SEC Requires Companies to Set Up Procedures to Claw Back Erroneously Awarded Compensation

calculator with red buttons on top of a black and white spreadsheet with non-descriptive typed textThe SEC adopted rules on Wednesday last week that will require companies to have a policy to claw back erroneously awarded incentive compensation paid to current or former executives. The policy must also be filed with a company’s annual report.

SEC Chair Gary Gensler said, “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.” And, through the rules and working with exchanges, the SEC has “the opportunity to fulfill Dodd-Frank’s mandate and Congress’s intention to prevent executives from keeping compensation received based on misstated financials.”

The final rules, 17 CFR Parts 229, 232, 240, 249, 270, and 274 (Release Nos. 33-11126; 34-96159; IC-34732; File No. S7-12-15), are available here: Final Rule: Listing Standards for Recovery of Erroneously Awarded Compensation ( 

The SEC originally proposed compensation recovery rules like these in 2015. According to the Wall Street Journal, “Accounting Errors to Cost Executives Their Bonuses Under SEC Rule” – WSJ, the rules passed last week are broader than what was proposed in 2015. The WSJ wrote that the 2015 proposal would have required clawbacks only if companies identified major accounting errors that required financial statements to be restated. The rules that the SEC just adopted also require companies to claw back bonuses paid to executives if they find smaller errors.

This blog is intended to provide information to the general public and to practitioners about developments that may impact Oregon Investments.

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Cody Berne

Cody Berne is an attorney at Stoll Berne in Portland. Cody’s practice focuses on representing investors who lost money because of fraud and other misconduct, class actions, and business litigation. He is a member of the Public Investors Advocate Bar Association and the Oregon Trial Lawyers Association.


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The information contained in this blog does not constitute legal advice, and does not create an attorney-client relationship. We make no claims, promises or guarantees about the accuracy, completeness, or adequacy of the information contained in or linked to this blog.