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David Engvall provides securities, transactional and general corporate advice to clients ranging from development stage ventures to large public companies.  His work includes private and public equity and debt securities offerings, investment transactions, corporate governance matters, and mergers and acquisitions.  Mr. Engvall also advises public company clients on a wide variety of SEC compliance and disclosure matters.  Recently, Mr. Engvall has been actively engaged in advising clients on a number of securities law provisions under the Dodd-Frank Wall Street Reform and Consumer Protection Act, including executive compensation, corporate governance, and specialized disclosures such as those pertaining to conflict minerals.  His practice includes clients in a variety of industries, with a recent focus on the energy, financial institutions and telecommunications industries.

On October 26, 2022, the Securities and Exchange Commission (the “SEC”) adopted a long-awaited rule[1] that will require listed companies to adopt and publicly file so-called “clawback” policies to recover erroneously awarded incentive-based compensation following accounting restatements. Companies with securities listed on national securities exchanges, including NYSE and Nasdaq, will be required to implement such policies within 60 days of the effective date of new listing standards, which the exchanges must adopt within 12 months of the new rule’s publication in the Federal Register. Companies who fail to comply will be subject to delisting.

The most significant deviation from the SEC’s initial proposal of the clawback rule in 2015 is that Rule 10D-1 will require companies to conduct a clawback analysis not only for “Big R” accounting restatements, which must be disclosed under Item 4.02(a) of Form 8-K, but also for “little r” accounting restatements, which involve the correction of errors in prior period financial statements when those financial statements are included in a current period filing.

Clawback Policy Requirements

Under the new rule, a listed company’s clawback policy must require the company to recover, reasonably promptly, erroneously awarded incentive-based compensation from persons who served as an executive officer at any time during the performance period for such incentive-based compensation and who received such compensation during the three fiscal years preceding the date on which the company is required to prepare an accounting restatement. The compensation to be recovered is the amount in excess of what would have been paid based on the restated results.

Continue Reading SEC Requires Clawback Policy

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