On June 5, 2023, the New York Stock Exchange (“NYSE”) filed an amendment to its proposed Dodd-Frank clawback listing policy providing for an effective date of October 2, 2023. Similarly, on June 6, 2023, Nasdaq filed an amendment proposing an October 2, 2023 effective date for its Dodd-Frank clawback listing standards.  If the US Securities and Exchange Commission (“SEC”) approves the revised listing standards with this effective date, companies listed on the NYSE or Nasdaq will have until Friday, December 1, 2023 to adopt compliant clawback policies, which will be welcome news for listed companies. However, even with an extension of time provided by a later effective date, listed companies should now be preparing for implementation of this new clawback policy requirement.

Both the NYSE and Nasdaq noted that that their proposed effective date is consistent with the expectations set forth in the SEC’s Rule 10D-1 adopting release that  “issuers will have more than a year from the date the final rules are published in the Federal Register to prepare and adopt compliant recovery policies.”  The need for more time to prepare for compliance with the clawback listing standards was also a concern raised in comment letters submitted to the SEC on behalf of listed issuers.

In April 2023, the SEC designated June 11, 2023, as the date by which it would either approve or disapprove, or institute proceedings to determine whether to disapprove the clawback listing standards, which means the SEC should soon announce whether it will approve these listing standards with an October 2, 2023 effective date. See here and here.

Background. The SEC adopted Rule 10D-1 in October 2022, directing national securities exchanges to establish listing standards that prohibit the listing of any security of a company that does not adopt and implement a written policy requiring the recovery, or “clawback,” of certain incentive-based executive compensation.  For more information on Rule 10D-1, see our Legal Update. In keeping with the schedule the  required by the SEC, the NYSE and Nasdaq proposed  clawback listing standards in February 2023. For more information on those listing standards, see our blog post.

Other Amendments. The NYSE’s amendment also revised cure period provisions so that they apply to all incidents of noncompliance with Section 303A.14 clawback listing standards and not just delayed adoption of recovery policies. In addition the NYSE’s amendment modified the text of Section 303A.00 of the NYSE Listed Company Manual to clarify that the following categories of listed issuers are required to comply with the requirements of Section 303A.14:

  • closed-end and open-end funds;
  • passive business organization, listed derivative or special purpose securities;
  • foreign private issuers; and
  • all companies listing only preferred or debt securities on the NYSE (including securities listed under Rule 5.2(j)).