Guidance On Executive Compensation Clawback Rules; NYSE And Nasdaq Issue Proposed Rules
On October 26, 2022, the SEC adopted final rules on listing standards for the recovery of erroneously awarded incentive-based executive compensation (“Clawback Rules”) (see HERE). The Clawback Rules 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.
The Clawback Rules add a check box to Forms 10-K, 20-F and 40-F to indicate whether the form includes the correction of an error in previously issued financial statements and a related recovery analysis. Although the check box has already been added to the Forms, the new Clawback Rules are not effective until November 28, 2023. As such, the SEC has issued guidance regarding compliance with the check box in
NYSE Annual Compliance Guidance Memo 2022
In January, NYSE Regulation sent out its yearly Compliance Guidance Memo to NYSE American listed companies. As discussed in the Compliance Memo, on October 26, 2022 the SEC adopted final rules on listing standards for the recovery of erroneously awarded incentive-based executive compensation (“Clawback Rules”). The Clawback Rules implement Section 954 of the Dodd-Frank Act and necessitate that national securities exchanges require disclosure of policies regarding and mandating the clawback of compensation under certain circumstances as a listing qualification. Each listed issuer will be required to adopt a compensation recovery policy, comply with that policy, and provide the necessary compensation recovery policy disclosures. An issuer will be subject to delisting if it does not adopt and comply with a compensation recovery policy that satisfies the listing standards. The NYSE must adopt the new listing standard by February 26, 2023. For more on the clawback rules, see HERE.
Annual Compliance Guidance Memo
The NYSE Memo provides a list of important
SEC Adopts Final Executive Compensation Clawback Rules
One year after reopening the comment period, and seven years after first publishing proposed rules, on October 26, 2022, the SEC adopted final rules on listing standards for the recovery of erroneously awarded incentive-based executive compensation (“Clawback Rules”). The Clawback Rules 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.
The final rules require a listed issuer to file the policy as an exhibit to its annual report and to include disclosures related to its recovery policy and recovery analysis where a recovery is triggered. New Exchange Act Rule 10D-1 directs national securities exchanges and associations to establish listing standards that require a listed company to: (i) adopt
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
