Companies listed on the New York Stock Exchange (NYSE) and Nasdaq have until Dec. 1, 2023, to adopt clawback policies that comply with the listing standards mandated by the Securities and Exchange Commission (SEC) in Rule 10D-1 (the SEC Clawback Rules). Compliant policies will require companies to clawback incentive-based compensation erroneously received by current or former executive officers after an accounting restatement. Companies must also publicly disclosure their policies as part of their first annual report filed on or after Dec. 1, 2023.

As the deadline to adopt compliant policies approaches, here are several key things to know about the SEC Clawback Rules.

1. Nearly all listed issuers are subject to the new clawback rules.

Generally, all listed companies on the NYSE and Nasdaq must comply with the SEC Clawback Rules, including listed foreign private issuers (FPIs) and emerging growth companies. The limited issuers exempt from the rules are issuers of security futures products, standardized options, unit investment trust securities, and certain registered investment company securities.

2. Misconduct or knowledge is not required for the clawback rules to apply.

The SEC Clawback Rules require recovery of the erroneously awarded incentive-based compensation (calculated based on the error that was subsequently corrected in the accounting restatement), regardless of any misconduct or knowledge of the officer who received the compensation. But recovery is not required if the compensation was received before the person began serving as an officer, or the person did not serve as an officer at any time during clawback period. 

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