NYSE and Nasdaq set for December 1 deadline to enforce executive pay clawback rules

U.S. stock exchanges, including the New York Stock Exchange (NYSE) and Nasdaq, are on the cusp of enforcing new rules that will require listed companies to reclaim incentive-based compensation from executives in the event of financial restatements due to material noncompliance. This regulatory shift, driven by the Securities and Exchange Commission’s (SEC) Rule 10D-1, mandates that by December 1, 2023, NYSE and Nasdaq-listed entities must have recovery policies in place. These policies are applicable to incentive pay awarded to executive officers over the past three fiscal years.

The SEC’s approval of the Listing Standards proposed by NYSE and Nasdaq in February 2023 marked a significant step towards the implementation of these clawback policies. Originally, the effective date for the new clawback provisions was set for October 2, 2023. However, the deadline for companies to comply with the new regulations is now December 1, 2023.

The rules extend to all listed Business Development Companies (BDCs) and certain listed registered management companies, with the exception of certain trusts and management companies that have not recently granted incentive compensation awards. Moreover, issuers are required to disclose their adherence to the mandated recovery policies in their annual reports and other regulatory filings, including those concerning externally-managed BDCs.

This move aims to strengthen the accountability of corporate executives and ensure that compensation is tied more closely to accurate financial reporting. Companies listed on these major exchanges are now tasked with the final preparations to align with these standards, which represent a significant shift in corporate governance and financial oversight.

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