U.S. securities regulators proposed new rules Wednesday designed to restore lending discipline, and to bolster the independence of compensation committees at public companies and the consultants who serve them.

The proposals by the Securities and Exchange Commission are the latest move by the agency to implement dozens of new requirements under the Dodd-Frank financial reform law.

The first proposal would require companies that bundle mortgages or other loans into asset-backed securities to retain a portion of the credit risk unless the loans meet strict underwriting criteria.

The plan, nearly identical to rules proposed for public comment by the Federal Deposit Insurance Corp and the Federal Reserve Board Tuesday, would require securitizers of the loans to have "skin in the game" by keeping 5 percent of the credit risk.

They could be exempted from these requirements if the loans are of a high quality and meet certain criteria.

"We certainly don't want to unduly restrict the securitization market... but we also don't want to overlook the problems that brought us here today," said SEC Commissioner Elisse Walter.

COMPENSATION COMMITTEES AND CONSULTANTS

The other proposals are designed to ensure compensation committees and consultants are independent by requiring stock exchanges to adopt certain listing standards.

The plan proposes enhanced independence requirements for company compensation committees.
In determining if a board member is independent, exchanges would need to consider certain factors such as board member pay and how the person is affiliated with the company.

Wednesday's proposal also lays out five different factors that compensation committees would need to consider before hiring compensation consultants from firms such as Towers Watson, Mercer and Hewitt Associates Inc.

These factors would include whether the consultancy firm is providing other services to the company and how much the consultancy firm has received in fees from the company.

Other factors include whether the consultant owns stock in the company, if the consultant has a business or personal relationship with a compensation committee member and the policies a consulting firm has in place to protect against conflicts.

SEC Commissioner Luis Aguilar said he has some concerns because the rules only apply to companies that rely on compensation committees for decisions on executive pay.

The Nasdaq stock market currently allows independent directors to make compensation decisions outside of a committee structure, raising some concerns that companies could circumvent the proposal, he said.

"In the future if a company wanted to avoid compliance, it could, in theory, dissolve any existing compensation committee or avoid forming one," Aguilar said.

SEC staff said that less than 2 percent of Nasdaq-listed companies use independent board directors instead of compensation committees now. The proposal asks questions about this issue.

(Reporting by Sarah N. Lynch; Editing by Dave Zimmerman and Tim Dobbyn