The NASDAQ Stock Market (Nasdaq) recently filed an amendment to its proposed listing rules implementing the requirements of Rule 10C-1 under the Securities Exchange Act of 1934 relating to compensation committee member independence and compensation committee advisers. Our client alert on Nasdaq's initial listing rule proposal can be found here.
The amendment makes changes in three areas: First, it changes the effective and compliance dates of the proposed listing rules. The rules requiring that the compensation committee have (i) authority to retain compensation consultants, legal counsel and other advisers, (ii) responsibility to appoint and oversee the work of such advisers, (iii) authority to fund such advisers and (iv) responsibility to consider certain independence factors before selecting such advisers, other than in-house legal counsel, would now become effective July 1, 2013. The initial rule proposal provided for immediate effectiveness upon SEC approval. Listed companies would be required to comply with the remaining rules, which would require a standing compensation committee and compensation committee member independence, by the earlier of (i) the listed company's first annual meeting after January 15, 2014 or (ii) October 31, 2014. The initial rule proposal contemplated compliance by the earlier of the listed company's second annual meeting after SEC approval or December 31, 2014. The proposed new effective and compliance dates are consistent with those proposed by the NYSE in its proposed listing standards relating to compensation committees, which we have discussed here.
Second, the amendment removes the word "independent" prior to "legal counsel" to clarify further that the compensation committee would be required to conduct an independence assessment with respect to any compensation consultant, legal counsel or other adviser to the compensation committee, other than in-house legal counsel, for which no such assessment is required.
Third, the amendment extends the phase-in schedule for companies graduating from smaller reporting company status.
Finally, the amendment includes a form of compensation committee certification that a listed company would have to use when certifying to Nasdaq its compliance with the new compensation committee listing rules, no later than 30 days after the final implementation deadline applicable to it.
As we noted previously, the SEC has extended the deadline for taking action on proposed stock exchange listing rules relating to compensation committees and their advisers to January 13, 2013.
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