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Winter 2013

Disclosing Compensation Consultant Conflicts

The SEC has added new Item 407(e)(3)(iv) to Regulation S-K requiring that a financial institution holding company include a disclosure in the annual proxy statement addressing whether the work performed by any compensation consultant raised a conflict of interest and, if so, the nature of the conflict and how it was addressed.

The requirements described in this article apply only to publicly-traded companies that are registered with the SEC. However, this disclosure is largely based on new requirements relating to the independence of the compensation committee and the compensation committee's access to independent advisers, which are discussed in the next article. As a result, as with other regulations, all financial institutions should expect the obligation to consider the independence of compensation consultants and other advisers to be subject to a "trickle-down" effect and "regulatory creep," as well as becoming "best practices." The issues and disclosures discussed herein are indicative of compensation, relationship and disclosure trends in business generally, and should be a guide for all institutions in dealing with compensation committees, compensation consultants and related issues.  Read more.

Complying with New Compensation Committee and Compensation Adviser Independence Standards

The national securities exchanges, as required by the Dodd-Frank Act, have proposed amendments to their listing requirements relating to compensation committees. These amendments require that:

  • Each member of the compensation committee be "independent";
  • Compensation committee charters specify the compensation committee's authority to engage compensation consultants, legal counsel and other advisers (collectively, "compensation advisers"); and
  • The compensation committee consider the "independence" of any compensation adviser (other than in-house legal counsel) before engaging the compensation adviser.

Complying with these proposed amendments will require that financial institution holding companies amend the (or, in some cases, adopt a) compensation committee charter and take certain other actions beginning in mid-2013. Read more.

Current Issues in Loan Participation

Recent regulatory actions impacting buyers and sellers of loan participation interests should prompt institutions to review their policies and procedures for such activities, and take whatever actions may be appropriate in light of their particular situation. While not raising new issues relating to the proper purchase, sale and accounting for participation interests, the regulatory actions serve to remind institutions that use of loan participations requires careful consideration and should not be engaged in lightly without understanding the potential impact on buying and selling institutions. Read more.

Basel III

Capital Planning for Financial Institutions

The banking industry has been dealing with the imposition of international standards for bank capital since the 1988 capital accord known formally as the "International Convergence of Capital Measurement and Capital Standards" and informally as "Basel I." Basel II, or the "International Convergence of Capital Measurement and Capital Standards; A Revised Framework," was adopted in 2004 and followed by revisions in 2005, 2009 and 2010.

"Basel III; A Global Regulatory Framework for More Resilient Banks and Banking Systems" was adopted in December 2010, and formed the basis for several far-reaching capital proposals by federal banking agencies in June 2012. Read more.

Online Banking Security Procedures for Commercial Customers

Why One Size Doesn't Fit All

Article 4A of the Uniform Commercial Code (Article 4A) sets forth the rights, duties and liabilities of banks and their commercial customers with respect to funds transfers. Today, the vast majority of funds transfers occur electronically (i.e., by wire transfer) through the placement of payment orders by commercial customers via their online bank accounts. These online bank accounts are protected to varying degrees by one or more security procedures (e.g., user IDs and passwords, challenge questions, token codes, risk scoring and monitoring, customer notification, etc.). The number, type and extent to which these security procedures are employed will often depend on the capabilities of the bank and the needs and financial resources of a particular commercial customer. Read more.

If you have an idea for an article you would like us to pursue, please contact your Vorys attorney. We hope you enjoy the read.

About the Vorys Banking Group

Our nearly 20 lawyers dedicated to our banking practice have hundreds of years of combined practical, hands-on experience in the industry. We have been named a "Top Lead Legal Advisor" by American Banker magazine, and a Go-To Law Firm® in banking and finance, securities and corporate transactions by Fortune 500 general counsel. We represent public and non-public institutions, from community banks and thrifts to large, multinational financial institutions throughout the United States. Our clients have been in Ohio, Washington, D.C., Maryland, Virginia, Arizona, Florida, Indiana, Michigan, Kentucky, Missouri, New York, North Carolina, South Carolina and West Virginia. Our team includes two former general counsels for major bank holding companies; their insight has been invaluable to our clients. We assist our clients with bank, thrift and holding company formations; securities law compliance; board governance; enforcement actions with state and federal agencies; M&A and divestitures; capitalization, recapitalization and private equity transactions; employment law matters; executive compensation and benefit plans; tax matters; and the negotiation of all types of contracts. We also represent financial institutions, other institutional lenders and borrowers in all types of complex commercial financings.

This magazine is for general information purposes and should not be regarded as legal advice.



Aaron S. Berke

Elizabeth Turrell Farrar

Jason L. Hodges

Michael D. Martz

Kimberly J. Schaefer

Jeffery E. Smith

J. Bret Treier

Anthony D. Weis



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This alert is for general information purposes and should not be regarded as legal advice. As always, please let us know if you want more information or have questions about how these developments apply to your situation.