12 June 2023
Good news! The deadline for US listed companies to comply with the new clawback reforms has been extended following last minute amendments filed by the NYSE and Nasdaq.
In our recent alert in May, we noted the proposed accelerated deadline for US listed companies to comply with the new clawback reforms. It was anticipated that the date for companies to have a compliant clawback policy in place would be 8 August 2023 (rather than the long stop date of 27 January 2024 set out in the SEC rules) but the position remained unclear.
Last week it was confirmed that the deadline was extended. Both the NYSE and Nasdaq filed amended proposed listing standards with the SEC. The key change in the amendments was to propose an effective date of 2 October 2023, pushing the date for company compliance to 1 December 2023 (being 60 days after the effective date). The SEC approved these amended listing standards on 9 June.
In addition, the NYSE amendment revised the cure-period provisions. Initially, the NYSE proposal was requesting delisting procedures with no cure-period in the event of non-compliance with the new clawback rules, other than a cure-period for the delayed adoption of a clawback policy. The proposed amendment aligns with other NYSE compliance processes, e.g., for late SEC filings, and includes cure-periods up to 12 months (at the NYSE’s discretion).The Nasdaq proposed policy already included cure-period provisions.
- 28 November 2022: the final recovery rules are officially published in the Federal Register, giving the US national exchanges and associations until 26 February 2023 to propose listing standards in compliance with the final rules.
- 22 February 2023: the NYSE and Nasdaq propose their new listing standards, which will take effect once approved by the SEC.
- 13 March 2023: the new NYSE and Nasdaq listing standards are officially published in the Federal Register, giving the public an opportunity to comment on the proposed listing standards until 3 April 2023. Under the draft proposals, the SEC must approve or disapprove the proposed listing standard by 27 April 2023, or within such longer period up to 11 June 2023 (as determined by the SEC).
- 3 April 2023: a collection of large US and international law firms submit a comment on the proposed listing standards requesting that the SEC not approve the adoption and effectiveness of the proposed listing standard until the 28 November 2023 deadline in order to allow listed companies time to implement compliant policies and any controls and procedures necessary to administer such policies.
- 25 April 2023: the SEC extends the deadline for it to approve or disapprove the proposed listing standards until at least 11 June 2023, meaning companies would be required to comply by 8 August 2023 at the earliest.
- 5 June 2023: NYSE filed Amendment No. 1 to its proposed clawback listing standards with the SEC, delaying the effective date to 2 October 2023.
- 6 June 2023: Nasdaq filed an amendment also delaying the effective date to 2 October 2023.
- 9 June 2023: the SEC approves the amendments.
- 2 October 2023: this is the current new effective date as set out in the NYSE and Nasdaq amended proposals.
- 1 December 2023: a listed company has 60 days to adopt and file a compliant clawback policy from the 2 October effective date, meaning that NYSE and Nasdaq listed companies will need to have a compliant policy in place by 1 December 2023 (being 60 days later).
This is great news and provides the clarity on company compliance timings that has been awaited. There was a real concern that companies would struggle to put in place compliant policies within the truncated timeframe, so more time is helpful. However, the issues outlined in our earlier alert remain relevant, so we suggest acting now (if you haven’t already) to be ready ahead of the 1 December deadline.
Thank you to our US counsel Chris Potash (from Harter Secrest & Emery LLP) for his continued support on these developments.
If you need any assistance with your approach to clawback following the reforms, in the US or globally, please do contact us and we would be happy to help.
Emilie Sylvester, Sally Blanchflower and Sharon Thwaites