The public comment period for the new NYSE and Nasdaq listing standards requiring public companies to have expanded clawback policies ended on April 3, 2023. The new standards will require listed companies to have clawback policies that provide for the recovery of excess incentive-based compensation of current and former executive officers upon the restatement of the company’s financial statements for any reason (currently recovery of compensation is only required for a restatement resulting from company misconduct and then only from the CEO and CFO).
The new listing standards, which closely track the SEC’s Rule 10D-1 under the Securities Exchange Act of 1934 that was adopted last October requiring exchanges to adopt clawback listing standards, can be found at this link (for the NYSE) and this link (for Nasdaq). Once the new listing standards are approved by the SEC, which could be at any time (though the statutory deadline is not until November), companies will have 60 days to put a compliant clawback policy in place to avoid being delisted.
The good news is that many public companies already have a clawback policy in place, based in part on Section 304 of the Sarbanes-Oxley Act. However, Rule 10D-1 and the new listing standards will require companies to revisit their existing clawback policies and expand them to apply to any restatement that results in the executives having received excess compensation during the prior three fiscal years without regard to misconduct.
For many companies, their existing policy covers more employees than necessary or covers compensation during a shorter period. Going forward, companies could be required to recover compensation from executives under both Section 304 of Sarbanes-Oxley and Rule 10D-1, although without double counting.
If you have any questions about the new listing standards, please contact your regular Locke Lord contact or any of the authors.
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