U.S. SEC breathes new life into 2015 executive compensation clawback rule

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WASHINGTON, Oct 14 (Businesshala) – The US Securities and Exchange Commission (SEC) voted on Thursday to revive a rule that has been unfinished since 2015 that limits the regulator’s powers to compensate clawback executives. When a company has to restore its financial dues. for compliance lapses.

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The SEC said it would seek another round of public feedback on the rule, which was mandated by Congress after the 2007-2009 financial crisis, with a view to finalizing the rule next year.

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The SEC proposed a draft in 2015, but failed to finalize it. The effort to revive the rule is part of a broader push by the SEC, now controlled by Democrats, to crack down on corporate malpractice by increasing its tools to punish executives.

Agency President Gary Genlser said in a statement that reopening the comment period gives the watchdog an opportunity to “strengthen the transparency and quality of corporate financial statements, as well as the accountability of corporate executives to their investors.”

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If finalized, the measure would apply to public companies of all sizes and to any executive officer making policymaking decisions and who have received incentive compensation, including stock options, in line with the agency’s existing clawback powers, created in 2002. The scope is expanding dramatically.

The SEC can use the new power to recover compensation in excess of what the executive concerned should have received in the event a company had to reassess its financial position due to “material non-compliance” with securities laws. .

This would apply to compensation paid in the three years leading up to the re-statement – ​​“even if the misstatement is due to fraud, errors or any other factor.”

It would also direct US stock exchanges to establish listing standards that each issuer would require to develop and enforce such a policy.

Five of the SEC’s commissioners voted unanimously to reopen the comment period on Thursday, and proposed a more stringent interpretation of the rule than a previous 2015 resolution, including a “restatement of accounts” and “reasonable conclusions to be drawn”. reconsidering the scope of Look back. (Reporting by Katanga Johnson Editing by Paul Simao)

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