June Edition 2023

47 beginning service as an executive officer or (ii) if that person did not serve as an executive officer at any time during the three-year lookback period to which the clawback rules apply. Disclosure on Form 20-F Form 20-F will now include a new item, 6.F. “Disclosure of a registrant’s action to recover erroneously awarded compensation.” The new Item 6.F provides for individualized disclosure for an issuer’s named executive officers. FPIs that file on domestic forms and provide executive compensation disclosure under Item 402 of Regulation S-K should provide individualized disclosure for their named executive officers to the extent required by Form 20-F. For FPIs that use Form 20-F, individualized disclosure is required about members of their administrative, supervisory, or management bodies for whom the issuer otherwise provides individualized compensation disclosure in the filing. What happens if an issuer fails to adopt a compliant policy? An issuer could be subject to delisting if it does not adopt a clawback policy that complies with the applicable listing standard, disclose the clawback policy and any application of the policy in accordance with SEC rules, or enforce the clawback policy’s recovery provisions. The new rules may also lead to increased shareholder derivative lawsuits seeking to force issuers to pursue clawback. When will the clawback rules become effective? Although the Form 10-K/20-F/40-F checkbox requirement became effective January 27, 2023, the listing standards are not required to be effective until November 28, 2023 and issuers will not be required to adopt a clawback policy for 60 days following the effective date of the applicable standards. In the adopting release, the SEC made clear that issuers will not be required to comply with the disclosure requirements before they have adopted clawback policies under the applicable exchange listing standard. Accordingly, while the rules and forms will include the checkboxes and other disclosure requirements in 2023, the SEC staff does “not expect issuers to provide such disclosure until they are required to have a recovery policy under the applicable listing standard.”