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SEC May Issue Final Clawback Regulations Next Month

SEC May Issue Final Clawback Regulations Next Month

Author Executive Benefits Team
Date September 15, 2022
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The Securities and Exchange Commission (SEC) anticipates issuing final clawback regulations before the end of October 2022.

On June 8, 2022, the SEC reopened a 30-day comment period on the proposed rules for Listing Standards for Recovery of Erroneously Awarded Compensation, relative to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

These rules would apply to what is described in executive compensation as a clawback. Presently, the Dodd-Frank Act includes a provision to require publicly traded companies to adopt and disclose a policy for recouping incentive compensation from current and former executives. The policy for recoupment of compensation is to be available in the event the company is ever required to prepare an accounting restatement because of the company’s material noncompliance with financial reporting requirements of securities law.

The timeline below helps illustrate some of the steps that have occurred since the financial industry bailout of the Great Recession*, the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and the further steps initiated by the SEC to define the role of clawbacks.

Timeline

Executive Compensation and Final Clawback Regulations

When Congress approved the Dodd-Frank Act, the intent of the complex legislation was to protect the country from practices within the financial sector and other verticals that created risks for consumers or the economy in general. Lawmakers across party lines have always agreed on the need to control unethical practices in the financial sector, such as predatory lending. Yet, how control can be achieved without creating a regulatory burden for select industries, has remained a point of debate. As a result, the Dodd-Frank Act has undergone numerous updates and revisions. Depending upon the updates released next month, companies could be facing the new requirements regarding clawbacks as soon as January 1, 2023.

Read more: The Evolving Use of Clawback Provisions in Corporate America

*see: Troubled Asset Relief Program

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This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. Any tax advice contained herein is of a general nature. You should seek specific advice from your tax professional before pursuing any idea contemplated herein.

Securities offered through Lion Street Financial, LLC (LSF) and Valmark Securities, Inc. (VSI), each a member of FINRA and SIPC. Investment advisory services offered through Lion Street Advisors, LLC (LSA) and Valmark Advisers, Inc. (VAI), each an SEC registered investment advisor. Please refer to your investment advisory agreement and the Form ADV disclosures provided to you for more information. VAI/VSI and LSF/LSA are non-affiliated entities and separate entities from OneDigital.

Unless otherwise noted, VAI/VSI, LSF/LSA are not affiliated, associated, authorized, endorsed by, or in any way officially connected with any other company, agency or government agency identified or referenced in this document.

Lion Street Advisors // Lion Street Financial

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