On October 26, 2022, the U.S. Securities and Exchange Commission (the “SEC”) adopted regulations implementing Section 10D of the Securities Exchange Act of 1934 (the “Exchange Act”), which was added by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd Frank”). The SEC originally proposed these rules in 2015, and reopened the comment period in October 2021 and again in June 2022.
New Exchange Act Rule 10D-1 required U.S. national stock exchanges, including the New York Stock Exchange (the “NYSE”) and the Nasdaq Stock Market (“Nasdaq”), to propose and adopt new listing standards mandating listed companies to adopt and comply with policies that provide for the recovery of incentive-based compensation received by current or former executive officers based on any misstated financial reporting measure if the company is required to prepare an accounting restatement.
On June 9, 2023, the SEC approved, on an accelerated basis, the NYSE’s and Nasdaq’s proposed listing standards implementing the SEC’s Dodd-Frank rules covering the recovery of erroneously awarded compensation. The listing standards will become effective on October 2, 2023. Listed companies will have 60 days following that date (i.e., until December 1, 2023) to adopt Dodd-Frank-compliant policies. Under those policies, listed companies must seek to recover erroneously awarded incentive-based compensation received by covered executives on or after October 2, 2023.
In light of the approaching effective date, our Public Company Advisory Practice, together with colleagues in the firm’s Executive Compensation group, have developed answers to a set of frequently asked questions related to the new rules. See Executive Compensation Clawback Policy Rules FAQs.
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