[Federal Register Volume 86, Number 201 (Thursday, October 21, 2021)]
[Proposed Rules]
[Pages 58232-58237]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-22754]


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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 229, 240, 249 and 274

[Release No. 33-10998; 34-93311; IC-34399; File No. S7-12-15]
RIN 3235-AK99


Reopening of Comment Period for Listing Standards for Recovery of 
Erroneously Awarded Compensation

AGENCY: Securities and Exchange Commission.

ACTION: Proposed rule; reopening of comment period.

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SUMMARY: The Securities and Exchange Commission (``Commission'') is 
reopening the comment period for its proposal to implement the 
provisions of Section 954 of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act of 2010 (``Dodd-Frank Act''). The proposed rule 
would direct the national securities exchanges and national securities 
associations to establish listing standards that would require each 
issuer to develop and implement a policy providing for the recovery, 
under certain circumstances, of incentive-based compensation based on 
financial information required to be reported under the securities laws 
that is received by current or former executive officers, and require 
disclosure of the policy (the ``Proposed Rules''). The Proposed Rules 
were set forth in a release published in the Federal Register on July 
14, 2015 (Release No. 34-75342) (the ``Proposing Release''), and the 
related comment period ended on September 14, 2015. The reopening of 
this comment period is intended to allow interested persons further 
opportunity to analyze and comment upon the Proposed Rules in light of 
developments since the publication of the Proposing Release and our 
further consideration of the Section 954 mandate.

DATES: The comment period for the proposed rule published July 14, 
2015, at 80 FR 41143, is reopened. Comments should be received on or 
before November 22, 2021.

ADDRESSES: Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/submitcomments.htm).

Paper Comments

     Send paper comments to Vanessa A. Countryman, Secretary, 
Securities and Exchange Commission, 100 F Street NE, Washington, DC 
20549-1090.

All submissions should refer to File Number S7-12-15. This file number 
should be included on the subject line if email is used. To help us 
process and review your comments more efficiently, please use only one 
method. The Commission will post all comments on the Commission's 
website (http://www.sec.gov/rules/proposed.shtml). Comments also are 
available for website viewing and printing in the Commission's Public 
Reference Room, 100 F Street NE, Washington, DC 20549-1090 on official 
business days between the hours of 10 a.m. and 3 p.m. Operating 
conditions may limit access to the Commission's public reference room. 
All comments received will be posted without change. Persons submitting 
comments are cautioned that we do not redact or edit personal 
identifying information from comment submissions. You should submit 
only information that you wish to make available publicly.

[[Page 58233]]

    Studies, memoranda, or other substantive items may be added by the 
Commission or staff to the comment file during this rulemaking. A 
notification of the inclusion in the comment file of any such materials 
will be made available on our website. To ensure direct electronic 
receipt of such notifications, sign up through the ``Stay Connected'' 
option at www.sec.gov to receive notifications by email.

FOR FURTHER INFORMATION CONTACT: Steven G. Hearne, Senior Special 
Counsel, in the Office of Rulemaking, at (202) 551-3430, Division of 
Corporation Finance, Securities and Exchange Commission, 100 F Street 
NE, Washington, DC 20549.

SUPPLEMENTARY INFORMATION:

I. Background

    Section 954 of the Dodd-Frank Act added Section 10D to the 
Securities Exchange Act of 1934 \1\ (``Exchange Act''), which provides 
that the Commission require national securities exchanges and national 
securities associations to prohibit the listing of any security of an 
issuer that does not develop and implement a policy providing for the 
recovery of erroneously awarded compensation and for disclosure of that 
policy. As described more fully in the Proposing Release,\2\ under the 
Proposed Rules, an issuer would be subject to delisting if it does not 
adopt a compensation recovery policy that complies with the applicable 
listing standard, disclose the policy in accordance with Commission 
rules, and comply with the policy's recovery provisions. Specifically, 
the Proposed Rules would:
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    \1\ 15 U.S.C. 78a et seq.
    \2\ See Listing Standards for Recovery of Erroneously Awarded 
Compensation, Release No. 34-75342 (Jul. 1, 2015) [80 FR 41143 (Jul. 
14, 2015)].
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    1. Require national securities exchanges and associations to 
establish listing standards that require listed issuers to adopt and 
comply with a compensation recovery policy in which:
    i. Recovery is required:
    a. From current and former executive officers who received 
incentive-based compensation during the three fiscal years preceding 
the date on which the issuer is required to prepare an accounting 
restatement to correct a material error.
    b. On a ``no fault'' basis, without regard to whether any 
misconduct occurred or an executive officer's responsibility for the 
misstated financial statements.
    ii. The amount of incentive-based compensation to be recovered is 
the amount received by an executive officer that exceeds the amount the 
executive officer would have received had the incentive-based 
compensation been determined based on the restated financial 
statements.
    iii. Issuers must recover in compliance with their recovery 
policies except to the extent that it would be impracticable to do so, 
such as where the direct expense of enforcing recovery would exceed the 
amount to be recovered or, for foreign private issuers, in specified 
circumstances where recovery would violate home country law.
    iv. Issuers are prohibited from indemnifying current and former 
executive officers against the loss of recoverable incentive-based 
compensation.
    2. Define significant terms, including:
    i. ``Incentive-based compensation'' as any compensation that is 
granted, earned, or vested based wholly or in part upon the attainment 
of a financial reporting measure, and further defining ``financial 
reporting measure'' as a measure that is determined and presented in 
accordance with the accounting principles used in preparing the 
issuer's financial statements, any measure derived wholly or in part 
from such financial information, and stock price and total shareholder 
return. For incentive-based compensation based on stock price or total 
shareholder return, issuers would be permitted to use a reasonable 
estimate of the effect of the restatement on the applicable measure to 
determine the amount to be recovered.
    ii. ``Executive officer'' modeled on the definition of ``officer'' 
under 15 U.S.C. 78p (``Exchange Act Section 16''), to include the 
issuer's president, principal financial officer, principal accounting 
officer, any vice-president in charge of a principal business unit, 
division or function, and any other person who performs policy-making 
functions for the issuer and otherwise conforms to the full scope of 
the Exchange Act Section 16 definition.\3\
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    \3\ See 17 CFR 240. 16a-1(f).
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    3. Require the filing of the compensation recovery policy as an 
exhibit to the issuer's Exchange Act annual report, and if during its 
last completed fiscal year the issuer either completed a restatement 
that required recovery, or there was an outstanding balance of excess 
incentive-based compensation relating to a prior restatement, require 
disclosure, block tagged in XBRL, to accompany the executive 
compensation disclosure in annual reports and any proxy or information 
statements of:
    i. The date on which the issuer was required to prepare each 
accounting restatement, the aggregate dollar amount of excess 
incentive-based compensation attributable to the restatement, and the 
aggregate dollar amount of excess incentive-based compensation that 
remained outstanding at the end of its last completed fiscal year.
    ii. The name of each individual subject to recovery from whom the 
issuer decided not to pursue recovery, the amounts due from each such 
individual, and a brief description of the reason the issuer decided 
not to pursue recovery.
    iii. If at the end of the issuer's last completed fiscal year, 
amounts of excess incentive-based compensation are outstanding from any 
individual for more than 180 days, the name of, and amount due from, 
each such individual.
    4. Apply to all listed issuers except for certain registered 
investment companies to the extent they do not provide incentive-based 
compensation to their employees and limited accommodations for foreign 
private issuers.

II. Reopening of Comment Period

    Since the enactment of Section 954 of the Dodd-Frank Act in 2010, 
and the publication of the Proposed Rules in 2015, there have been 
important developments relating to clawback policies. We have observed 
an increase in the number of issuers disclosing information about their 
ability to recoup performance-based awards in the event of fraud, 
restatement of financial statements, or other reasons, and adopting and 
implementing executive compensation clawback policies addressing these 
circumstances.\4\
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    \4\ An Intelligize search indicates a significant increase in 
the number of publicly traded companies that adopted a clawback 
compensation policy, from 982 in 2015 to 1,321 in 2018 and to 2,021 
in 2020.
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    In light of these developments, and our further consideration of 
how best to implement the Section 954 mandate, we are reopening the 
comment period for the Proposed Rules until November 22, 2021 to 
provide the public with an additional opportunity to analyze and 
comment on the Proposed Rules. Commenters may submit, and the 
Commission will consider, comments on any aspect of the Proposed Rules. 
All comments received to date on the Proposed Rules will be considered 
and need not be resubmitted. Comments are particularly helpful to us if 
accompanied by quantified estimates or other detailed analysis and 
supporting

[[Page 58234]]

data regarding the issues addressed in those comments. In addition to 
the requests for comment included in the Proposing Release, the 
Commission specifically seeks comments on the following:

Request for Comment

    1. Exchange Act Section 10D provides for the implementation of a 
policy for the recovery of certain incentive-based compensation ``in 
the event that the issuer is required to prepare an accounting 
restatement due to the material noncompliance of the issuer with any 
financial reporting requirement under the securities laws.'' The 
Commission proposed to define an ``accounting restatement'' for this 
purpose as ``the result of the process of revising previously issued 
financial statements to reflect the correction of one or more errors 
that are material to those financial statements.'' The proposed 
definition would not require a recovery where an issuer's previously 
issued financial statements are required to be restated in order to 
correct errors that were not material to those previously issued 
financial statements, but would result in a material misstatement if 
(a) the errors were left uncorrected in the current report or (b) the 
error correction was recognized in the current period.
    Since the Commission issued the Proposing Release in 2015, concerns 
have been expressed that issuers may not be making appropriate 
materiality determinations for errors identified. Some commentators 
have suggested that this could be because some of these issuers are 
seeking to avoid compensation recovery under their clawback 
policies.\5\ One commenter expressed concerns regarding immaterial 
``revision restatements'' that would allow an issuer to avoid the 
application of the proposed clawback provisions and recommended that 
the clawback trigger not be limited to material restatements of 
previously issued financial statements.\6\ In this regard, we note that 
Commission staff has provided guidance that an issuer's materiality 
evaluation of an identified unadjusted error should consider the 
effects of the identified unadjusted error on the applicable financial 
statements and related footnotes, and evaluate quantitative and 
qualitative factors.\7\
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    \5\ See, e.g., Shh! Companies Are Fixing Accounting Errors 
Quietly--WSJ--Wall Street Journal (Dec. 5, 2019). See also 
Choudhary, Preeti and Merkley, Kenneth J. and Schipper, Katherine, 
Immaterial Error Corrections and Financial Reporting Reliability 
(June 15, 2021) available at https://ssrn.com/abstract=2830676 or 
http://dx.doi.org/10.2139/ssrn.2830676; and Thompson, Rachel, 
Reporting Misstatements as Revisions: An Evaluation of Managers' Use 
of Materiality Discretion (Sept. 17, 2021) available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3450828.
    \6\ See letter in response to the Proposing Release from AFL-CIO 
(Sept. 14, 2015) (``AFL-CIO''). Some commenters supported a trigger 
when any revision to previously issued financial statements 
occurred. See, e.g., letters in response to the Proposing Release 
from As You Sow Foundation (Sept. 15, 2015); Council of 
Institutional Investors (Aug. 27, 2015); California Public Employees 
Retirement System (Sept. 14, 2015). Other commenters supported the 
proposed standard to limit the trigger to material restatements of 
previously issued financial statements. See, e.g., letters in 
response to the Proposing Release from Ernst & Young LLP (Sept. 15, 
2015) and Society of Corporate Secretaries and Governance 
Professionals (Sept. 18, 2015) (``SCSGP'').
    \7\ The staff has provided guidance to assist registrants in 
carrying out these evaluations. See Staff Accounting Bulletin No. 
99, Materiality (Aug. 12, 1999) and Staff Accounting Bulletin No. 
108, Considering the Effects of Prior Year Misstatements when 
Quantifying Misstatements in Current Year Financial Statements 
(Sept. 13, 2006). The statements in the staff accounting bulletins 
are not rules or interpretations of the Commission, nor are they 
published as bearing the Commission's official approval. They 
represent interpretations and practices followed by the Division of 
Corporation Finance and the Office of the Chief Accountant in 
administering the disclosure requirements of the Federal securities 
laws.
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    We are considering whether the term ``an accounting restatement due 
to material noncompliance'' should be interpreted to include all 
required restatements made to correct an error in previously issued 
financial statements.\8\ This interpretation would include restatements 
required to correct errors that were not material to those previously 
issued financial statements, but would result in a material 
misstatement if (a) the errors were left uncorrected in the current 
report or (b) the error correction was recognized in the current 
period. Under such an interpretation, those restatements as well as 
restatements to correct errors that are material to the previously 
issued financial statements, would be considered ``an accounting 
restatement due to material noncompliance'' and therefore would result 
in a clawback recovery analysis. We believe that revising the Proposed 
Rules to encompass these types of restatements would be an appropriate 
means of implementing the statute.
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    \8\ See Financial Accounting Standards Board (``FASB'') 
Accounting Standards Codification (``ASC'') Topic 250, which defines 
``error in previously issued financial statements'' as an error in 
recognition, measurement, presentation, or disclosure in financial 
statements resulting from mathematical mistakes, mistakes in the 
application of generally accepted accounting principles, or 
oversight or misuse of facts that existed at the time the financial 
statements were prepared.
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    Should the scope of the Proposed Rules include (1) restatements 
that correct errors that are material to previously issued financial 
statements and (2) restatements that correct errors that are not 
material to previously issued financial statements, but would result in 
a material misstatement if (a) the errors were left uncorrected in the 
current report or (b) the error correction was recognized in the 
current period? Are there practical or other considerations that would 
make application of the clawback policy in these circumstances 
challenging or unduly burdensome? If so, are there additional changes 
we should make to address those challenges or burdens? For example, in 
instances where a clawback analysis would be trigged by restatements 
that correct errors that are not material to previously issued 
financial statements, should the rules provide additional discretion 
for compensation committees of the issuer's board of directors to 
determine whether to pursue recovery of incentive-based compensation 
and how much to recover, and would such discretion be consistent with 
Section 954? Is there an alternative interpretation of ``an accounting 
restatement due to material noncompliance'' that would be more 
appropriate and better capture required restatements? Are there 
accounting restatements that are due to material noncompliance that 
would not be captured by the proposed definition or the interpretation 
set forth above that should be subject to clawback?
    2. For purposes of triggering the three-year lookback period, the 
Proposed Rules would establish the date on which an issuer is required 
to prepare an accounting restatement as the earlier of (a) the date the 
issuer's board of directors, a committee of the board of directors, or 
the officer or officers of the issuer authorized to take such action if 
board action is not required, concludes, or reasonably should have 
concluded, that the issuer's previously issued financial statements 
contain a material error, or (b) the date a court, regulator or other 
legally authorized body directs the issuer to restate its previously 
issued financial statements to correct a material error. The Proposing 
Release indicated the Commission's belief that a definition that 
incorporates the proposed triggering events rather than leaving the 
determination solely to the discretion of the issuer would better 
realize the objectives of Section 10D while providing clarity about 
when a recovery policy, and specifically the determination of the 
three-year look-back period, would be triggered for purposes of the 
proposed listing standards. Some commenters expressed concern that the 
``reasonably should have concluded'' standard adds

[[Page 58235]]

unnecessary uncertainty to the determination.\9\ Should we remove the 
``reasonably should have concluded'' standard in light of concerns that 
the standard adds uncertainty to the determination? For example, should 
we revise the trigger to use the earlier of (a) the date the issuer's 
board of directors, a committee of the board of directors, or the 
officer or officers of the issuer authorized to take such action if 
board action is not required, concludes that the issuer's previously 
issued financial statements require a restatement to correct an error 
in those financial statements that is material to the previously issued 
financial statements or that would result in a material misstatement if 
(1) the error was left uncorrected in the current report or (2) the 
error correction was recognized in the current period; or (b) the date 
a court, regulator or other legally authorized body directs the issuer 
to restate its previously issued financial statements for either type 
of error? For errors that are material to the previously issued 
financial statements, we generally expect the date in (a) to coincide 
with the date disclosed in the Item 4.02(a) Form 8-K filed.\10\ For 
errors that are not material to the previously issued financial 
statements but where the issuer concludes that a restatement is 
required, we believe evidence of the conclusion that a restatement is 
required is generally included in the issuer's documentation of its 
materiality analysis of the error.\11\ Should we remove the 
``reasonably should have concluded'' standard in light of concerns 
raised by commenters, regardless of whether we revise the proposed 
trigger to accommodate the additional accounting restatements that we 
are considering? Is there another standard consistent with the purposes 
of the rule that may reduce the expected complexities of applying the 
``reasonably should have concluded'' standard?
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    \9\ See letters in response to the Proposing Release from 
American Bar Association (Feb. 11, 2016) (``ABA''); Business 
Roundtable (Sept. 14, 2015); Center on Executive Compensation (Sept. 
14, 2015); Davis Polk & Wardwell LLC (Sept. 11, 2015); Exxon Mobil 
Corporation (Sept. 14, 2015); and SCSGP. The letter from Exxon Mobil 
Corporation asserted it is not ``a realistic concern'' that issuers 
would delay issuing a restatement to avoid a clawback.
    \10\ An Item 4.02(a) Form 8-K is required to report when the 
registrant concludes that its previously issued financial statements 
should no longer be relied upon because of an error in such 
financial statements as addressed in FASB ASC Topic 250, Accounting 
Changes and Error Corrections.
    \11\ An Item 4.02 Form 8-K is not typically filed for an error 
that is not material to the previously issued financial statements.
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    3. The Commission proposed defining a number of terms for purposes 
of the Proposed Rules. Alternatively, should the Commission rely on 
common understanding or specifically delineate the rules without 
relying on a set of definitions specific to this rule? For example, an 
``accounting restatement'' was proposed to be defined solely for the 
purposes of the Proposed Rule as ``the result of the process of 
revising previously issued financial statements to reflect the 
correction of one or more errors that are material to those financial 
statements.'' U.S. GAAP and IFRS include guidance on how an issuer 
should correct accounting errors in previously issued financial 
statements.\12\ In addition, Federal securities laws and Commission 
rules require presenting information that is not misleading. To assist 
registrants with compliance with the Federal securities laws, the staff 
has provided certain guidance on how registrants assess the materiality 
of an accounting error.\13\ Because the revised clawback trigger we are 
considering would specifically refer to all required restatements to 
previously issued financial statements, including those restatements 
that were not material to those previously issued financial statements, 
but would result in a material misstatement if (a) the errors were left 
uncorrected in the current report or (b) the error correction was 
recognized in the current period, we are considering whether it would 
be more appropriate to rely on existing guidance, literature and 
definitions concerning accounting errors rather than define 
``accounting restatement'' and ``material noncompliance.'' Should we 
rely on these existing resources and remove the proposed definitions of 
``accounting restatement'' and ``material noncompliance''? 
Alternatively, are there other definitions of ``accounting 
restatement'' and ``material noncompliance'' we should use or would 
adding new definitions cause more confusion in their application? 
Additionally, if the rule does not establish a specific definition 
regarding when incentive-based compensation is ``received,'' what 
guidance, if any, should we provide regarding the meaning of that term?
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    \12\ See FASB ASC Topic 250, Accounting Changes and Error 
Corrections, and International Accounting Standard 8, Accounting 
Policies, Changes in Accounting Estimates and Errors.
    \13\ See supra note 7.
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    4. If we interpret the statutory term ``an accounting restatement 
due to material noncompliance'' to include restatements required to 
correct errors that were not material to previously issued financial 
statements, but would result in a material misstatement if (a) the 
errors were left uncorrected in the current report or (b) the error 
correction was recognized in the current period, then those 
restatements would require a recovery analysis. Registrants do not 
always label historical financial statements as ``restated'' for these 
types of restatements. Also, an Item 4.02 Form 8-K filing is not 
typically filed for this type of error, because the error is not 
material to the previously issued financial statements. As such, to 
provide greater transparency around such restatements, we are 
considering whether to add check boxes to the cover page of the Form 
10-K that indicate separately (a) whether the previously issued 
financial statements included in the filing include an error 
correction, and (b) whether any such corrections are restatements that 
triggered a clawback analysis during the fiscal year. Would one or both 
checkboxes and the related information be useful to investors? Is there 
another method, such as via a Form 8-K filing, that we should consider 
in order to provide this information to investors in a transparent and 
prominent manner? Are there any other disclosures that would be useful 
to investors in explaining or clarifying information surrounding any 
restatements or the issuer's decision of whether or not to claw back 
compensation?
    5. As noted above, there has been an observed increase in voluntary 
adoption of compensation clawback policies in recent years, together 
with accompanying disclosures about those policies. These developments 
would impact the potential costs of the Proposed Rules at the aggregate 
level. However, such impact is likely to differ across issuers in a 
variety of ways. For example, some issuers may already have policies 
that would satisfy, or easily could be modified to satisfy, the 
requirements of the Proposed Rules. Other issuers may have clawback 
policies in place that are substantially different from the 
requirements of the Proposed Rules, or may not have clawback policies 
in place altogether. We request any estimates or data that would allow 
us to refine our characterization of costs and benefits of the clawback 
policies under the current state of issuer clawback policies and how 
such effects would differ under the Proposed Rules. In particular, we 
request specific estimates of the costs that are incurred by issuers in 
implementing these policies, and the costs and benefits to investors. 
How might these costs and/or benefits change in implementing a policy 
pursuant to a

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Commission rulemaking and the new potential interpretation of ``an 
accounting restatement due to material noncompliance''? We also request 
data regarding the characteristics of voluntarily adopted clawback 
policies (for example, clawback triggers, scope of covered persons, 
scope of compensation covered, among other characteristics), and data 
regarding compensation structures that are used by issuers (for 
example, compensation instruments utilized, measures used to award/earn 
such compensation, among others). Has the voluntary adoption of 
clawback provisions resulted in a decrease of incentive-based 
compensation or an increase in compensation tied to non-financial 
performance by issuers?
    6. We understand that as part of the materiality analysis relating 
to errors, issuers already consider whether any misstatement of 
previously issued financial statements had the effect of increasing 
management's compensation. To what extent can the evaluation already 
conducted in connection with evaluating the materiality of an error be 
leveraged in connection with determining the need for and the amount of 
any clawback? Would revising the scope of the Proposed Rules to 
encompass additional accounting restatements, as described above, 
affect how an issuer conducts this evaluation and, if so, how? Would 
revising the scope largely capture situations where issuers may have 
shifted from restating previously issued financial statements to avoid 
triggering compensation clawback policies, or would there be situations 
where the revised scope becomes over-inclusive? How would revising the 
scope impact the costs to issuers or benefits to investors of the 
clawback provision and the execution of the clawback analysis as 
compared to the Proposed Rules? We request data or analysis that will 
assist us in evaluating the effects of including these additional 
accounting restatements within the scope of the rule, in particular any 
data that may assist in quantifying the number of additional clawback 
analyses that would be triggered and the costs and benefits of revising 
the scope of the rule. How would the potential changes discussed in 
this release affect the appropriateness of the scope of the Proposed 
Rules overall? For example, in response to the Proposing Release, some 
commenters stated that the Proposed Rules applied too broadly both to 
individuals and to issuers.\14\ Is the rule as proposed appropriately 
tailored? How, if at all, would the changes to the scope of the rules 
discussed in this release affect the other aspects of the Proposed 
Rules?
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    \14\ See e.g., letters in response to the Proposing Release from 
ABA; National Association of Manufacturers (Sept. 14, 2015); and 
SCSGP. But see, e.g., letters in response to the Proposing Release 
from Better Markets, Inc. ((Sept. 14, 2015); and AFL-CIO (supporting 
the scope of the Proposed Rules).
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    7. The Commission proposed to define the recoverable amount as 
``the amount of incentive-based compensation received by the executive 
officer or former executive officer that exceeds the amount of 
incentive-based compensation that otherwise would have been received 
had it been determined based on the accounting restatement.'' \15\ 
Applying this definition, after an accounting restatement, the issuer 
would first recalculate the applicable financial reporting measure and 
the amount of incentive-based compensation based thereon. The issuer 
would then determine whether, based on that financial reporting measure 
as calculated relying on the original financial statements and taking 
into account any discretion that the compensation committee had applied 
to reduce the amount originally received, the executive officer 
received a greater amount of incentive-based compensation than would 
have been received applying the recalculated financial reporting 
measure.
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    \15\ See Proposed Rule 10D-1(b)(1)(iii).
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    There are a number of possible methods to reasonably estimate the 
effect of an accounting restatement on stock price with varying levels 
of complexity and a range of related costs. For incentive-based 
compensation based on stock price or total shareholder return, where 
the amount of erroneously awarded compensation is not subject to 
mathematical recalculation directly from the information in the 
accounting restatement, the Proposed Rules would require an issuer to 
maintain documentation of the determination of that reasonable estimate 
and provide such documentation to the relevant exchange or 
association.\16\ The Proposed Rules did not explicitly require 
disclosure of how issuers calculated the recoverable amount. We request 
comment on whether additional disclosures beyond what was proposed 
should be required. For example, would investors benefit from 
disclosure of how issuers calculated the recoverable amount, including 
their analysis of the amount of the executive's compensation that is 
recoverable under the rule, and/or the amount that is not subject to 
recovery? For incentive-based compensation based on stock price or 
total shareholder return, would investors benefit from disclosure 
regarding the determination and methodology that an issuer used to 
estimate the effect of stock price or total shareholder return? What 
are the costs associated with such disclosure?
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    \16\ See Proposed Rule 10D-1(b)(1)(iii)(B).
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    8. Have there been any changes or developments since the Proposing 
Release with respect to payment of incentive-based compensation by 
listed registered management investment companies that should affect 
how listed registered management investment companies are treated under 
the Proposed Rules? If an investment company, or a business development 
company, is externally, rather than internally, managed, should this 
impact how the company is treated under the Proposed Rules? For 
example, should listed business development companies (or externally 
managed listed business development companies) be treated the same as 
listed registered management investment companies and be eligible for 
the conditional exemption as long as they do not actually pay 
incentive-based compensation? Should we reconsider any of the Proposed 
Rules' conditions or disclosure requirements with respect to registered 
or unregistered investment companies? What impact would any of those 
changes have on the economic effects of the rule?
    9. The Commission proposed to require that the new compensation 
recovery disclosures be block-text tagged using XBRL. The Commission is 
considering requiring that specific data points within the new 
compensation recovery disclosure be separately detail tagged using 
Inline XBRL instead of, or in addition to, the proposed block-text 
tagging.\17\ Would Inline XBRL detail tagging of some or all of the 
compensation recovery disclosures be valuable to investors? If so, 
which disclosures should we require issuers to detail tag and why? Is 
there an alternative technology to XBRL that we should consider? Should 
we enable more flexibility by adopting other tagging technologies?
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    \17\ Subsequent to the proposal, the Commission adopted rules 
replacing XBRL tagging requirements for issuer financial statements 
and open-end fund risk/return summary disclosures with Inline XBRL 
tagging requirements. Inline XBRL embeds the machine-readable tags 
in the human-readable document itself, rather than in a separate 
exhibit. See Inline XBRL Filing of Tagged Data, Release No. 33-10514 
(June 28, 2018) [83 FR 40846 (Aug. 16, 2018)]. As a result of those 
changes, we are considering using Inline XBRL, rather than XBRL, for 
the proposed tagging requirements.
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    10. Are there any other developments since the Proposing Release 
that should affect our consideration of the Proposed

[[Page 58237]]

Rules or their potential economic effects? Are there any changes we 
should consider in the methodologies and estimates used to analyze the 
economic effects of the Proposed Rules in the Proposing Release?
    We request and encourage any interested person to submit comments 
regarding the Proposed Rules, specific issues discussed in this release 
or the Proposing Release, and other matters that may have an effect on 
the Proposed Rules. We request comment from the point of view of 
issuers, shareholders, directors, investors, and other market 
participants. We note that comments are of particular assistance to us 
if accompanied by supporting data and analysis of the issues addressed 
in those comments, particularly quantitative information as to the 
costs and benefits. If alternatives to the Proposed Rules are 
suggested, supporting data and analysis and quantitative information as 
to the costs and benefits of those alternatives are of particular 
assistance. Commenters are urged to be as specific as possible; when 
commenting, it would be most helpful if you include the reasoning 
behind your position or recommendation. All comments received to date 
on the Proposed Rules will be considered and need not be resubmitted. 
If any commenters who have already submitted a comment letter wish to 
provide supplemental or updated comments, we encourage them to do so.

    Dated: October 14, 2021.

    By the Commission.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2021-22754 Filed 10-20-21; 8:45 am]
BILLING CODE 8011-01-P