Treasury Department Announces Executive Compensation Restrictions, Corporate Governance Standards for TARP Participants

June 23, 2009

On June 10, 2009, Treasury issued a new Interim Final Rule implementing the executive compensation and corporate governance standards of the Emergency Economic Stabilization Act of 2008 ("EESA"), as amended by the American Recovery and Reinvestment Act of 2009 ("ARRA"). The Interim Final Rule applies to all entities (public and private) that have received or will receive financial assistance under the Troubled Asset Relief Program ("TARP") as well as any entity within a TARP participant's parent-subsidiary controlled group (using a 50% ownership test).

The Interim Final Rule consolidates all executive compensation related provisions that are specifically directed at TARP participants into one rule and, along with the provisions of the ARRA, supersedes all prior executive compensation rules and guidance issued by Treasury under EESA, including the executive compensation guidelines announced by Treasury in February 2009. The Interim Final Rule became effective June 15, 2009. The following are highlights of certain requirements contained in the Interim Final Rule for TARP participants:

TARP participants should be mindful that many provisions of the Interim Final Rule apply differently depending on whether the participant is public or private, the level of TARP financial assistance received by the participant and the varying levels of compensation of the participant's employees. Each TARP participant should establish adequate controls to identify employees covered by the Interim Final Rule and to comply with the particular provisions that apply to it.

Frost Brown Todd has in depth knowledge of banking and securities law and regulation and expansive experience representing public and private companies in corporate and securities transactions. Our law firm has assisted a number of financial institutions and public companies on issues related to the Treasury's Troubled Asset Relief Program, including the application process, closing of approved purchases and compliance with executive compensation and corporate governance rules. We will continue to monitor developments related to this advisory and any upcoming guidance.

Click here to view the The Interim Final Rule.

For more information or assistance, please contact your regular Frost Brown Todd LLC attorney or one of the members of our Financial Institutions, Public Companies and Securities, or Executive Compensation practice groups.