The U.S. Securities and Exchange Commission’s mandatory clawback rule went into effect Monday, providing for the recovery of incentive-based compensation erroneously paid to current and former executives at publicly traded companies due to financial reporting errors.

In October 2022, the SEC adopted a clawback rule in compliance with Section 954 of the 2010 Dodd-Frank Act. The rule directs the national stock exchanges to establish standards for publicly held companies to implement, disclose and comply with written clawback policies.