2022 was a busy year in rulemaking for the Securities and Exchange Commission (SEC). As a result, there are many new disclosure requirements for companies to keep top of mind as they work through this year’s annual report, proxy season and related disclosure matters. We have prepared the below checklist to help ensure these new SEC disclosure requirements are considered and addressed as part of an already thorough annual review and form check process.
Universal Proxy Rules
On November 17, 2021, the SEC adopted rule and form amendments to the proxy rules, requiring the use of a “universal proxy card” in contested elections of directors, except those involving registered investment companies and business development companies, and imposed new voting options applicable to all director elections (Universal Proxy Rules). These amended rules apply to all shareholder meetings held after August 31, 2022. See below for a brief summary of new disclosure obligations (assuming there is not a contested election),[1] compliance dates and disclosure locations:
The SEC announcement, fact sheet and final rule text for the Universal Proxy Rules are available here, here and here, respectively. Our Q&A about the Universal Proxy Rules is available here.
Pay Versus Performance Rules
On August 25, 2022, the SEC adopted a final rule requiring companies (other than emerging growth companies, registered investment companies or foreign private issuers) to provide clear disclosure of the relationship between executive compensation and company financial performance (PvP Rules) through new tabular and other prescribed disclosures beginning with the 2023 proxy season. See below for a brief summary of the new disclosure obligations, compliance dates and disclosure locations:
The SEC announcement, fact sheet and final rule text for the PvP Rules are available here, here and here, respectively. Our alert summarizing the PvP Rules is available here.
Recovery of Erroneously Awarded Compensation Rules
On October 26, 2022, the SEC adopted long-awaited recovery of erroneously awarded compensation rules (Clawback Rules). The new disclosure obligations thereunder are generally not applicable for this proxy season as they will not become applicable until shortly after the national securities exchanges (such as Nasdaq and NYSE) adopt conforming listing standards. The exchanges are required to file proposed listing standards no later than February 24, 2023, and such listing standards are to be effective no later than November 28, 2023. Companies are required to adopt a compliant clawback policy no later than 60 days following the date on which the applicable listing standards become effective (which will be no later than January 27, 2024). While compliance will generally not be required until late 2023 or early 2024, as a technical matter new checkboxes should be added to the cover of any Form 10-K filed on or after January 27, 2023, as provided below.
Companies should still become familiar with the other new obligations and corresponding compliance dates that will begin to apply shortly after the national securities exchanges adopt conforming listing standards, summarized in Appendix A hereto for reference.
The SEC announcement, fact sheet and final rule text for the Clawback Rules are available here, here and here, respectively. Our alert summarizing the Clawback Rules is available here.
Rules to Enhance Investor Protections Concerning Insider Trading
On December 14, 2022, the SEC adopted changes to the rules governing insider trading defenses, including amendments to Rule 10b5-1, new required disclosure regarding Rule 10b5-1 trading arrangements and insider trading policies and procedures, as well as amendments regarding the disclosure of the timing of certain equity compensation awards and reporting of gifts on Form 4 (collectively, the Amended Insider Trading Rules). While the new conditions for valid 10b5-1 plans will begin to apply February 27, 2023, many of the corresponding disclosure obligations imposed by the Amended Insider Trading Rules are generally not applicable for this proxy season. See below for a brief summary of the new disclosure obligations to take effect this year, compliance dates and disclosure locations:
Companies should still become familiar with the other new obligations and corresponding compliance dates that will generally apply for next proxy season, summarized in Appendix A hereto for reference.
The SEC announcement, fact sheet and final rule text for the Amended Insider Trading Rules are available here, here and here, respectively. Our alert summarizing the Amended Insider Trading Rules is available here.
Other New Disclosure Requirements and Updates to Consider
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Appendix A
New Clawback Rules to Keep in Mind for Next Season
Amended Insider Trading Rules to Keep in Mind for Next Season
[1] In the event of a contested election, additional Universal Proxy Rule disclosures would apply. Our Q&A about the Universal Proxy Rules is available here.
[2] However, companies will not need to evaluate whether these checkboxes must be checked until compliance with the underlying rules is required, as explained in greater detail below.
[3] For a company with a December 31 fiscal year end, this will be first required in the 10-Q filed for the fiscal quarter ending June 30, 2023.
[4] An “integrated annual report” as permitted under Exchange Act Rule 14a-3(d) and General Instruction H to Form 10-K—is a Form 10-K that includes all of the information required by Rule 14a-3(b). In such case, the company would furnish a pdf of the entire 10-K under “Form ARS” to satisfy this requirement.
[5] Applies only to companies listed on The Nasdaq Global Select Market, The Nasdaq Global Market or The Nasdaq Capital Market.
[6] So long as the prior year matrix remains publicly available elsewhere (i.e., a proxy statement or company Web site) the company can choose to disclose the current year matrix only. Nasdaq Q&A ID 1753, published 4/26/2022.
[7] If providing the disclosure on a Web site, you must submit the disclosure concurrently with the filing of the annual meeting proxy statement and submit a URL link to the disclosure either through the Nasdaq Listing Center or via an e-mail to [email protected], within one business day after such posting.
[8] For a company with a December 31 fiscal year end, this will be first required in the 10-K for the fiscal year ending December 31, 2024, and the 2025 annual meeting proxy statement on Schedule 14A.
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