Short answer: when either a “little r” or “Big R” occur and it results in an executive officer receiving incentive-based compensation they would not have otherwise received.
Long answer: The new rule will apply the clawback policy to both “little r” and “Big R” restatements. If a listed issuer is “required to prepare an accounting restatement, including to correct an error that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period, the issuer would be required to recover from any current or former executive officers incentive-based compensation that was erroneously awarded during the three years preceding the date such a restatement was required. The recoverable amount is the amount of incentive-based compensation received in excess of the amount that otherwise would have been received had it been determined based on the restated financial measure.”