Yesterday, the SEC posted notice – for the NYSE, Nasdaq and other SROs – that it would designate a longer period for taking action on proposed listing standards to implement Dodd-Frank clawback rules. This action follows comment letters that were submitted earlier this month to urge a longer lead-time – and it’s welcome news to anyone trying to keep up with the demands of recent SEC rulemaking.
That said, don’t get too excited. For each exchange, the Commission has designated June 11th as the date by which it will either approve or disapprove – or institute proceedings to determine whether to disapprove – the proposed rule change. Under Section 19(b)(2) of the Exchange Act, that’s the outside date of 90 days from the date the notices of these proposals were published in the Federal Register. If the Commission hadn’t designated this longer period, it would have had to act by April 27th.
The lingering issue presented by this June date is that the original proposals from the exchanges said that they’d be effective on the date approved by the SEC (see pg. 31 of the NYSE’s proposal and pg. 31 of Nasdaq’s proposal). So, unless the exchanges amend that portion of their proposed listing standards, if the SEC approves them in June, that’s when they’ll go effective. That will start the 60-day clock for listed companies to adopt a compliant clawback policy – putting the deadline in early August. That’s still a lot earlier than many folks originally expected, and means you can’t delay work on your clawback policy.
We’ll continue to cross our fingers that this plays out more in line with the originally expected timeframe of a November effective date for the exchange listing standards and a January 2024 compliance date. Keep following this blog for updates & practical guidance as the date nears (one way or the other) – and make sure to use the resources available in our “Clawbacks” Practice Area (including a sample policy). And, mark your calendars for our “Proxy Season Post Mortem” webcast – 2pm ET on Tuesday, June 27th, as we’ll touch on this as a “hot topic.” As always, an archive replay and transcript will be available to members following the live program.
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– Meredith Ervine