The New York Stock Exchange (NYSE) and Nasdaq, on June 5 and June 6, respectively, amended the proposed listing standards they previously submitted to the US Securities and Exchange Commission (SEC) to extend the compliance deadline. As amended, if the listing standards are approved by the SEC (as expected to happen this week), the clawback rules would be effective on October 2, 2023, and public issuers would be required to adopt compliant policies within 60 days after the effective date, i.e., no later than Friday, December 1, 2023.

As a recap of the developments before this week, on October 26, 2022 the SEC adopted a final Dodd-Frank clawback rule (Rule 10D-1 of the Securities Exchange Act of 1934, as amended). As required by Rule 10D-1, the NYSE and Nasdaq submitted their clawback proposals to the SEC on February 22, 2023. The proposals contemplated that the listing standards would be effective immediately upon approval by the SEC.

On April 24, 2023, the SEC indicated that it would take the full 90-day review period to assess the listing standards. Unless the SEC’s review period were further extended, the end of the review period—and SEC date of approval—would be June 11. Because the listing standards previously contemplated immediate effectiveness, the approval would start a 60-day clock, with compliance required on or before August 10.

By removing the immediate effectiveness, the exchanges have provided some additional lead time for public issuers to adopt compliant clawback policies and review and update their internal compliance processes. While this timeline could be further pushed back by the SEC, public companies should be taking steps now to prepare for implementing compliant policies by the December 1 deadline.