Anthony, Linder & Cacomanolis, PLLC

Nasdaq amended Listing Rule 5810(c)(2)(A)(iii) to provide that a company that failed to comply with the clawback rules must submit to Nasdaq Staff a plan to regain compliance. The administrative process that will be followed is similar to other corporate governance deficiencies, allowing Nasdaq Staff to provide the issuer up to 180 days to cure the deficiency. The Nasdaq Staff is then required to issue a delisting letter, which could be appealed to the Hearings Panel, which in turn could allow the issuer up to an additional 180 days to cure the deficiency. #SecuritiesLawBlog #NASDAQ #ALCLAW

Nasdaq defines the term “Incentive-based compensation” to mean any compensation that is granted, earned or vested based wholly or in part upon the attainment of any financial reporting measure. #SecuritiesLawBlog #NASDAQ #ALCLAW

A company is prohibited from indemnifying any current or former executive officer against the loss of erroneously awarded compensation. #SecuritiesLawBlog #NASDAQ #ALCLAW

For purposes of the Nasdaq clawback rule, the date that a company is required to prepare an accounting restatement is the earlier to occur of: (i) the date the company’s board of directors, a committee of the board, or company officers concludes or reasonably should have concluded that the company is required to prepare an accounting restatement; or (ii) the date a court, regulator, or other authorized body directs the company to prepare an accounting restatement. #SecuritiesLawBlog #NASDAQ #ALCLAW

Nasdaq requires that a company’s recovery policy apply to all incentive based compensation received by a person: (i) after beginning service as an executive officer; (ii) who served as an executive officer at any time during the performance period for that incentive based compensation; (iii) while the company has a class of securities listed on a national securities exchange; and (iv) during the three completed fiscal years immediately preceding the date that the company is required to prepare an accounting restatement, and any related transition periods resulting from a change in fiscal year end. #SecuritiesLawBlog #NASDAQ #ALCLAW

As a condition to listing on Nasdaq, all companies must: “Adopt and comply with a written policy providing that the company will recover, reasonably promptly, the amount of erroneously awarded incentive-based compensation in the event that the company is required to prepare an accounting restatement due to the material noncompliance of the company with any financial reporting requirement under the securities laws, including any required accounting restatement to correct an error in previously issued financial statements that is material to the previously issued financial statements, or that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period.” #SecuritiesLawBlog #NASDAQ #ALCLAW

The Nasdaq clawback rules provide that the listed company’s board is required to apply on a “no fault” basis any recovery policy consistently to executive officers, and a listed company is prohibited from indemnifying any current or former executive officer for recovered compensation. #SecuritiesLawBlog #NASDAQ #ALCLAW

As allowed by Rule 10D-1, the Nasdaq clawback rule provides that a company would not be required to pursue recovery if it would be impracticable because: (i) the direct expense paid to a third party to assist in enforcing the policy would exceed the amount to be recovered, (ii) recovery would violate home country law, where that law was adopted prior to November 28, 2022, based on an opinion of counsel acceptable to Nasdaq or (iii) recovery would cause a broad-based retirement plan to fail to meet the tax-qualification requirements. Before concluding that pursuit is impracticable, a company must first make a reasonable attempt to recover the incentive-based compensation and provide that documentation to Nasdaq. #SecuritiesLawBlog #NASDAQ #ALCLAW

Nasdaq listing Rule 5608 sets forth the listing requirements related to the recovery of erroneously awarded compensation. The language conforms closely to SEC Rule 10D-1, including explanations on materiality and “little r” restatements that are material based on facts and circumstances and existing judicial and administrative interpretations. #SecuritiesLawBlog #NASDAQ #ALCLAW

Delegated entities generally will include EDGAR filing agents, issuers and others making submission on behalf of individuals pursuant to Section 16 of the Exchange Act and parent companies handling the filings for subsidiaries. #SecuritiesLawBlog #EDGAR #ALCLAW