SEC approves exchange listing rules after amendments to establish later effective date
This briefing was originally published on June 9, 2023. It has been updated to reflect the SEC’s approval of the amendments.
The U.S. Securities and Exchange Commission (the “SEC”) has approved the NYSE’s and Nasdaq’s amendments to their proposed compensation clawback listing rules establishing an effective date of October 2, 2023. Listed companies will have to adopt compliant compensation clawback policies by no later than December 1, 2023. The amendments did not change the substantive requirements for an issuer compensation clawback policy as described in our client briefing on the proposed rules.
New Section 303A.14 of the NYSE Listed Company Manual and new Nasdaq Listing Rule 5608 implement the SEC’s compensation clawback rule (details of which are discussed in our previous client briefing).
Under the amended and now final NYSE and Nasdaq rules:
- Issuers must have compensation clawback policies in place by no later than December 1, 2023;
- All incentive-based compensation “received” on and after October 2, 2023 is subject to clawback; and
- Issuers must make compensation clawback disclosures (as required) in annual reports and proxy and information statements filed on or after October 2, 2023.
For foreign private issuers with a December 31 year end, the first reports subject to the compensation clawback disclosure requirements will be their annual reports on Form 20-F for the financial year ended December 31, 2023. For foreign private issuers with a June 30 year end, the first reports subject to the compensation clawback disclosure requirements will be their annual reports on Form 20-F for the financial year ended June 30, 2024.1
In its amended rule, the NYSE also extended the cure period to all incidents of non-compliance with Section 303A.14. In the original proposal, failure to comply with any provision of Section 303A.14 (other than adoption of a clawback policy) would have resulted in an immediate trading suspension and commencement of delisting procedures. Under the final rule, NYSE-listed issuers will have up to six months to cure their failure to comply with any provision of the clawback rule. This is similar to the final Nasdaq listing rule.
Please see here for our comparison of Rule 10D-1’s requirements with the final NYSE and Nasdaq listing rules.
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We are working with a number of our clients on the drafting of clawback policies, and we invite you to reach out to your regular Linklaters contact if you would like to discuss approaches and options.
We will continue to monitor developments in this area and welcome any queries you may have.
1 Foreign private issuers are technically subject to the disclosure requirements for any annual report on Form 20-F filed on or after October 2, 2023. However, the SEC has issued guidance stating that it does “not expect issuers to provide such disclosure until they are required to have a recovery policy under the applicable listing standard.” As clawback policies are not required to be in place until December 1, 2023, we do not expect June 30 year-end companies to be required to provide the applicable disclosures or file their clawback policies until their Form 20-F filed in 2024.
For further information, please contact:
Mike Bienenfeld, Partner, Linklaters
mike.bienenfeld@linklaters.com
