Update: On June 6, 2023, Nasdaq filed Partial Amendment No. 1 to its proposed rule change to also delay the effective date of the proposed rules until October 2, 2023.

Update: On June 5, 2023, the NYSE filed Amendment No. 1 to its proposed rule change to establish listing standards required by Exchange Act Rule 10D-1. Among other changes, Amendment No. 1 provides that new Section 303A.14 (Erroneously Awarded Compensation) would become effective on October 2, 2023. With that effective date, companies would be required to adopt compliant clawback policies by December 1, 2023.

Update: On April 24, 2023, the SEC designated a longer period for action on the NYSE's and Nasdaq's proposed clawbacks listing standards. The SEC designated June 11, 2023, as the date by which it must approve, disapprove, or institute proceedings to determine whether to disapprove the proposed rule changes filed by both exchanges.

On February 22, 2023, the New York Stock Exchange (NYSE) and Nasdaq Stock Market (Nasdaq) filed proposed rule changes with the SEC to establish listing standards related to the recovery of erroneously awarded executive compensation (clawbacks), as required by Exchange Act Rule 10D-1.

Rule 10D-1, which became effective on January 27, 2023, directs the national securities exchanges to establish listing standards requiring companies to:

Both the NYSE's and Nasdaq's proposed listing standards closely mirror the language of Rule 10D-1. For more information on Rule 10D-1, see Legal Update, SEC Adopts Final Executive Compensation Clawback Rules.

Under Rule 10D-1's implementation timeframe, the proposed listing standards must be approved and become effective by November 28, 2023. Under the NYSE's and Nasdaq's proposed listing standards (as well as Rule 10D-1), listed companies must:

The primary distinction between the NYSE's and Nasdaq's proposed listing standards relates to non-compliance. Under the NYSE's proposed listing standards, a company that fails to adopt a clawback policy within the requisite time period would need to notify the exchange in writing and issue a press release disclosing that it had not adopted a policy and the reason for the delinquency, and the NYSE would communicate with the company regarding curing the delinquency. In addition, if a company does not comply with recovering erroneously paid incentive compensation under its policy or disclosing clawback information as required under the federal securities laws, its listed securities would be immediately suspended, and the NYSE would immediately commence delisting procedures. Under Nasdaq's proposed listing standards, a company that does not adopt a compliant clawback policy, disclose all required clawback information or comply with the provisions of its clawback policy would be subject to delisting under Nasdaq's existing delisting process and procedures. The company would need to submit to Nasdaq its plan to regain compliance and would be subject to Nasdaq's customary process for handling other corporate governance deficiencies.

For more information on the final clawback policy and disclosure rules, see Legal Update, SEC Adopts Final Executive Compensation Clawback Rules. For more information on and a sample form of a clawback policy, see Standard Document, Clawback Policy.