SEC passes Dodd-Frank executive pay clawback rule

The Securities and Exchange Commission (SEC) on Wednesday passed a rule to require public companies to recover incentive-based compensation doled out to current and former executives in certain cases of accounting restatement.

The new rule, which takes effect 60 days after being posted in the Federal Register, mandates public companies develop policies and procedures that will demand the return of compensation paid to executives if the firm’s finances are restated within the past three years. Failing to implement a policy that meets the requirements of the rule could result in a public company being delisted from U.S. stock exchanges, according to an SEC fact sheet.

Types of compensation that could be clawed back include “options and other equity awards whose grant or vesting is based wholly or in part upon the attainment of any measure based upon or derived from financial reporting measures,” the rule said.