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SEC Proposes to Regulate Endowment Investment Office Compensation


Last week, RFG’s CEO, Deborah Prutzman, submitted a comment letter to the SEC which addressed the reasons why endowment investment offices should not be subjected to a proposed rule on incentive-based compensation. The proposal was put forward by the SEC and other financial regulators pursuant to Section 956 of the Dodd-Frank Act. In arguing that investment offices should be exempted from the requirements, RFG highlighted that the investment and compensation practices of charitable organizations are already regulated by state attorneys general, the dictates of the Internal Revenue Code, and by the boundaries of uniform state laws that govern endowment management, usage and expenses. Against this backdrop, charitable organizations did not play a role in creating the financial crisis for which the Dodd-Frank Act was the legislative response and were not intended by Congress to be subject to additional regulations under the Act. Should the SEC determine to proceed with regulating the compensation practices of charities, RFG suggested ways to avoid perverse consequences that arise primarily because (i) the application of the proposal is keyed off assets and (ii) charities may have significant assets devoted to their charitable endeavors. A copy of the letter can be found here. RFG members have received substantial information about this proposal (and other evolving developments that may impact investment offices and their clients). If you have any questions or concerns about whether the proposal might reach your staff, please reach out to Information@RegFG.com. We would also welcome the opportunity to describe our services to you — we know of no other resource with the focus and scope of RFG.


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