Following an October 2021 reopening of the comment period for the Dodd-Frank Act-prompted executive compensation clawback proposal (reported on here), the SEC once again reopened the comment period on the proposal yesterday. The stated basis for reopening the comment period is supplemental data and analysis released by the SEC’s Division of Economic and Risk Analysis on the prevalence and scope of voluntarily adopted clawback policies since the proposal was issued in 2015, as well as the prevalence in 2021 of “little r” restatements overall and in relation to “Big R” restatements (we reported on here: see “Financial Restatement Statistics & Trends”), both of which may impact the proposed rule’s cost/benefit analysis.
The scope of the rule, and the proposed inclusion of “little r” restatements specifically, was among those provisions that the Society recommended be excluded from the final rule in its comment letter submitted to the SEC in November 2021. The Society’s 2021 comment letter also discussed the widespread voluntary adoption of clawback policies since the 2015 release and the scope of those policies among larger companies based on then-recent data.
According to the Fact Sheet, the SEC is also still seeking comment on whether the proposed “reasonably should have concluded” look-back period trigger for a restatement that was included in the proposing release (which the Society previously recommended be excluded from the final rule both in our November 2021 letter, as well our initial comment letter in 2015) should be revised.
Comments are due 30 days after publication of the rerelease in the Federal Register.
See the SEC’s press release; this Cooley post; and additional information & resources on our Clawbacks page.