By David Woodcock and Nicki Glauser

The power of companies to indemnify their directors and officers for legal penalties has narrowed through Sarbanes-Oxley rules and tougher SEC policies. Now, the clawback provision in the Dodd-Frank Act could further limit top executives' indemnification claims.

The Securities and Exchange Commission has made no secret of the fact that its increased enforcement activity will target individuals. Corporate officers and directors may be at increased personal financial risk as a result of the SEC's historic antipathy towards indemnification, which may be even stronger in light of new Commission enforcement initiatives, judicial decisions supporting those initiatives, and at least one element of the recently enacted Dodd-Frank Act. Both companies and their directors should assess whether an SEC enforcement action against a director implicates the company's assets, the individual's assets, or both. Read the entire article here.