A quarterly review of compliance trends, SEC comment letters, and the complexities of recovery analysis

SEC Rule 10D-1 – often referred to as the compensation clawback rule — requires public companies to adopt policies to recover excess incentive compensation that was paid to current or former executives because it was based on metrics that were later restated. Created under the Dodd-Frank Act, the rule aims to reinforce accountability by requiring the recoupment of bonus or performance-based compensation tied to incorrect results, regardless of whether the error was caused by simple mistakes or misconduct. It applies to both material (“Big R”) and immaterial (“little r”) restatements.

The rule also adds disclosure requirements: companies have to flag on the cover page of their annual reports when the filing reflects corrections to past financial statements, explain whether and how they pursued recovery of excess compensation, and include their clawback policy as an exhibit to the annual report.

Key H1 2026 findings:

• The number of companies with an error correction flag declined to 142 in the first half of 2026, compared with 169 in the first half of 2025 (down 16% year over year) and 206 in the first half of 2024 (down 31% over two years).
• The number of companies indicating that they performed a recovery analysis declined to 57 in the first half of 2026, compared with 70 in the first half of 2025 (down 19% year over year), but remained substantially above the 29 reported in the first half of 2024 (up 97%).
• The number of companies providing recovery analysis disclosures declined sharply to 25 in the first half of 2026, down from 48 in the first half of 2025 (down 48% year over year), but remained above the 18 reported in the first half of 2024 (up 39%).
• Clawbacks remained rare, with 4 companies disclosing compensation recoupment during the first half of 2026, compared with 6 in the first half of 2025 (down 33%) and 2 in the first half of 2024 (up 100%).
• At the same time, several companies reported that their clawback analysis remained in progress. Four companies disclosed that their recovery analysis had not been completed by the filing date, compared with 2 in the first half of 2025 (up 100%) and none in the first half of 2024.

Figure 1 – Companies with error correction and recovery analysis boxes selected, H1 2026

Figure 2 – Companies with error correction and recovery analysis boxes selected, Q2 2026

Note: company-level data underlying Figure 1 is available for premium subscribers of Deep Quarry.)

The first half of 2026 data continues to support the conclusion that the decline in Rule 10D-1 disclosures largely tracks a broader slowdown in restatement activity rather than reflecting a fundamental change in how companies apply the clawback rule. The number of companies checking the error-correction box declined from 169 during the first half of 2025 to 142 during the first half of 2026. Importantly, the decline is primarily attributed to the first quarter. In contrast, second-quarter activity was broadly comparable year over year, with 39 companies reporting an error correction in Q2 2026 versus 40 in Q2 2025.

As discussed in my prior analysis, the elevated level of Rule 10D-1 disclosures during the 2024 filing season and the first quarter of 2025 was likely influenced by the Borgers-related re-audit wave, which required numerous issuers to replace audit reports and, in some cases, correct accounting errors identified by successor auditors. By the Q2 2025 filing season, however, most of those re-audits had been completed, and restatement activity appears to have returned closer to historical levels.

Investors continue to periodically see restatements resulting from re-audits of companies whose former auditors are no longer registered with the PCAOB (for instance, former clients of Olayinka Oyebola & Co). However, these appear to be isolated cases rather than a broad re-audit wave comparable to the one triggered by the BF Borgers enforcement action.

The comparable number of companies with the error correction box checked in Q2 2025 and Q2 2026 supports the hypothesis that the 2024 uptick was transitory, followed by a return to the mean.

Another factor that may have contributed to the decline in Rule 10D-1 disclosures is the slowdown in the SEC’s Division of Corporation Finance disclosure review program. As discussed in my prior analysis of amended Form 10-K filings, a subset of the 2025 restatements and related clawback assessments followed SEC comment letters challenging accounting judgments, disclosure decisions, or materiality conclusions.

The volume of publicly released SEC comment letters began to decline during the second quarter of 2025 amid reduced staffing levels at the Division of Corporation Finance, fell further during the second half of 2025 following the government shutdown, and remained below historical levels into 2026.

To the extent that SEC reviews identify accounting or disclosure issues that ultimately result in restatements, a sustained reduction in review activity could contribute to fewer restatements and, consequently, fewer Rule 10D-1 error-correction disclosures. (See the Perkins Coie memorandum summarizing SEC officials’ remarks at the SEC Speaks 2026 conference regarding the effects of staffing reductions and the government shutdown on the Division’s Disclosure Review Program.)

This is an abridged version of the analysis. The full Deep Quarry post – available to paid Deep Quarry subscribers – identifies companies that invoked mandatory recoupment policies under Rule 10D-1 and discusses restatements that triggered the clawbacks.

For questions and data inquiries please contact olga@deepquarry.com.

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