The Securities and Exchange Commission gave its approval to a
specific type of equity-based compensation involving loans to
executives and directors, saying that the structure would not violate
the Sarbanes-Oxley Act’s ban on companies making personal loans to top
management.

In a so-called “no-action” letter earlier this month, the SEC’s Division of Corporation Finance said financial services firm RingsEnd Partners cou ld go ahead with an executive equity-compensation plan that included loans arranged through BNP Paribas
and an independently managed trust. The plan involves transferring
shares to an independent Delaware statutory trust, which can obtain
loans from a banking institution using those shares as collateral. It
was designed to encourage employees to hold onto company shares as long
as possible, but RingsEnd was not sure it could extend the program to
executives without violating Sarbanes-Oxley, according to the request RingsEnd sent to the SEC.

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