Tag: exchange listing standards
SEC posts NYSE and Nasdaq proposals for clawback listing standards
It was just November last year when the SEC finally adopted rules to implement Section 954 of Dodd-Frank, the clawback provision. (Remember that Dodd-Frank dates to 2010 and the clawback rules were initially proposed by the SEC back in 2015.) The new rules directed the national securities exchanges to establish listing standards requiring listed issuers to adopt and comply with clawback policies and to provide disclosure about their policies and implementation. Under the rules, the clawback policy must provide that, in the event the listed issuer is required to prepare an accounting restatement—including a “little r” restatement—the issuer must recover the incentive-based compensation that was erroneously paid to its current or former executive officers based on the misstated financial reporting measure. (See this PubCo post.) The final rules required any covered exchanges to file proposed listing standards with the SEC no later than February 27, with the listing standards to be effective no later than one year after publication. On Tuesday, the SEC posted the listing standards proposed by Nasdaq and by the NYSE. They’re largely the same, with some differences, both tracking the SEC requirements closely. Both proposals are open for comment until 21 days after publication in the Federal Register.
Corp Fin provides new disclosure guidance for China-based issuers
Yesterday, Corp Fin posted CF Disclosure Guidance: Topic No. 10, Disclosure Considerations for China-Based Issuers, which provides guidance regarding disclosure considerations for companies based in or with the majority of their operations in the People’s Republic of China (China-based Issuers). You might recall that, in August, the President’s Working Group on Financial Markets, which includes Treasury Secretary Steven T. Mnuchin, Fed Chair Jerome H. Powell, SEC Chair Jay Clayton and CFTC Chair Heath P. Tarbert, issued a Report on Protecting United States Investors from Significant Risks from Chinese Companies, which made a number of recommendations, among them that regulators should require enhanced and prominent issuer disclosures of the risks of investing in China-based Issuers and should issue interpretive guidance to clarify these disclosure requirements and increase awareness of the risks of investing in these companies. (See this PubCo post.) This guidance appears designed to implement that recommendation. The clear implication of the guidance is that China-based Issuers need to consider beefing up their risk factor and related disclosures; in outlining risks and posing questions to consider, the guidance provides a great starting point.
SEC preparing proposals to implement recommendations regarding emerging market listings
For over a decade, the PCAOB has been unable to fulfill its SOX mandate to inspect audit firms in “Non-Cooperating Jurisdictions,” or “NCJs,” including China. To address this issue, in May, the Senate passed the Holding Foreign Companies Accountable Act, which would amend SOX to impose certain requirements on public companies that are audited by a registered public accounting firm that the PCAOB is unable to inspect, and a version was subsequently passed by the House as an amendment to a defense funding bill. Around the same time, Nasdaq also proposed rule changes aimed at addressing similar issues in restricted markets, including new initial and continued listing standards. (See this PubCo post.) Now, the President’s Working Group on Financial Markets, which includes Treasury Secretary Steven T. Mnuchin, Fed Chair Jerome H. Powell, SEC Chair Jay Clayton and CFTC Chair Heath P. Tarbert, has issued a Report on Protecting United States Investors from Significant Risks from Chinese Companies. The Report makes five recommendations “designed to address risks to investors in U.S. financial markets posed by the Chinese government’s failure to allow audit firms that are registered with the Public Company Accounting Oversight Board (PCAOB) to comply with U.S. securities laws and investor protection requirements.” In this Statement, the SEC Chair Jay Clayton, Chief Accountant Sagar Teotia and the Directors of various SEC Divisions responded to the Report, indicating that Clayton had already “directed the SEC staff to prepare proposals in response to the report’s recommendations for consideration by the Commission and to provide assistance and guidance to investors and other market participants as may be necessary or appropriate. The SEC staff also stands ready to assist Congress with technical assistance in connection with any potential legislation regarding these matters.”
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