US SEC Proposed Clawback Rules – Application to Foreign Issuers with a Secondary Listing in the US

 In July 2015, the US Securities and Exchange Commission issued the proposed clawback rules, which would obligate national securities exchanges to adopt listing standards that require listed companies to adopt and disclose clawback policies to recover from current and former executive officers excess “incentive-based compensation” attained during the three fiscal years preceding the date on which the company is required to prepare an accounting restatement to correct a material error. As proposed, the SEC identifies “incentive-based compensation” as any compensation that is granted, earned or vested based wholly or in part upon the attainment of any financial reporting measure. The proposed rules are subject to a 60-day comment period and require the national securities exchanges to adopt listing standards, so it is unlikely the rules will take effect prior to the 2016 proxy season.

The proposed clawback rules generally apply to all issuers which are publicly listed on a national securities exchange or association in the US, including foreign private issuers, with very limited exemptions for issuers of security futures products and standardized options, certain registered management investment companies and unit investment trusts.

A copy of the proposals can be viewed on the SEC website.