NASDAQ Amends Rules For Waivers To Code Of Conduct
On September 5, 2023, Nasdaq adopted amendments to Listing Rule 5610 and IM-5610 requiring listed companies to maintain a code of conduct and to disclose certain waivers. This is also a good time to discuss the code of conduct/code of ethics requirements applicable to all companies subject to the Securities Exchange Act of 1934 (“Exchange Act”) reporting requirements.
Code of Conduct/Code of Ethics
Section 406(c) of the Sarbanes-Oxley Act of 2002 (“SOX”) requires all companies that are subject to the Exchange Act reporting requirements to disclose whether they have adopted a code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. If the company has not adopted such a code, it must explain why it has not done so.
SOX defines a code of ethics as written standards reasonably designed to deter wrongdoing and to promote: (i) honest and ethical conduct including related to conflicts of
Final Rules On The Foreign Companies Accountable Act; PCAOB Reached Deal WIth China And Hong Kong – Part III
The Holding Foreign Companies Accountable Act (“HFCA”) was adopted on December 18, 2020, requiring both the SEC and the PCAOB to adopt rules and procedures implementing its provisions. The HFCA requires foreign-owned issuers to certify that the PCAOB has been able to audit specified reports and inspect their audit firm within the last three years. If the PCAOB is unable to inspect the company’s public accounting firm for three consecutive years, the company’s securities are banned from trading on a national exchange.
As part of the HFCA’s implementation, on November 5, 2021, the SEC approved PCAOB Rule 6100 establishing a framework for the PCAOB’s determination that it is unable to inspect or investigate completely registered public accounting firms located in foreign jurisdictions because of a position taken by an authority in that jurisdiction (see HERE) On December 2, 2021, the SEC adopted amendments to finalize rules implementing the submission and disclosure requirements in the HFCA (see HERE) and
Final Rules On The Foreign Companies Accountable Act; PCAOB Reached Deal WIth China And Hong Kong – Part II
The Holding Foreign Companies Accountable Act (“HFCA”) was adopted on December 18, 2020, requiring both the SEC and the PCAOB to adopt rules and procedures implementing its provisions. The HFCA requires foreign-owned issuers to certify that the PCAOB has been able to audit specified reports and inspect their audit firm within the last three years. If the PCAOB is unable to inspect the company’s public accounting firm for three consecutive years, the company’s securities are banned from trading on a national exchange.
As part of the HFCA’s implementation, on November 5, 2021, the SEC approved PCAOB Rule 6100 establishing a framework for the PCAOB’s determination that it is unable to inspect or investigate completely registered public accounting firms located in foreign jurisdictions because of a position taken by an authority in that jurisdiction (see HERE.) On December 2, 2021, the SEC adopted amendments to finalize rules implementing the submission and disclosure requirements in the HFCA and published a sample
SEC Re-Visits Executive Compensation Clawback Rules
As expected, on October 14, 2021, the SEC re-opened the comment period on proposed rules on listing standards for the recovery of erroneously awarded executive compensation (“Clawback Rules”). The Clawback Rules would implement Section 954 of the Dodd-Frank Act and require that national securities exchanges require disclosure of policies regarding and mandating clawback of compensation under certain circumstances as a listing qualification. The proposed rules were first published in July 2015 (see HERE) and have moved around on the SEC semiannual regulatory agenda from proposed to long-term and back again for years, but finally seem to be moving forward. Although the proposed rule remains unchanged from the July 2015 version, the SEC has added a few questions for comment in its re-opening release.
Background
There are currently existing rules which require the recovery of executive compensation and disclosure of such policies. In particular, Section 304 of the Sarbanes-Oxley Act of 2002 (“SOX”) requires the CEO and CFO to reimburse
SEC Adopts Amendments To Accelerated And Large Accelerated Filer Definitions
In March, 2020 the SEC adopted amendments to the definitions of an “accelerated filer” and “large accelerated filer.” The amendments were adopted largely as proposed in May 2019 (see HERE).
A company that is classified as an accelerated or large accelerated filer is subject to, among other things, the requirement that its outside auditor attest to, and report on, management’s assessment of the effectiveness of the issuer’s internal control over financial reporting (ICFR) as required by Section 404(b) of the Sarbanes-Oxley Act (SOX). The JOBS Act exempted emerging growth companies (EGCs) from this requirement. Moreover, historically the definition of a smaller reporting company (SRC) was set such that an SRC could never be an accelerated or large accelerated filer, and as such would never be subject to Section 404(b) of SOX.
In June 2018, the SEC amended the definition of an SRC to include companies with less than a $250 million public float (increased
