Money manager Franklin Resources Inc., which runs a $743 billion mountain of mutual-fund investments, has only about $16 billion of its own assets. And private-equity colossus Blackstone Group LP manages $344 billion, while the company itself has just $22 billion. Even giant hedge funds -- recently flagged by U.S. regulators as deserving more scrutiny for their hefty leverage -- would avoid most of the new limits.
Delaying bonuses is already common on Wall Street, though not all firms defer them for as long as the four years proposed by regulators. For asset management, a review of companies’ disclosures in regulatory filings shows broad similarities between pay practices at banks and those at independent firms.
Pay Comparison
The prospectus for the $29.4 billion BlackRock Strategic Income Opportunities Portfolio fund says pay consists of base salary and a discretionary amount linked to the company’s overall performance and the investment returns of an employee’s portfolio. JPMorgan’s Core Bond Fund, which manages $30 billion, offers salary supplemented by a bonus, with as much as 60 percent of the incentive compensation deferred for unspecified periods.
The pay-rule proposal represents yet another tax on big banks for being big, said Ireland. He said it adds to a long list of measures targeting Wall Street since the crisis, including tailored capital demands and a ban on banks trading with their own money.
Spokesmen for JPMorgan, Goldman Sachs, Morgan Stanley and Bank of America declined to comment on the potential impact of the rules, as did spokesmen for the SEC and the Fed.
Industry complaints are unlikely to get a sympathetic hearing from regulators responsible for implementing Dodd-Frank. Government officials have long argued that the biggest, most complex banks deserve the toughest rules, because if they go down, they can cause widespread economic damage.
European Rules
U.S. agencies are lagging behind their overseas counterparts in imposing pay caps. The European Banking Authority moved two years ago to ban bonuses of more than twice an employee’s base pay, leading companies to shift more compensation to salary and forcing the regulator to fend off efforts to skirt the limits. An effort last year to extend bonus limits to asset managers has sparked widespread industry criticism.
Companies affected by the U.S. rules might be able to sidestep the stiffest restrictions if they can slice money-management units away from their banking operations and squeeze assets down below $1 billion, said Marc Trevino, a partner at Sullivan & Cromwell LLP in New York who specializes in pay issues. If they can’t do that, they might have to boost compensation to stay competitive in hiring, he said.