SEC Rule 10D-1 Clawback: No Misconduct Required

If you read proxy statements for insider signals, there’s a line item you’ve probably skipped past: “Recovery of Erroneously Awarded Compensation.” It sounds like boilerplate. It isn’t. That section exists because of the SEC Rule 10D-1 clawback— a 2022 rule that forces every NYSE- and Nasdaq-listed company to take back incentive-based executive pay after an accounting restatement, whether or not any executive did anything wrong.

That’s the part people get wrong. This isn’t a punishment for fraud — it’s a mechanical, no-fault rule tied purely to whether the numbers used to calculate a bonus turned out to be wrong. Two real cases, one closed and one still unfolding, show exactly how it plays out on EDGAR.

What the SEC Rule 10D-1 Clawback Actually Requires

The SEC adopted Rule 10D-1 on October 26, 2022, implementing Section 10D of the Securities Exchange Act — a provision Congress added through the Dodd-Frank Act back in 2010 and left unfinished for twelve years. Then-Chair Gary Gensler framed it plainly: “Through today’s action and working with the exchanges, we have the opportunity to fulfill Dodd-Frank’s mandate and Congress’s intention to prevent executives from keeping compensation received based on misstated financials.”

The mechanics, laid out in the final rule, are narrower and more specific than most compliance summaries make them sound:

Three-year lookback.A company must recover incentive-based compensation received by current or former executive officers during the three completed fiscal years immediately preceding the date it’s required to prepare an accounting restatement.

No-fault standard.Recovery is required “regardless of any fault of the executive officer for the accounting errors” and regardless of whether that officer directly contributed to the mistake. If the restatement lowers what the incentive metric should have paid out, the excess comes back — full stop.

Who counts as a covered executive officer.The definition mirrors Section 16 insider reporting: the company’s president, principal financial officer, principal accounting officer (or controller), any vice president in charge of a principal business unit, and anyone else with a policy-making function.

What counts as a restatement.The rule reaches both “Big R” restatements — corrections of material errors in prior-period financials — and “little r” restatements, where the error wasn’t material to the prior period but would be if corrected in the current one. Both trigger the same analysis.

The escape hatch is narrow: a company can skip recovery only if the direct cost of enforcing it would exceed the amount recovered, after documenting a reasonable collection attempt. Companies must also tag the disclosure in Inline XBRL and, if recovery is impracticable, disclose the amount forgone and why.

How NYSE and Nasdaq Turned a Federal Rule Into a Delisting Risk

Rule 10D-1 itself doesn’t punish anyone directly — the SEC wrote it as a directive to the exchanges, requiring them to build their own listing standards that force compliance. NYSE and Nasdaq did exactly that, and the SEC approved both sets of rules on June 9, 2023, effective October 2, 2023.

Every listed issuer had until December 1, 2023to adopt a compliant, written clawback policy — which is why virtually every DEF 14A filed since early 2024 includes some version of the “Recovery of Erroneously Awarded Compensation” section. It’s a listing requirement, not optional disclosure.

Case Study: How Macy’s Clawed Back $609,613

Macy’s (NYSE: M) gives one of the cleanest completed examples of the rule in action. An employee had been entering erroneous accounting accrual entries that concealed delivery expenses, hiding more than $150 million in costs over roughly three years. The correction overstated 2023 adjusted EBITDA by about $81 million.

Because the company’s 2023 short-term incentive plan paid out based on that EBITDA figure, the restatement mechanically shifted the plan’s payout from 60.47% of target down to 51.59% of target. Under its Rule 10D-1 policy, Macy’s determined it had issued $609,613 in erroneously awarded compensation and moved to recover it — disclosed in its April 2025 DEF 14A under the “Recovery of Erroneously Awarded Compensation” heading.

More than half the clawed-back amount was still uncollected as of that disclosure date. Fortune reported the concealed delivery-expense entries ran from the fourth quarter of 2021 through the third quarter of 2024 before they were caught. The gap between “determined” and “collected” is worth noting: a clawback showing up in a proxy doesn’t mean the money is back in hand yet.

A Clawback in Progress: Driven Brands’ 2026 Restatement

Macy’s case is finished. Here’s what an active one looks like before the clawback math ever reaches a proxy statement. On February 25, 2026, Driven Brands Holdings (Nasdaq: DRVN) filed an Item 4.02 Form 8-K disclosing that its Audit Committee, after consulting management, concluded there were material errors in its previously issued financial statements for fiscal 2023, fiscal 2024, and several 2025 interim periods.

The filing lists the error categories directly: problems with lease accounting (right-of-use assets and liabilities), unreconciled cash balances dating back to 2023 and earlier, misclassified operating expenses, and a grab-bag of other issues touching income tax provisions, revenue recognition, and fixed assets. The company also disclosed that its internal control over financial reporting was not effective as of December 27, 2025, the end of its 2025 fiscal year.

Driven Brands’ own 2026 proxy statement already states, under “Compensation Best Practices,” that “clawback provisions apply in the event of accounting restatements and instances of fraud or violation of restrictive covenants.” What it doesn’t yet contain is a dollar figure — that depends on quantifying how the restated numbers changed incentive-plan payouts, work the company says is ongoing. Expect the actual math, if any, to land in next year’s DEF 14A under the same heading Macy’s used.

How Often Does This Actually Happen? The 2026 Numbers

Macy’s and Driven Brands aren’t outliers, but they’re also not the norm. Quarterly tracking of the error-correction disclosure tied to Rule 10D-1 shows the count declining from 169 companies in the first half of 2025 to 142 in the first half of 2026, a 16% drop. Quarter-over-quarter, the picture is steadier: 39 companies flagged an error correction in Q2 2026 versus 40 in Q2 2025.

The 2024-into-early-2025 spike this decline is measured against wasn’t about Rule 10D-1 getting stricter — it tracked a wave of re-audits tied to the Borgers auditor scandal, which forced many issuers to replace prior audit reports around the same time. Once that wave cleared, filings settled back toward a more typical baseline.

Does the Rule Actually Work? What the Research Found

A natural worry with any no-fault clawback rule is that boards route around it — paying executives more up front, or shifting away from the performance-based pay that triggers clawback risk. A study by Michael Dambra (University at Buffalo), Bryce Schonberger, and Andrea Pawliczek (CU Boulder), examining 2019–2024 data on U.S. public companies, found the opposite: newly covered firms hired more accounting staff, paid higher audit fees, and reported earnings faster, with “no evidence” of higher CEO pay or a shift away from performance-based compensation. Their share prices rose roughly 1% to 2% around key SEC rule-adoption announcements, and analyst coverage increased. As of the study’s December 2025 publication, actual recoveries were still rare enough that the researchers pointed to Macy’s $600,000 case as the leading real-world example.

Where to Find a Clawback Disclosure Yourself

Any company’s clawback policy and its application, if triggered, live in the same place: the DEF 14A proxy statement, usually inside or near the executive compensation discussion. A few ways to find it:

Search EDGAR full text search at sec.gov/edgar/search for the exact phrase “Recovery of Erroneously Awarded Compensation” combined with a ticker or company name — that heading is now close to standardized language across issuers.

Or pull a specific company’s DEF 14A from its EDGAR filing history and search the page for “clawback” or “10D-1.” Most proxies disclose the policy even in years with nothing to recover — that’s the baseline the listing standards require.

Watch for the trigger first.An Item 4.02 Form 8-K, like Driven Brands’ February 2026 filing, is the earliest public signal a Rule 10D-1 analysis is coming; the dollar figure itself usually shows up later, in the next DEF 14A. And because the disclosure is tagged in Inline XBRL, it’s screenable across many companies at once rather than read one proxy at a time — the same EDGAR habit our guide to reading Form 4 filings covers.

Rule 10D-1 vs. Section 16(b): Two Different “Clawbacks”

“Clawback” gets used loosely enough to be worth disambiguating. Our explainer on the Section 16(b) short-swing profit rule covers a much older mechanism that also gets called a clawback — and works nothing like Rule 10D-1.

The two can even apply to the same person in the same year for unrelated reasons — one because a bonus was calculated off financials that later proved wrong, the other because of trade timing. Neither requires proving intent.

What a Clawback Disclosure Means (and Doesn’t Mean) for Investors

A Rule 10D-1 clawback disclosure is not a prediction about where a stock is headed. It is, however, a confirmed fact worth adding to a diligence checklist: the company had an accounting error material enough to require a restatement, and its board followed through on the recovery process the listing standards require. The size of the number matters less than what it’s attached to — a $609,613 clawback tied to a $151 million concealment scheme, as in Macy’s case, tells you more about the scale of the underlying accounting problem than about the clawback dollar figure itself.

It’s also worth tracking whether the amount was actually collected, not just determined — Macy’s still had $352,093 outstanding as of its own disclosure date. “Recovery required” and “recovery completed” are two different lines in the same section, and with 140–170 companies flagging a restatement-triggered error correction per half-year, it isn’t rare enough to skip past the next time it shows up in a proxy you’re reading.