On Nov. 28, 2022, the Securities and Exchange Commission (the SEC) published final clawback rules (the final rules) in response to the long-standing requirement under Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act to increase transparency and disclosure in financial reporting; the final rules were adopted by the SEC on Oct. 26, 2022, and became effective on Jan. 27, 2023.
Ultimately, the final rules will require companies that are listed on the NYSE or NASDAQ to establish, comply with, and disclose a written policy that provides for the recovery, or clawback, by the company of any incentive-based executive compensation that is received by current and former executive officers during the three-year period preceding any requirement to prepare an accounting restatement based on a misstated financial performance measure. Smaller reporting companies, emerging growth companies, foreign private issuers, and controlled companies will not be exempt from compliance with the final rules.
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