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Firm Memoranda

SEC Adopts Final Rule 10D-1 Regarding Clawbacks of Executive Compensation

Date: 01/20/23

On October 26, 2022, the Securities and Exchange Commission (“SEC”) adopted Rule 10D-1 entitled “Listing Standards for Recovery of Erroneously Awarded Compensation.” The rule has two main requirements. First, it directs national securities exchanges to require listed issuers to develop and implement written policies to claw back incentive-based executive compensation if the issuer is later required to issue an accounting restatement. The policies must comply with the elements set out in the final rule. Second, the rule directs exchanges to require that issuers publicly disclose their written policies.

The final rule creates important new requirements for public companies, with significant
consequences for noncompliance. An issuer that fails to adopt, comply with, and disclose a clawback policy will be subject to delisting from the exchange. The final rule also follows recent enforcement efforts to deter corporate misconduct by clawing back executive compensation. Rule 10D-1 extends those efforts by increasing (1) the likelihood that a company will have to claw back incentive-based compensation and (2) the universe of individuals who may be subject to a clawback. The rule becomes effective on January 27, 2023. 

SEC Adopts Final Rule 10D-1 Regarding Clawbacks of Executive Compensation..pdf (pdf | 139.57 KB )