SEC Adopts Compensation Recovery Listing Standards and Disclosure Rules
summary
The Securities and Exchange Commission (SEC) adopted new rules requiring listed companies to develop and implement policies for recovering erroneously awarded incentive-based compensation from executive officers, with the rules becoming effective 60 days after publication.
paragraph
The SEC's new rules implement Section 10D of the Securities Exchange Act of 1934, added by the Dodd-Frank Wall Street Reform and Consumer Protection Act. The rules require listed issuers to adopt and comply with a written policy for recovery of erroneously awarded incentive-based compensation, and to disclose those policies in accordance with Commission rules. The rules aim to prevent executives from keeping compensation received based on misstated financials, and will become effective 60 days following publication in the Federal Register.
narrative
The Securities and Exchange Commission (SEC) adopted new rules requiring listed companies to develop and implement policies for recovering erroneously awarded incentive-based compensation from executive officers. The rules implement Section 10D of the Securities Exchange Act of 1934, added by the Dodd-Frank Wall Street Reform and Consumer Protection Act. The new rules aim to prevent executives from keeping compensation received based on misstated financials, and require listed issuers to adopt and comply with a written policy for recovery of erroneously awarded incentive-based compensation. The rules also mandate that issuers file their recovery policies as exhibits to annual reports, disclose recovery actions taken, and use tagged data for transparency. The rules will become effective 60 days following publication in the Federal Register, and exchanges must file proposed listing standards within 90 days of the rule's publication. Issuers must adopt recovery policies within 60 days of those standards taking effect. The SEC's action fulfills Congress's intent to hold executives accountable for financial misstatements and enhance investor confidence.
Classified corporate-fraud(confidence 80%). EDGAR detection: forms 10-K/10-Q/8-K· recall 56% / precision 8%. detection rule →
Statutes
Section 10D of the Securities Exchange ActRule 10D-1
Parties
final rulesgary genslerlisted issuerSecurities and Exchange Commission
Keywords
recoverylisting standardsrulescompensationlistingstandardscompensation recoverypolicyrequirerules requireincentive-based compensationcompensation receivedfinal rulesrequire listedlisted issuer
Exhibits & Attached Documents (2)
Extracted insights
Entities 4
- person final rules
- person gary gensler
- person listed issuer
- agency Securities and Exchange Commission
Triples 5
- Securities And Exchange Commission Adopted Rules Require securities exchanges to adopt listing standards that require issuers to develop and implement a policy for recovery of erroneously awarded incentive-based compensation
- Listed Issuer Required To File Policy as exhibit to its annual report
- Gary Gensler Said These rules will strengthen transparency and quality of corporate financial statements, investor confidence, and accountability of corporate executives to investors
- New Exchange Act Rule 10D-1 Directs National securities exchanges and associations to establish listing standards
- Final Rules Will Become Effective 60 days following publication of the adopting release in the Federal Register
PDF (from attached: pdf)
Text layers
Extracted body text (3,273c)
The Securities and Exchange Commission today adopted rules to require securities exchanges to adopt listing standards that require issuers to develop and implement a policy providing for the recovery of erroneously awarded incentive-based compensation received by current or former executive officers. The final rules require a listed issuer to file the policy as an exhibit to its annual report and to include disclosures related to its recovery policy and recovery analysis where a recovery is triggered. The Commission proposed compensation recovery rules in 2015 and reopened the comment period on the proposal in October 2021 and again in June 2022. “I believe that these rules will strengthen the transparency and quality of corporate financial statements, investor confidence in those statements, and the accountability of corporate executives to investors,” said SEC Chair Gary Gensler. “Through today’s action and working with the exchanges, we have the opportunity to fulfill Dodd-Frank’s mandate and Congress’s intention to prevent executives from keeping compensation received based on misstated financials.” The new rules implement Section 10D of the Securities Exchange Act of 1934, a provision added by the Dodd-Frank Wall Street Reform and Consumer Protection Act. New Exchange Act Rule 10D-1 directs national securities exchanges and associations to establish listing standards that require a listed issuer to: (1) adopt and comply with a written policy for recovery of erroneously awarded incentive-based compensation received by its current or former executive officers in the event it is required to prepare an accounting restatement due to its material noncompliance with any financial reporting requirement under the securities laws, during the three completed fiscal years immediately preceding the date that the issuer is required to prepare an accounting restatement; and (2) disclose those compensation recovery policies in accordance with Commission rules, including providing the information in tagged data format. Further the final rules require specific disclosure of the listed issuer’s policy on recovery of incentive-based compensation and information about actions taken pursuant to such recovery policy. The amendments also require all listed issuers to: (i) file their written recovery policies as exhibits to their annual reports; (ii) indicate by check boxes on their annual reports whether the financial statements included in the filings reflect correction of an error to previously issued financial statements and whether any of those error corrections are restatements that required a recovery analysis; and (iii) disclose any actions they have taken pursuant to such recovery policies. The final rules will become effective 60 days following publication of the adopting release in the Federal Register. Exchanges will be required to file proposed listing standards no later than 90 days following publication of the release in the Federal Register, and the listing standards must be effective no later than one year following such publication. Issuers subject to such listing standards will be required to adopt a recovery policy no later than 60 days following the date on which the applicable listing standards become effective.
OCR text (3,273c · html-text · 99% conf)
The Securities and Exchange Commission today adopted rules to require securities exchanges to adopt listing standards that require issuers to develop and implement a policy providing for the recovery of erroneously awarded incentive-based compensation received by current or former executive officers. The final rules require a listed issuer to file the policy as an exhibit to its annual report and to include disclosures related to its recovery policy and recovery analysis where a recovery is triggered. The Commission proposed compensation recovery rules in 2015 and reopened the comment period on the proposal in October 2021 and again in June 2022. “I believe that these rules will strengthen the transparency and quality of corporate financial statements, investor confidence in those statements, and the accountability of corporate executives to investors,” said SEC Chair Gary Gensler. “Through today’s action and working with the exchanges, we have the opportunity to fulfill Dodd-Frank’s mandate and Congress’s intention to prevent executives from keeping compensation received based on misstated financials.” The new rules implement Section 10D of the Securities Exchange Act of 1934, a provision added by the Dodd-Frank Wall Street Reform and Consumer Protection Act. New Exchange Act Rule 10D-1 directs national securities exchanges and associations to establish listing standards that require a listed issuer to: (1) adopt and comply with a written policy for recovery of erroneously awarded incentive-based compensation received by its current or former executive officers in the event it is required to prepare an accounting restatement due to its material noncompliance with any financial reporting requirement under the securities laws, during the three completed fiscal years immediately preceding the date that the issuer is required to prepare an accounting restatement; and (2) disclose those compensation recovery policies in accordance with Commission rules, including providing the information in tagged data format. Further the final rules require specific disclosure of the listed issuer’s policy on recovery of incentive-based compensation and information about actions taken pursuant to such recovery policy. The amendments also require all listed issuers to: (i) file their written recovery policies as exhibits to their annual reports; (ii) indicate by check boxes on their annual reports whether the financial statements included in the filings reflect correction of an error to previously issued financial statements and whether any of those error corrections are restatements that required a recovery analysis; and (iii) disclose any actions they have taken pursuant to such recovery policies. The final rules will become effective 60 days following publication of the adopting release in the Federal Register. Exchanges will be required to file proposed listing standards no later than 90 days following publication of the release in the Federal Register, and the listing standards must be effective no later than one year following such publication. Issuers subject to such listing standards will be required to adopt a recovery policy no later than 60 days following the date on which the applicable listing standards become effective.