The SEC Adopts Incentive-Based Compensation Clawback Rule

On Oct. 26, the SEC adopted a final rule addressing the obligations of listed issuers or "companies" to recover incentive-based compensation paid to executive officers prior to an accounting restatement. The final rule will require many issuers to (i) adopt more stringent written clawback policies than those currently in place and (ii) provide more extensive disclosures of these policies. The final rule implements these new requirements by directing national securities exchanges to establish listing standards addressing the recovery of overpayments of incentive-based compensation. As a result, issuers will only be required to comply with the final rule after the applicable updated listing standards are effective. Such listing standards (and the final rule) will apply to virtually all public companies or issuers of public debt, including foreign private issuers, controlled companies, small reporting companies and emerging growth companies.