SEC Issues New C&DIs Regarding Form 10-K “Clawback” Checkboxes
The U.S. Securities and Exchange Commission’s (SEC) Division of Corporation Finance recently released updates to several Compliance & Disclosure Interpretations (C&DIs) related to the SEC’s recently adopted rules directing national securities exchanges to adopt listing standards that require issuers to adopt and implement “clawback” policies. Specifically, the updated C&DIs aim to clarify the SEC’s expectations regarding a set of new checkboxes that have been added to the cover pages of Form 10-K, Form 20-F, and Form 40-F pursuant to the rules.
Pursuant to the recently adopted rules, the cover pages of Form 10-K, Form 20-F, and Form 40-F have been amended to include a set of new checkboxes intended to indicate:
Whether the financial statements included in the report reflect the correction of an error to previously issued financial statements; and
Whether any of the error corrections require a recovery analysis under the issuer’s clawback policy.
While the rules were effective as of Jan. 27, 2023, the SEC’s adopting release noted that the listing standards mandated by the rules are not required to be effective until Nov. 28, 2023, and that issuers subject to such listing standards will not be required to adopt a clawback policy until 60 days following the date on which the applicable listing standards become effective.
Given the disconnect between the effective date of the disclosure requirements mandated by the new rules — including the new checkboxes — and the date upon which issuers are required to adopt the clawback policies that are the subject of such disclosures, the updated C&DIs clarify that the SEC does not expect compliance with the disclosure requirements mandated by the new rules until issuers are required to have a clawback policy under the applicable exchange listing standard, with the SEC noting that “[w]hile the checkboxes 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 [clawback] policy under the applicable listing standard.”
The affected C&DIs are Exchange Act Forms C&DIs 104.19, 110.09, 112.04, and Exchange Act Rules C&DI 121H.01.