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 pay 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 Q4 2025 findings:
The Q4 2025 pattern continued the Q3 2025 trend, with companies still encountering many of the same implementation frictions we observed in 2024 and early 2025.
- The number of companies checking the error correction box declined sharply quarter-over-quarter, from 28 in Q4 2024 to 18 in Q4 2025.
- The number of recovery analysis flags declined in the fourth quarter of 2025, with 13 recovery analysis flags in Q4 2025 compared to 16 in Q4 2024.
- The number of recovery analysis disclosures in Q4 2025 was slightly lower compared to that in Q4 2024, with 7 and 9 disclosures, respectively.
- The number of clawbacks stood at 2 in Q4 2025. There were no clawbacks in Q4 2024.
Key Y2025 findings:
- On an annual basis, 235 companies disclosed an error correction flag in 2025, down from 289 in 2024, a decline of approximately 19%.
- On an annual basis, 90 companies checked the recovery analysis flag in 2025 compared to 53 in 2024, an increase of approximately 70%.
- On an annual basis, 63 companies checked the recovery analysis flag in 2025, almost double the 32 recovery analysis disclosures in 2024.
- Companies invoked the mandatory clawback policies in 8 cases in 2025 compared to 2 in 2024. Additionally, four companies disclosed in 2025 that it is unclear whether a clawback is required because the analysis is still underway; all four disclosures were in the first three quarters of 2025.
The figure below shows the number of companies with error-related flags in the fourth quarter and for the year 2025.
Figure 1 – Companies with error correction and recovery analysis boxes selected, Q4 2025
Source: SEC filings, analysis by Deep Quarry.
Figure 2 – Companies with error correction and recovery analysis boxes selected, Y2025
Source: SEC filings, analysis by Deep Quarry.
(Note: company-level data underlying Figure 1 is available for premium subscribers of Deep Quarry.)
The number of companies checking the error-correction box fell from 28 in Q4 2024 to 18 in Q4 2025, and from 289 to 235 year-over-year. There are several possible explanations for the drop in the number of companies that identified Rule 10D-1 restatements on the cover page:
- The 2025 pullback could partially be attributed to Borgers-related fresh-eyes restatements detected by the new auditors during the re-audit process in the second half of 2024, following the SEC sanctions on BF Borgers in May 2024. With that in mind, Borgers-related restatements are unlikely to fully explain the 2025 decline.
- Some corrections may appear in filings that don’t trigger the Rule 10D-1 cover-page requirements. For example, an error correction that affects annual periods but first disclosed in a 10-Q would be subject to the Rule 10D-1 requirement once the 10-K is filed.
Recovery analysis
The 2025 data shows an increase in the proportion of companies disclosing a recovery analysis under Rule 10D-1. The percentage of companies with a recovery analysis flag rose from 57% in Q4 2024 to 72% in Q4 2025, and from 18% to 38% on a full-year basis.
Under Rule 10D-1, a recovery analysis is required when a company reports a “Big R” or “little r” restatement. The objective of the recovery analysis is to determine whether any current or former executive officers received erroneously awarded incentive-based compensation during the three-year lookback period. The increase in flagged recovery analysis cover page boxes indicates that a larger share of restatement filers is expressly addressing whether such compensation was subject to recovery.
However, in Q4 2025 and Y2025, approximately 28% and 72% of companies, respectively, did not include a recovery analysis flag, indicating that evaluation and disclosure practices are not uniform. As more restatements fall squarely within the rule’s effective period and companies complete additional annual reporting cycles under the clawback framework, the proportion of companies including recovery analysis disclosure may continue to increase.
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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