What should investors know about the new restatements disclosure rule?

Rule 10D-1 of the Securities and Exchange Act of 1934 mandates companies to clawback erroneously paid compensation rooted in incorrect accounting figures. By December 1, 2023, registrants were required to adopt clawback policies compliant with the new Rule 10D-1. These policies extend to clawing back compensation based on accounting information later restated for material (Big R) or immaterial (little r) accounting errors.

As stated in “Final Amendments” section of the adopting release:

 “…the statutory language of Section 10D - “an accounting restatement due to the material noncompliance of the issuer with any financial reporting requirement under the securities laws”—can appropriately be read to encompass both “Big R” and “little r” restatements.”

The new rule also enhances disclosure transparency by mandating that the registrants indicate on the annual report cover page whether financial state…