SEC Clarifies Clawback Listing Standard and Disclosure Requirements

The SEC Division of Corporation Finance updated its Compliance and Disclosure Interpretations ("C&DIs") regarding (i) listing standards related to recovery of erroneously awarded compensation and (ii) disclosure of executive compensation by foreign issuers.

The new guidance, in the form of FAQs, update Exchange Act Rules and Forms promulgated under the registration and reporting provisions of Sections 12, 13 and 15 of the Exchange Act.

The updates concerned individualized disclosure for an issuer's named executive officers and other matters related to adopted form amendments. The SEC said that an issuer is not required to disclose whether a Form 10-K, Form 20-F or Form 40-F filing includes the correction of an error in previously issued financial statements, nor conduct a related recovery analysis until the listing standards become effective. Such standards could become effective as late as November 28, 2023, as determined by the exchanges when they issue their listing standards, at which point the issuer would be required to adopt a recovery policy compliant with applicable listing standards. Additionally, the SEC said that foreign private issuers must provide individualized Form 20-F and Form 40-F disclosure for any employee for which the issuer otherwise provides individualized compensation disclosure in the filing.