The Advisors' Blog

– Broc Romanek

Now that Nasdaq’s new golden leash disclosure requirement is effective, it’s time to get up-to-speed. Here’s an excerpt from this Gibson Dunn memo about how Nasdaq’s new disclosure requirement intersects with the Form 8-K disclosure requirements:

However, under SEC rules, for directors appointed outside of a shareholder meeting, Item 5.02(d)(2) of Form 8-K requires disclosure of “any arrangement or understanding between [a] new director and any other persons, naming such persons, pursuant to which such director was selected as a director.” Where a company provides the 8-K disclosure, Rule 5250(b)(3)(A) states that separate additional disclosure “in the current fiscal year” is not necessary under the rule. This provides companies with one-time relief from the requirement to provide proxy disclosure, for the fiscal year in which an Item 5.02(d) 8-K announcing the appointment of a new director is filed, if the third-party compensation arrangement was disclosed in the Form 8-K. However, this relief may prove to be largely
technical.

In this regard, it seems likely that companies would repeat the information in the proxy statement because of the likelihood that shareholders would view it as relevant to the director’s election. Moreover, disclosure would be required in future years because the NASDAQ rule imposes an annual disclosure obligation thereafter.