SEC Proposes Rules Requiring Companies to Adopt, Disclose, and Comply With Clawback Policies on Erroneously Awarded Executive Compensation

July 2015

On July 1, 2015, the US Securities and Exchange Commission (SEC) issued a long-awaited release (Proposing Release) proposing rules that would direct the national securities exchanges to establish listing standards requiring listed companies, including emerging growth and smaller reporting companies, to adopt a policy that requires their executive officers to pay back to the company any incentive-based compensation awarded to them based on incorrect financial information that was later corrected in an accounting restatement.

The SEC was required to issue these rules pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) and section 10D of the Securities Exchange Act, as amended (Exchange Act), enacted under the Dodd-Frank Act. Listed companies that do not adopt, disclose, and comply with their recovery policies will be subject to delisting from their exchange.

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