As we overviewed in the first post in this series, in late 2022 and early 2023, the SEC adopted four Final Rules that created a raft of new and detailed reporting requirements in Forms 10-Q and 10-K.

This is the third of five posts that provide details and suggestions to help companies analyze and implement these changes in upcoming periodic reports. This post goes into detail about the disclosure changes from the SEC’s October 2022 Final Rule “Listing Standards for Recovery of Erroneously Awarded Compensation.”

And, to help keep track of the topics we will explore, here is a reminder list of our current and future posts in this series to help you implement all these new disclosure requirements:

Current posts:

• • So Many Form 10-Q and 10-K Changes! [Part 1 of 5]

• • Insider Trading Arrangements and Related Disclosures (Rule 10b5-1 Plans) [Part 2 of 5]

• • Listing Standards for Recovery of Erroneously Awarded Compensation Disclosures [This post – Part 3 of 5]

Future posts:

• • Share Repurchase Disclosure Modernization [Part 4 of 5]
  • Pay Versus Performance Disclosures (Proxy statement only disclosures) [Part 5 of 5]

As a preliminary note, as you read this post, the Listing Standards for Recovery of Erroneously Awarded Compensation Final Rule does not create any new disclosures in Form 10-Q.

Details of Form 10-K Changes for Listing Standards for Recovery of Erroneously Awarded Compensation

The four changes to Form 10-K from Listing Standards for Recovery of Erroneously Awarded Compensationare:

• • 1.  Two new check boxes on the cover page related to clawback disclosures:

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. □

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). □

These boxes have already been added to the cover of the 10-K.  As they are on the official form, all filers should include them on the cover page.  However, they will apply only to issuers with exchange-listed securities.  Additionally, for those issuers, no response to the disclosures is required until after October 2, 2023, when the exchange listing standards become effective.

• • 2.  Item 11. Executive Compensation. – now requires details of any recovery of erroneously awarded compensation (S-K 402(w)), and related changes to executive compensation disclosures.  These disclosures are required on or after December 1, 2023 for issuers who have securities listed on a national securities exchange.

• • 3.  Item 13. Certain Relationships and Related Transactions, and Director Independence. – has administrative updates related to recovery of erroneously awarded compensation (S-K Item 404, Instruction 5a).  The transition is the same as number 2 above.

• • 4.  Item 15. Exhibit and Financial Statement Schedules. – includes new exhibit 97 for clawback policies.  The transition is the same as number 2 above.

1. As mentioned above, the new cover page check boxes are in place now. You can find the current version of the Form 10-K Instructions here.  You can read more about the checkboxes and review CorpFin’s related Compliance and Disclosure Interpretations in this blog post.

2. The mechanics of the change to Item 11. Executive Compensation do not require any updates to the instructions to the form, as the Item 11 instructions already refer to S-K Item 402. New paragraph (w) has been added to S-K item 402.

S-K Item 402(w) requires the following disclosures:

(w) Disclosure of a registrant’s action to recover erroneously awarded compensation.

(1) If at any time during or after the last completed fiscal year the registrant was required to prepare an accounting restatement that required recovery of erroneously awarded compensation pursuant to the registrant’s compensation recovery policy required by the listing standards adopted pursuant to 17 CFR 240.10D-1, or there was an outstanding balance as of the end of the last completed fiscal year of erroneously awarded compensation to be recovered from the application of the policy to a prior restatement, the registrant must provide the following information:

(i) For each restatement:

(A) The date on which the registrant was required to prepare an accounting restatement;

(B) The aggregate dollar amount of erroneously awarded compensation attributable to such accounting restatement, including an analysis of how the amount was calculated;

(C) If the financial reporting measure as defined in 17 CFR 240.10D-1(d) related to a stock price or total shareholder return metric, the estimates that were used in determining the erroneously awarded compensation attributable to such accounting restatement and an explanation of the methodology used for such estimates;

(D) The aggregate dollar amount of erroneously awarded compensation that remains outstanding at the end of the last completed fiscal year; and

(E) If the aggregate dollar amount of erroneously awarded compensation has not yet been determined, disclose this fact, explain the reason(s) and disclose the information required in paragraphs (w)(1)(i)(B) through (D) of this section in the next filing that is required to include disclosure pursuant to Item 402 of Regulation S-K;

(ii) If recovery would be impracticable pursuant to 17 CFR 240.10D-1(b)(1)(iv), for each current and former named executive officer and for all other current and former executive officers as a group, disclose the amount of recovery forgone and a brief description of the reason the listed registrant decided in each case not to pursue recovery; and

(iii) For each current and former named executive officer from whom, as of the end of the last completed fiscal year, erroneously awarded compensation had been outstanding for 180 days or longer since the date the registrant determined the amount the individual owed, disclose the dollar amount of outstanding erroneously awarded compensation due from each such individual.

(2) If at any time during or after its last completed fiscal year the registrant was required to prepare an accounting restatement, and the registrant concluded that recovery of erroneously awarded compensation was not required pursuant to the registrant’s compensation recovery policy required by the listing standards adopted pursuant to 17 CFR 240.10D-1, briefly explain why application of the recovery policy resulted in this conclusion.

(3) The information must appear with, and in the same format as, the rest of the disclosure required to be provided pursuant to this Item 402. The information is required only in proxy or information statements that call for Item 402 disclosure and the registrant’s annual report on Form 10-K, and will not be deemed to be incorporated by reference into any filing under the Securities Act, except to the extent that the listed registrant specifically incorporates it by reference.

(4) The disclosure must be provided in an Interactive Data File in accordance with Rule 405 of Regulation S-T and the EDGAR Filer Manual.

In addition to new paragraph S-K Item 402(w), the Recovery of Erroneously Awarded Compensation rule makes two changes to adjust disclosures in the Summary Compensation Table for recovered amounts:

Instructions to Item 402(c).

1. 1. 5. Reduce the amount reported in the applicable Summary Compensation Table column for the fiscal year in which the amount recovered initially was reported as compensation by any amounts recovered pursuant to a registrant’s compensation recovery policy required by the listing standards adopted pursuant to 17 CFR 240.10D-1, and identify such amounts by footnote.

Instructions to Item 402(n).

5. 1. 5. Reduce the amount reported in the applicable Summary Compensation Table column for the fiscal year in which the amount recovered initially was reported as compensation by any amounts recovered pursuant to the compensation recovery policy required by the listing standards adopted pursuant to 17 CFR 240.10D-1, and identify such amounts by footnote.

3. The mechanics of the change to Item 13. Certain Relationships and Related Transactions, and Director Independence do not require any updates to the instructions to the form, as the Item 13 instructions already refer to S-K Item 404. New instruction 5.a.iii has been added to S-K item 404, and provides an exception to related transaction reporting if a transaction relates to a clawback event and has been appropriately reported:

Instructions to Item 404(a). * * * 5.a. * * *

5.a. Disclosure of an employment relationship or transaction involving an executive officer and any related compensation solely resulting from that employment relationship or transaction need not be provided pursuant to paragraph (a) of this Item if:

***

iii. The transaction involves the recovery of erroneously awarded compensation computed as provided in 17 CFR 240.10D-1(b)(1)(iii) and the applicable listing standards for the registrant’s securities, that is disclosed pursuant to Item 402(w) (§229.402(w)).

4. The mechanics of the change to Item 15. Exhibit and Financial Statement Schedules are to add new exhibit 97:

(b) * * *

(97) Policy relating to recovery of erroneously awarded compensation. A registrant that at any time during its last completed fiscal year had a class of securities listed on a national securities exchange registered pursuant to section 6 of the Exchange Act (15 U.S.C. 78f) or a national securities association registered pursuant to section 15A of the Exchange Act (15 U.S.C. 78o-3) must file as an exhibit to its annual report the compensation recovery policy required by the applicable listing standards adopted pursuant to 17 CFR 240.10D-1.

You can read more about the adoption of appropriate clawback policies and find a link to a template policy in this blog post.

As always, your thoughts and comments are welcome!

As we overviewed in the first post in this series, in late 2022 and early 2023, the SEC adopted four Final Rules that created a raft of new and detailed reporting requirements in Forms 10-Q and 10-K.

This is the second of five posts that provide details and suggestions to help companies analyze and implement these changes in upcoming periodic reports. This post goes into detail about the disclosure changes from the SEC’s December 2022 Final Rule “Insider Trading Arrangements and Related Disclosures (Rule 10b5-1 Plans).” 

And, to help keep track of the topics we will explore, here is a reminder list of our current and future posts in this series to help you implement all these new disclosure requirements:

Current posts:

• • So Many Form 10-Q and 10-K Changes! [Part 1 of 5]
  • Insider Trading Arrangements and Related Disclosures (Rule 10b5-1 Plans) [This post – Part 2 of 5]

Future posts:

• • Listing Standards for Recovery of Erroneously Awarded Compensation Disclosures [Part 3 of 5]
  • Share Repurchase Disclosure Modernization Disclosures [Part 4 of 5]
  • Pay Versus Performance Disclosures (Proxy statement only disclosures) [Part 5 of 5]

Details of Form 10-Q Changes for Insider Trading Arrangements and Related Disclosures

The changes to Form 10-Q from the Insider Trading Arrangements and Related Disclosures (Rule 10b5-1 Plans) Final Rule are in Part II – Item 5 – Other Information, where disclosure of officer and director Rule 10b5-1 plans and “non-10b5-1 trading arrangements” is now required.

This change was effective for the first full fiscal quarter beginning on or after April 1, 2023 – i.e., now.

The mechanics of this change start with this modification to the instructions to Part II – Item 5, adding new paragraph (c):

Item 5. Other Information.

*****
(c) Furnish the information required by Item 408(a) of Regulation S-K (17 CFR 229.408(a)).

S-K Item 408(a) requires the following disclosures:

229.408 (Item 408) Insider trading arrangements and policies.

(a)(1) Disclose whether, during the registrant’s last fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report), any director or officer (as defined in § 240.16a-1(f) of this chapter) adopted or terminated:

(i) Any contract, instruction or written plan for the purchase or sale of securities of the registrant intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) (§ 240.10b5- 1(c) of this chapter) (a “Rule 10b5-1 trading arrangement”); and/or

(ii) Any “non-Rule 10b5-1 trading arrangement” as defined in paragraph (c) of this section.

(2) Identify whether the trading arrangement is intended to satisfy the affirmative defense of Rule 10b5-1(c), and provide a description of the material terms, other than terms with respect to the price at which the individual executing the Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement is authorized to trade, such as:

(A) The name and title of the director or officer;

(B) The date on which the director or officer adopted or terminated the trading arrangement;

(C) The duration of the trading arrangement; and

(D) The aggregate number of securities to be purchased or sold pursuant to the trading arrangement.

(3) The disclosure provided pursuant to paragraphs (a)(1) and (2) of this section must be provided in an Interactive Data File as required by 17 CFR 232.405 (Rule 405 of Regulation S-T) in accordance with the EDGAR Filer Manual.

(Note:  Company 10b5-1 plan disclosure is required by the Share Repurchase Final Rule and will be reviewed in Post 4 of 5.)

Details of Form 10-K Changes for Insider Trading Arrangements and Related Disclosures

The four changes to Form 10-K from the Insider Trading Arrangements and Related Disclosures (Rule 10b5-1 Plans) Final Rule are in:

• • 1.  Part II – Item 9B. Other Information, where disclosure of officer and director Rule 10b5-1 plans and “non-10b5-1 trading arrangements” is now required.  This change is effective for Form 10-K if it contains a fourth quarter that begins on or after April 1, 2023.  Thus, it will also be effective for a fiscal year that ends on or after June 30, 2023.

• • 2.  Part III – Item 10. Directors, Executive Officers and Corporate Governance, which now includes information about insider trading policies. This change is effective for 10-Ks for fiscal years ending on or after December 31, 2024 as well as for proxy statements for 2025 annual meetings.

• • 3.  Part III – Item 11. Executive Compensation, which now requires disclosures about policies and practices related to the grant of certain equity awards close in time to the release of material nonpublic information.  This change is effective for 10-Ks for fiscal years ending on or after December 31, 2024 as well as for proxy statements for 2025 annual meetings.

• • 4.  Part IV – Item 15. Exhibit and Financial Statement Schedules, which now includes exhibit 19 for insider trading policies.  This change is effective for 10-Ks for fiscal years ending on or after December 31, 2024. 

1.  The mechanics of the change to Item 9B start with this modification to the instructions:

PART II – Item 9B. Other Information

Furnish the information required by Item 408(a) of Regulation S-K (§ 229.408(a) of this chapter).

S-K Item 408(a) requires the following disclosures:

229.408 (Item 408) Insider trading arrangements and policies.

(a)(1) Disclose whether, during the registrant’s last fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report), any director or officer (as defined in § 240.16a-1(f) of this chapter) adopted or terminated:

(i) Any contract, instruction or written plan for the purchase or sale of securities of the registrant intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) (§ 240.10b5- 1(c) of this chapter) (a “Rule 10b5-1 trading arrangement”); and/or

(ii) Any “non-Rule 10b5-1 trading arrangement” as defined in paragraph (c) of this section.

(2) Identify whether the trading arrangement is intended to satisfy the affirmative defense of Rule 10b5-1(c), and provide a description of the material terms, other than terms with respect to the price at which the individual executing the Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement is authorized to trade, such as:

(A) The name and title of the director or officer;

(B) The date on which the director or officer adopted or terminated the trading arrangement;

(C) The duration of the trading arrangement; and

(D) The aggregate number of securities to be purchased or sold pursuant to the trading arrangement.

(3) The disclosure provided pursuant to paragraphs (a)(1) and (2) of this section must be provided in an Interactive Data File as required by 17 CFR 232.405 (Rule 405 of Regulation S-T) in accordance with the EDGAR Filer Manual.

2.  The mechanics of the change to Item 10 start with this modification to the instructions to include S-K Item 408(b):

Item 10. Directors, Executive Officers and Corporate Governance

Furnish the information required by Items 401, 405, 406, 407(c)(3), (d)(4), (d)(5), and 408(b) of Regulation S-K (§ 229.401, § 229.405, § 229.406, § 229.407(c)(3), (d)(4), (d)(5), and § 229.408(b) of this chapter).

S-K Item 408(b) requires the following disclosures:

229.408 (Item 408) Insider trading arrangements and policies.

(b)(1) Disclose whether the registrant has adopted insider trading policies and procedures governing the purchase, sale, and/or other dispositions of the registrant’s securities by directors, officers and employees, or the registrant itself, that are reasonably designed to promote compliance with insider trading laws, rules and regulations, and any listing standards applicable to the registrant. If the registrant has not adopted such policies and procedures, explain why it has not done so.

(2) If the registrant has adopted insider trading policies and procedures, the registrant must file such policies and procedures as an exhibit. If all of the registrant’s insider trading policies and procedures are included in its code of ethics (as defined in 17 CFR 229.406(b)) and the code of ethics is filed as an exhibit pursuant to 17 CFR 229.406(c)(1), that would satisfy the exhibit requirement of this paragraph.

(3) The disclosure provided pursuant to paragraph (b)(1) of this section must be provided in an Interactive Data File as required by 17 CFR 232.405 in accordance with the EDGAR Filer Manual.

3.  The mechanics of the change to Item 11. Executive Compensation do not require any updates to the instructions to the form, as the Item 11 instructions already refer to S-K Item 402. New paragraph (x) has been added to S-K item 402.

229.402 (Item 402) Executive compensation.

*****
(x) Disclosure of the registrant’s policies and practices related to the grant of certain equity awards close in time to the release of material nonpublic information.

(1) Discuss the registrant’s policies and practices on the timing of awards of options in relation to the disclosure of material nonpublic information by the registrant, including how the board determines when to grant such awards (for example, whether such awards are granted on a predetermined schedule); whether the board or compensation committee takes material nonpublic information into account when determining the timing and terms of such an award, and, if so, how the board or compensation committee takes material nonpublic information into account when determining the timing and terms of such an award; and whether the registrant has timed the disclosure of material nonpublic information for the purpose of affecting the value of executive compensation.

(2) (i) If, during the last completed fiscal year, the registrant awarded options to a named executive officer in the period beginning four business days before the filing of a periodic report on Form 10-Q (§ 249.308a of this chapter) or Form 10-K (§ 249.310 of this chapter), or the filing or furnishing of a current report on Form 8-K (§ 249.308 of this chapter) that discloses material nonpublic information (other than a current report on Form 8-K disclosing a material new option award grant under Item 5.02(e) of that form), and ending one business day after the filing or furnishing of such report provide the information specified in paragraph (x)(2)(ii) of this section, concerning each such award for each of the named executive officers in the following tabular format:

(ii) The Table shall include:

(A) The name of the named executive officer (column (a));

(B) On an award-by-award basis, the grant date of the option award reported in the table (column (b));

(C) On an award-by-award basis, the number of securities underlying the options, (column (c));

(D) On an award-by-award basis, the per-share exercise price of the options (column (d));

(E) On an award-by-award basis, the grant date fair value of each award computed using the same methodology as used for the registrant’s financial statements under generally accepted accounting principles (column (e)).

(F) For each instrument reported in column (b), disclose the percentage change in the market price of the underlying securities between the closing market price of the security one trading day prior to and the trading day beginning immediately following the disclosure of material nonpublic information (column (f)).

Instruction to paragraph (x)(2). A registrant that is a smaller reporting company or emerging growth company may limit the disclosures in the table to its PEO, the two most highly compensated executive officers other than the PEO who were serving as executive officers at the end of the last completed fiscal year, and up to two additional individuals who would have been the most highly compensated but for the fact that the individual was not serving as an executive officer at the end of the last completed fiscal year.

(3) The disclosure provided pursuant to this paragraph (x) must be provided in an Interactive Data File as required by 17 CFR 232.405 (Rule 405 of Regulation S-T) in accordance with the EDGAR Filer Manual.

4. The mechanics of the change to Item 15. Exhibit and Financial Statement Schedules are to add new exhibit 19:

(b)* * *

(19) Insider trading policies and procedures. Any insider trading policies and procedures, or amendments thereto, that are the subject of the disclosure required by § 229.408(b) (Item 408(b) of Regulation S-K).

(Note:  S-K Item 408(b) is reviewed above with Item 10 changes.)

To implement all these new disclosure requirements companies will need to establish a process and appropriate disclosure controls and procedures to accumulate information from officers and directors about their 10b5-1 plans.  In addition, adopting a compliant insider trading policy, or, as necessary, updating insider trading policies, will be necessary.

You can find more information about the changes to the use of Rule 10b5-1 plans, including the cooling-off period and certification provisions, in this blog post.

As always, your thoughts and comments are welcome!

As we discussed in a prior post, three parts of the SEC’s 2020 MD&A modernization have become focus areas in the comment process:

• • Critical accounting estimate disclosures
  • Quantitative and qualitative disclosures about material changes
  • Meaningfully addressing liquidity and capital resources disclosures

We also explored how one of the reasons behind this increase in MD&A comments could be that companies are reluctant to change MD&A, even when the change is to comply with a new rule or to improve MD&A!

In earlier posts we explored comment letter exchanges focused on critical accounting estimate disclosures and quantitative and qualitative disclosures about material changes.

Today’s post examines an example comment and company response for the third of these three areas, meaningfully addressing liquidity and capital resources disclosures.

The Regulation S-K Item 303 guidance for this disclosure is very big picture:

Analyze the registrant’s ability to generate and obtain adequate amounts of cash to meet its requirements and its plans for cash in the short-term (i.e., the next 12 months from the most recent fiscal period end required to be presented) and separately in the long-term (i.e., beyond the next 12 months). The discussion should analyze material cash requirements from known contractual and other obligations.

……..

Describe the registrant’s material cash requirements, including commitments for capital expenditures, as of the end of the latest fiscal period, the anticipated source of funds needed to satisfy such cash requirements and the general purpose of such requirements.

It is important to note that the language “cash requirements” does not limit the disclosure to contractual obligations, but all reasonably likely cash requirements.  This in essences is a discussion of how the business is funded in both the long- and short-term.  An important part of this analysis is clear and understandable disclosure about sources of cash and how they have varied in the past and how they could vary in the future.

Here is an example disclosure from a company’s Form 10-Q MD&A that generated a comment to provide more meaningful disclosure about how cash is generated:

Net cash provided by operations was $19.8 million for the twenty-six weeks ended June 24, 2022 consisting of a net income of $18.3 million and $37.1 million of non-cash charges, partially offset by investments in working capital growth of $35.6 million. Non-cash charges increased $20.4 million primarily due to a $12.8 million change in deferred tax expenses and a $5.0 million increase in changes in the fair value of earn-out liabilities. The cash used for working capital growth of $11.8 million is primarily driven by the Company’s reinvestment in working capital to support sales growth.

The SEC’s comment focuses on more robust explanations for the causal factors behind changes in cash from operating activities:

Liquidity and Capital Resources Cash Flows, page 2

1. 2. Your analysis of changes in operating cash flows references net results, noncash charges and working capital. Note that references to these items may not provide a sufficient basis to understand how operating cash actually was affected between periods. Your analysis should discuss factors that actually affected operating cash and reasons underlying these factors.  In connection with this, discuss more fully what the cash used for working capital growth primarily driven by the Company’s reinvestment in working capital to support sales growth represents and the potential for this to be a continuing trend.  Refer to the introductory paragraph of section IV.B and paragraph B.1 of Release No. 33-8350 for guidance, and section 501.04 of the staff’s Codification of Financial Reporting Releases regarding quantification of variance factors.  Please revise your disclosure as appropriate.

In its response, the company provided more detailed discussion about the causal factors behind the change in operating cash flows:

In response to the Staff’s comment the Company will expand its disclosure of the factors impacting operating cash flows in future filings. The following is an example of the future disclosure related to operating cash flows:

Net cash provided by operations was $19.8 million for the twenty-six weeks ended June 24, 2022, compared to net cash used in operating activities of $23.9 million for the twenty-six weeks ended June 26, 2021. The increase in cash provided by operating activities is primarily due to the increased net income, net of non-cash charges, in the current year of $55.4 million versus a loss of $0.1 million in the prior year period. This improvement in cash-based profitability is primarily due to a 65% increase in sales compared to the prior year period. The sales growth also resulted in higher working capital (increased accounts receivable and inventory partially offset by higher accounts payable). The working capital growth of $11.8 million versus the prior year period partially offset the favorable impact of increased profitability. The Company’s increased working capital investment in the current year is the result of rapid sales growth driven by the Company’s recovery from the pandemic. The Company expects working capital growth to moderate in the future as sales growth normalizes.

Each of the three MD&A areas addressed in our “Getting Ahead of the MD&A Update Curve” series was changed in the SEC’s 2020 modernization rule, which has been in effect for two years.  SEC comments, like those discussed in this series, can be easily avoided by assuring your MD&A appropriately addresses each area.

As always, your thoughts and comments are welcome!

The SEC’s October 2022 “Listing Standards for Recovery of Erroneously Awarded Compensation” Final Rulewill require companies whose securities are listed on national securities exchanges to develop and adopt  policies for the recovery or “clawback” of incentive compensation that has been “erroneously awarded” when a company restates its financial statements. Because the SEC generally cannot directly regulate corporate governance matters, the new requirements are being implemented through listing standards that national securities exchanges will soon be required to adopt.

Based on the Final Rule, clawback policies will be required to:

• • Apply to all current and former executive officers,
  • Require clawback of incentive compensation that was based on a financial measure that is changed when a company restates its financial statements, and
  • Apply to the three years before the date on which the company restates its financial statements.

Gary Brown, Partner at Nelson Mullins Riley & Scarborough LLP, and SEC Institute workshop leader and PLI author, has drafted an “Incentive Compensation Recoupment Policy” template to help companies get a head start in this process.  You can find the policy template here.

If you would like to learn more about the provisions of and timing for the new requirements, some highlights are provided below.  You can also learn more in this Fact Sheet and the Final Rule.

The Final Rule became effective on January 27, 2023.  Based on this effective date, the timing requirements of the Final Rule are:

• • February 26, 2023 – last day by which national securities exchanges are to file proposed clawback listing standards;
  • November 28, 2023 – last day by which clawback listing standards must become effective; and
  • January 27, 2024 – last day by which listed companies must adopt and comply with an appropriate clawback policy.

Of course, if the exchanges enact listing standards earlier than the deadlines outlined above, companies will have to adopt policies before January 27, 2024.

Three important notes:

• • These new rules apply to all listed companies – including SRCs, emerging growth companies and foreign private issuers,
  • The clawback provisions will apply to both “Big R” and “little r” restatements, and
  • The requirement to pursue clawback recoveries will be subject to very limited “impracticability” exceptions.

In our next post we will review the related new disclosure requirements and form changes.

As always, your thoughts and comments are welcome!