On October 26, 2022, the Securities and Exchange Commission adopted final rules implementing the Dodd-Frank requirement for issuers to recover incentive-based compensation erroneously paid to current and former executive officers due to an accounting restatement.
These rules were originally proposed in July of 2015, and subsequently reopened for comment in October 2021 and June 2022.3 Under the Clawback Rules, substantially all issuers (including FPIs, EGCs, SRCs, and controlled companies) will be required to implement and disclose “no fault” clawback policies that meet strict recovery standards for both “Big R” and “little r” restatements.
The Clawback Rules require listing exchanges to adopt clawback standards that go into effect no later than fourth quarter 2023, with issuers required to implement policies within 60 days thereafter. Issuers should be prepared to have policies in effect no later than the fall of 2023.
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