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No Fault, No Relief: SEC Proposes New “No-Fault” Clawback Rules
13 July 2015
View Client Update
The SEC has proposed long-awaited clawback rules for incentive-based compensation that would require most listed issuers (including foreign private issuers) to adopt and comply with policies to recover, on a pre-tax basis, excess incentive-based compensation paid to executive officers in the event of financial statement errors, regardless of fault.
The proposed clawback rule would apply to incentive-based compensation determined based on financial or stock-based performance measures, but not to items like salaries, discretionary bonuses and awards based solely on length of service.
Listed issuers would be required to publicly disclose, among other things, the substance of their recovery policies, and the details of their implementation and recovery efforts.
The rules are subject to a 60-day comment period and are unlikely to apply in the upcoming 2016 proxy season.
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