In accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank), new rules directing national securities exchanges, including the New York Stock Exchange (NYSE) and Nasdaq Stock Market (Nasdaq), to adopt listing standards for compensation recovery (clawback) policies were announced on October 26, 2022 by the US Securities and Exchange Commission (SEC).
Following this announcement, and in conformance with the SEC’s final Dodd-Frank clawback rule (Rule 10-D1 of the Securities Exchange Act of 1934, as amended), both the NYSE and Nasdaq submitted their clawback proposals to the SEC on February 22, 2023.
The SEC indicated on April 24, 2023 that it expects to take longer than the initial 45 days contemplated by the proposed NYSE/Nasdaq clawback listing standards and expects to instead take up to the full 90 days (or longer) to approve the standards. The outside date of this 90-day review period (barring another SEC extension) will be June 11, and the SEC has stated that it will decide on the current proposals by that date (absent further extension).
If the SEC waits until June 11, then public companies will have 60 days after that date to adopt compliant clawback policies, and the deadline date for compliance would be August 10. We note that June 11 is a Sunday, so if SEC approval is granted on the last business day of the 90-day period (June 9), the 60th day would be Tuesday, August 8.
While this timeline could be pushed back by the SEC, public companies should be taking steps now to prepare for implementing compliant policies by the August deadline.
Read our 10 compliance tips for public companies implementing clawback policies >>
We will continue to monitor the SEC regulatory process with respect to clawback policies. Stay tuned for further ML BeneBits posts, LawFlashes, and webinars on the latest developments. To receive timely updates regarding compliance and implementation deadlines, subscribe to our blog posts.