On April 24, 2023, the U.S. Securities and Exchange Commission (SEC) extended the time period for its review and approval of the clawback-related listing standards from April 27, 2023 to June 11, 2023 (here and here).
As discussed in our previous blog post, Rule 10D-1 of the Securities Exchange Act of 1934, adopted by the SEC last October, required the national securities exchanges and national securities associations to propose listing standards for approval by the SEC that comply with Rule 10D-1, including rules prohibiting the initial or continued listing of any security of an issuer that is not in compliance with the requirements of Rule 10D-1, no later than February 27, 2023.
On February 22, 2023, the New York Stock Exchange (NYSE) and Nasdaq filed proposed rule changes with the SEC to adopt listing standards related to the recovery of erroneously awarded executive compensation. The proposed rule changes were published in the Federal Register on March 13, 2023 (here and here).
Following publication in the Federal Register, the SEC had 45 days within which to take action on the proposed rule changes, i.e., to approve or disapprove of the proposed rule changes, or to initiate proceedings to determine whether the proposed rule changes should be disapproved. That 45-day period ends on April 27, 2023.
However, the SEC is permitted to designate an additional 45-day period to take action on the proposed rule changes if it finds this longer period to be appropriate and publishes its reason for doing so. Accordingly, on April 24, the SEC published notices designating the additional 45-day period for taking action on the proposed rule changes “so that it has sufficient time to consider the proposed rule change and the comments received.” Wilson Sonsini submitted a comment letter on these proposed rule changes, in addition to signing on to a multi-firm comment letter.
As a reminder, once the applicable stock exchange listing standards become effective (which must occur no later than November 28, 2023), listed companies will have 60 days to adopt their clawback policies. We are continuing to monitor developments, including whether the NYSE and/or Nasdaq submit any amendments to their proposed rule changes.