SEC Reopens Comment Period for Proposal on Listing Standards for "Clawbacks"

The SEC reopened the comment period for a proposal that would require listed companies "to adopt and comply with a compensation recovery policy, often known as a clawback policy." Comments must be submitted 30 days after publication in the Federal Register.

As previously covered, the proposal would:

• require listed companies to develop and enforce recovery policies that would, in the event of accounting restatements, "claw back" from current and former executive officers any incentive-based compensation that the restatements show to have been awarded based on previous accounting errors;

• define "executive officer," noting that the definition will differ from "officer"; and

• require that a public company file its compensation recovery policy as an exhibit to its Exchange Act annual report.

Additionally, SEC staff released a memo that addresses (i) voluntary adoption of compensation recovery policies by issuers, (ii) the number of additional restatements that would trigger a compensation recovery analysis if the rules were adopted and (iii) potential implications for the costs and benefits of the proposed rules.