SEC Proposes Broadened Executive Compensation "Clawback" Rules

On July 1, the SEC proposed rules requiring national security exchanges (such as NYSE and Nasdaq) to establish listing standards requiring publicly traded companies to adopt, comply with and disclose written clawback policies. The proposed rules would implement Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Act) and is the last of the four main executive compensation-related rules that the SEC was required to implement under the Act. The fact that the clawback proposal came last was not unexpected, as it creates some of the more difficult interpretive questions of all of the Dodd-Frank executive compensation rules.

Under the Act, the SEC is required to direct the national securities exchanges to prohibit the listing of any security of a company that fails to adopt and disclose a clawback policy that provides for recovery of any incentive compensation received by any current or former executive officer within three years prior to