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SEC Issues Proposed Incentive Compensation Clawback Rule

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July 2015

In another round of rulemaking related to the Dodd-Frank Wall Street Reform and Consumer Protection Act, the SEC proposed a rule that would require certain executive officers to pay back incentive compensation tied to accounting-related metrics in the event of an accounting restatement. Specifically, the proposed rules require publicly-traded companies to adopt clawback policies and publish those policies as an exhibit to their annual report. If there is an accounting restatement, the company’s recovery policy would require an executive to pay back certain excess incentive compensation for the three years before the date that the company is required to prepare the accounting restatement. The rule covers incentive compensation paid to “executive officers,” which the rule defines as the president, principal financial officer, principal accounting officer, certain vice presidents, and other employees who perform policy-making functions.

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