subsection (b)(3) or 22 for the payment of another fine for misconduct that oc- 23 curred while the individual was still employed by the cov- 24 ered financial institution or subsidiary. 25 VerDate Sep 11 2014 01:48 Jul 11, 2023 Jkt 039200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H4200.IH H4200 pbinns on DSKJLVW7X2PROD with $$_JOB 6 •HR 4200 IH (f) RULEMAKING.—The Board of Governors of the 1 Federal Reserve System, the Comptroller of the Currency, 2 the Federal Deposit Insurance Corporation, the Federal 3 Housing Finance Agency, the National Credit Union Ad- 4 ministration, and the Securities and Exchange Commis- 5 sion may each issue such rules as may be necessary to 6 carry out this section with respect to covered financial in- 7 stitutions and subsidiaries subject to supervision by the 8 agency. 9 (g) DEFINITIONS.—In this section: 10 (1) APPROPRIATE FEDERAL REGULATOR.—The 11 term ‘‘appropriate Federal regulator’’ means— 12 (A) the appropriate Federal banking agen- 13 cy, as defined under section 3 of the Federal 14 Deposit Insurance Act; 15 (B) the Federal Housing Finance Agency, 16 in the case of the Federal National Mortgage 17 Association or the Federal Home Loan Mort- 18 gage Corporation; 19 (C) the National Credit Union Administra- 20 tion, in the case of a credit union described 21 under paragraph (6)(C); and 22 (D) the Securities and Exchange Commis- 23 sion, in the case of a person described under 24 subparagraph (B) or (D) of paragraph 6). 25 VerDate Sep 11 2014 01:48 Jul 11, 2023 Jkt 039200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H4200.IH H4200 pbinns on DSKJLVW7X2PROD with $$_JOB 7 •HR 4200 IH (2) COMPENSATION.—With respect to an em- 1 ployee, the term ‘‘compensation’’ means any finan- 2 cial remuneration, including salary, bonuses, incen- 3 tives, benefits, severance, deferred compensation, or 4 golden parachute benefits, and any profits that 5 would be realized from the sale of the securities of 6 the company employing the employee. 7 (3) CONSOLIDATED FINANCIAL INSTITUTION.— 8 With respect to a financial institution, the term 9 ‘‘consolidated financial institution’’ means the finan- 10 cial institution and all subsidiaries of the financial 11 institution. 12 (4) COVERED DEFERMENT PERIOD.—The term 13 ‘‘covered deferment period’’ means— 14 (A) with respect to a covered financial in- 15 stitution with less than $10,000,000,000 in 16 consolidated assets, a number of years, to be 17 determined by the appropriate Federal regu- 18 lator if determined necessary by such appro- 19 priate Federal regulator, beginning on the date 20 the compensation is deferred; 21 (B) with respect to a covered financial in- 22 stitution with $10,000,000,000 or more, but 23 less than $50,000,000,000, in consolidated as- 24 VerDate Sep 11 2014 01:48 Jul 11, 2023 Jkt 039200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H4200.IH H4200 pbinns on DSKJLVW7X2PROD with $$_JOB 8 •HR 4200 IH sets, 2 years beginning on the date the com- 1 pensation is deferred; 2 (C) with respect to a covered financial in- 3 stitution with $50,000,000,000 or more, but 4 less than $250,000,000,000, in consolidated as- 5 sets, 6 years beginning on the date the com- 6 pensation is deferred; and 7 (D) with respect to a covered financial in- 8 stitution with $250,000,000,000 or more in 9 consolidated assets, 8 years beginning on the 10 date the compensation is deferred. 11 (5) COVERED FINANCIAL INSTITUTION.—The 12 term ‘‘covered financial institution’’ means a finan- 13 cial institution with more than $1,000,000,000 in 14 consolidated assets. 15 (6) FINANCIAL INSTITUTION.—The term ‘‘fi- 16 nancial institution’’ means— 17 (A) a depository institution or depository 18 institution holding company, as such terms are 19 defined, respectively, in section 3 of the Federal 20 Deposit Insurance Act (12 U.S.C. 1813); 21 (B) a broker or a dealer registered under 22 section 15 of the Securities Exchange Act of 23 1934 (15 U.S.C. 78o); 24 VerDate Sep 11 2014 01:48 Jul 11, 2023 Jkt 039200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H4200.IH H4200 pbinns on DSKJLVW7X2PROD with $$_JOB 9 •HR 4200 IH (C) a credit union, as described in section 1 19(b)(1)(A)(iv) of the Federal Reserve Act; 2 (D) an investment adviser, as defined in 3 section 202(a) of the Investment Advisers Act 4 of 1940 (15 U.S.C. 80b–2(a)); 5 (E) the Federal National Mortgage Asso- 6 ciation; and 7 (F) the Federal Home Loan Mortgage 8 Corporation. 9 (7) SENIOR EMPLOYEE.—The term ‘‘senior em- 10 ployee’’ means an employee of a covered financial in- 11 stitution or a subsidiary of the covered financial in- 12 stitution who— 13 (A) is a senior executive officer; 14 (B) has total annual compensation of more 15 than $1,000,000; 16 (C) with respect to a covered financial in- 17 stitution with $50,000,000,000 or more, but 18 less than $250,000,000,000, in consolidated as- 19 sets— 20 (i) is in the top 2 percent of the most 21 highly compensated employees in the con- 22 solidated financial institution; or 23 VerDate Sep 11 2014 01:48 Jul 11, 2023 Jkt 039200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H4200.IH H4200 pbinns on DSKJLVW7X2PROD with $$_JOB 10 •HR 4200 IH (ii) has the authority to commit or ex- 1 pose 0.5 percent or more of the capital of 2 the consolidated financial institution; or 3 (D) with respect to a covered financial in- 4 stitution with $250,000,000,000 or more in 5 consolidated assets— 6 (i) is in the top 5 percent of the most 7 highly compensated employees in the con- 8 solidated financial institution; or 9 (ii) has the authority to commit or ex- 10 pose 0.5 percent or more of the capital of 11 the consolidated financial institution. 12 Æ VerDate Sep 11 2014 01:48 Jul 11, 2023 Jkt 039200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6301 E:\BILLS\H4200.IH H4200 pbinns on DSKJLVW7X2PROD with $$_JOB