1. Rarely Enforced SEC Rules do Little to Fight Earnings Manipulation

    Rarely Enforced SEC Rules do Little to Fight Earnings Manipulation

    The enforcement of rules meant to reclaim compensation paid executives whose companies had to restate financial results has been virtually nonexistent...

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    1. Subjecting a broad swath of executive officers to a no-fault recovery mandate creates the potential for substantial injustice.
    2. The SEC incentivized this to continue by choosing to not enforce this new law for almost five years after Sarbanes-Oxley was passed.
    3. The population of eligible restatements continues to decline, perhaps because the decision of whether to make the kind of restatement that qualifies for a clawback is based on subjective criteria.
    4. The rules as proposed could prove to be very difficult to administer as a practical matter.
    5. Congress shifted a big implementation responsibility to the issuer and the penalty for non-compliance…is draconian.
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