Nasdaq and NYSE-listed companies must have a compensation recovery policy that complies with the Securities and Exchange Commission’s clawback rule. The rule requires the clawback of executive compensation after an accounting restatement due to material noncompliance with financial reporting requirements. But the clawback rule exceeds its statutory authorization. The rule mandates clawbacks even after immaterial error corrections and even from non-executive officers. The statute authorizes neither of those types of clawbacks. The rule is unlawful. The SEC should revise the rule to comport with its statutory authority or a court should vacate the rule.
Originally published in The Review of Securities & Commodities Regulation - April 23, 2025.
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