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SEC Clawback Rule

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Opmerkingen

5 opmerkingen

  • Mike

    Great question as always, Ken!

    I asked some of our experts on this and have the following info for you.

    First, there are a few phases to the final rule.
    • Exchanges have no more than 90 days to file proposed listing standards following publication of the release in the Federal Register.
    • Those listing standards must be effective no later than one year from publication.
    • Issuers subject to such listing standards will be required to adopt a recovery policy no later than 60 days following the date on which the applicable listing standards become effective.
    This info can be found at the bottom of the Fact Sheet of the final rule. The main impact to all upcoming 10-K (and 20-F and 40-F) filings will be the addition of two new checkboxes (XBRL tagged) on the cover page to indicate if the filing contains a correction to a previously filed financials as well as a checkbox if the correction required a recovery analysis. This final rule has the details.
     
    The cover page tagging aspect is something Workiva is actively confirming timing with SEC, i.e. will it go into effect this coming 10-K season or after the policy mandates are in place. This also depends on the DEI availability as well.
     
    We'll keep this post updated with any updates, but definitely give me a holler if you have any questions on the above. Thanks as always and happy Friday!
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  • Kenneth Ho

    Hi Mike, 

    Thank you for the quick response as always.  

    My confusion is that if the listing standards are not updated by the time we file 2022 10K in Feb/March, are those two check boxes (together with XBRL) still required for the 2022 10K?  I checked the SEC.GOV Form 10K template ant it is not updated with those two boxes.  As you said, we will keep monitoring for the updates.  

    Have a great weekend.  

    Ken

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  • Mike

    Quick update for you today regarding the clawback rule. Last week, the SEC posted an interpretation update on the clawback regulation, and is especially relevant here.

    Question 121H.01

    Question: Will issuers be required to mark the check boxes in 2023 before an issuer is required to adopt a recovery policy and comply with the applicable listing standards? 

    Answer: In the adopting release, the Commission indicated that it does not expect compliance with the disclosure requirements until issuers are required to have a recovery policy under the applicable exchange listing standard. While the check boxes and other disclosure requirements will be in the rules and forms in 2023, we do not expect issuers to provide such disclosure until they are required to have a recovery policy under the applicable listing standard.

    They also updated the Form 10-K PDF to include the new checkboxes, as described in the final rule.  https://www.sec.gov/about/forms/form10-k.pdf. That being said, we can likely assume that since most filers will not have a recovery policy in place before they file their 10K this year, you can include the checkboxes but leave them blank.

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  • Kenneth Ho

    Thanks Mike for the update.  Any guidance from your XBRL team in terms of how to tag those new boxes?  

    Ken

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  • Mike

    While we'd always encourage our clients to confirm with their own legal team, here's what we know so far about the tagging of these boxes.

    Today the tags only exist on the draft ECD taxonomy, so they aren't available to be used currently. And based on how the FAQ is stated, i.e. "...we do not expect issuers to provide such disclosure until they are required to have a recovery policy under the applicable listing standard", as these policies are not in place yet, it wouldn't be anticipated that the SEC would expect tagging as of yet. 

    You could add the check boxes to the cover page of your 10-K so that is the format in the current Form 10-K instructions. You could not check a box (i.e. leave them both blank) or tag the boxes until the related guidance was in effect for your company, which will certainly not be for the upcoming 2022 10-K filings.

    Hopefully that helps some. Let me know if you have any follow-ups for me. Thanks and chat soon!

     
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