SEC Proposes Executive Compensation Clawback Rule
On July 1, 2015, the Securities and Exchange Commission (“SEC”) proposed a rule requiring that national securities exchanges and national securities associations prohibit the listing of any security of an issuer that is not in compliance with Dodd-Frank’s requirements for disclosure of the issuer’s “policy on incentive-based compensation and recovery of incentive-based compensation that is received in excess of what would have been received under an accounting restatement” (commonly referred to as a “clawback policy”). The proposed rule would direct the exchanges to establish listing standards requiring issuers to:
- Adopt and comply with policies that provide for clawback of incentive-based pay that is based on financial information reported under the securities laws. The policies would need to apply to the listed issuers’ executive officers; and
- Disclose those recovery policies as an exhibit to their annual reports.
Issuers may be subject to delisting if they do not comply with these standards.
Proposed Rule 10D-1 under the Securities Exchange Act of 1934, as amended (the “
Exchange Act”) would codify “the listing requirements that exchanges would be directed to establish pursuant to Section 10D of the Exchange Act,” which was added by Section 954 of the Dodd-Frank Act.