The Advisors' Blog

This blog features wisdom from respected compensation consultants and lawyers

April 10, 2023

Dodd-Frank Clawbacks: Comments on Listing Standards Urge Reasonable Effective Date & More

Here’s an optimistic update that Dave shared on last week:

As John recently noted, the timing of the SEC’s approval of exchange listing standards implementing Rule 10D-1 could be upon us sooner rather than later. That outcome could prompt a flurry of activity as issuers seek to implement compliant clawback policies within the 60-day window mandated by the SEC.

On Monday, April 3rd, a group of law firms submitted letters to the SEC responding to the requests for comments on the NYSE and Nasdaq clawback proposals, asking that the SEC not approve the adoption and effectiveness of the listing standards earlier than November 28, 2023. The letters outlined the many challenges that issuers are facing in determining how to implement a compliant clawback policy, on top of having to address other recent SEC rules changes such as the pay versus performance disclosure requirements and the Rule 10b5-1 amendments. The letters also note that adoption of a clawback policy would require board approval, and issuers would therefore be forced to hastily convene board meetings for such purpose given the uncertainty associated with the effective date of the listing standards and the subsequent short compliance period.

We can only hope that the SEC will carefully consider these comments when determining the timing for approval of the final listing standards.

In addition to the letter signed by 39 law firms to urge a reasonable effective date for the Dodd-Frank clawback listing standards, the following groups have also submitted comments:

CII – expressing concern over the lack of investor participation in the NYSE’s proposed delisting procedures for companies that fail to comply, which differs from the Nasdaq approach

Society for Corporate Governance – also urging a longer lead time

Trade Group Coalition (American Securities Association, Business Roundtable, Center On Executive Compensation, National Association of Manufacturers, U.S. Chamber of Commerce) – also urging a longer lead time

Dave noted that one of the key questions as you look to comply with these new rules is whether to adopt a new standalone policy or try to integrate the Dodd-Frank clawback requirements into your existing policy. We’re continuing to share practical information about the Dodd-Frank clawback requirement in our “Clawbacks” Practice Area.

We’ll also be sharing key action items at our “20th Annual Executive Compensation Conference” this September. Although we all hope the approval of these rules occurs no earlier than November, with delisting on the line, it’s not a topic you can ignore. The Conference agenda is filled with other essential info as well – 19 panels over the course of three days for our combined “Proxy Disclosure & 20th Annual Executive Compensation Conferences.” Register now to get the “early bird” rate before it expires – you can sign up online using the “Conferences” drop-down menu, email or call 800.737.1271.

Liz Dunshee