On February 22, 2023, the New York Stock Exchange (“NYSE”) and the Nasdaq Stock Market (“Nasdaq”) filed rule proposals[1] to adopt new listing standards implementing Rule 10D-1 under the Securities Exchange Act of 1934. That rule, which the Securities and Exchange Commission (the “SEC”) adopted in October 2022, requires national securities exchanges to implement standards to require listed companies to adopt and publicly file so-called “clawback” policies to recover erroneously awarded incentive-based compensation following accounting restatements. Rule 10D-1, which was first proposed in 2015 and re-opened for comment twice, implements Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The proposed listing standards are subject to a 21-day comment period once published in the Federal Register before the SEC can approve them, and must, in any event, become effective by November 28, 2023. Listed companies will be required to adopt clawback policies that comply with the new standards within 60 days of the effective date of the applicable listing standards (the “Adoption Deadline”).

The listing standards proposed by both NYSE and Nasdaq are materially consistent with Rule 10D-1 and its adopting release. Among other things, both proposed listing standards provide for the commencement of delisting proceedings for listed companies that fail to either adopt a compliant clawback policy or comply with such policy after a clawback obligation arises. These delisting provisions are discussed below, and, for an in-depth discussion of Rule 10D-1’s requirements, please refer to our previous alert.

NYSE – Delisting for Noncompliance

Failure to Adopt a Policy: As proposed, a company listed on NYSE that fails to adopt a compliant clawback policy by the Adoption Deadline will have five days to notify NYSE, after which the exchange will send a written delinquency notification to the company. Upon receipt of this notification, the company would have five days to contact NYSE to discuss the delinquency and to issue a press release disclosing the company’s delinquency, the reason for the delinquency and, if known, the anticipated date on which a clawback policy will be adopted. If the company fails to issue such a press release in time, NYSE will issue a press release stating that the company has received a delinquency notice.

NYSE’s proposed Section 802.01F provides for two consecutive six-month cure periods (the second of which is subject to NYSE’s discretion) during which a company’s securities may continue to be traded despite failing to adopt a compliant clawback policy. Nevertheless, NYSE retains sole discretion to initiate suspension and delisting procedures under Section 804[2] at any time following a company’s failure to timely adopt a compliant clawback policy. If a company has not adopted a compliant clawback policy within one year of the Adoption Deadline, NYSE must immediately initiate suspension and delisting procedures.

Failure to Comply with an Adopted Policy: After adoption of a compliant clawback policy, if a company fails to comply with its policy “reasonably promptly”[3] after a clawback obligation arises, NYSE will immediately suspend trading in the company’s securities and commence the delisting procedure set forth in Section 804 of the NYSE Listed Company Manual.[4] As opposed to a failure to adopt a policy, there is no stated cure period for a company’s failure to comply with an adopted clawback policy.

Nasdaq – Delisting for Noncompliance

As proposed, a Nasdaq company that fails to either adopt a compliant clawback policy by the Adoption Deadline or comply with its clawback policy “reasonably promptly” after a clawback obligation arises would be required to submit to Nasdaq a plan to regain compliance, generally within 45 days of receiving a notice of noncompliance. The Nasdaq staff would have discretion to provide up to 180 days to cure the deficiency. If, following the cure period, the company remains non-compliant, Nasdaq will immediately issue a delisting letter.[5]

Adoption Timeline

As described above, listed companies will be required to adopt clawback policies meeting the requirements of the applicable exchange listing standards by the applicable Adoption Deadline, i.e., 60 days after the applicable effective date. As proposed, a listed company would be required to apply its clawback policy to incentive-based compensation received on or after the effective date of the applicable listing standard.

NYSE’s and Nasdaq’s proposed standards also require listed companies to file all clawback-related disclosures required by Rule 10D-1, as discussed in our prior alert, including filing a copy of their clawback policy as an exhibit to their Annual Report on Form 10-K or equivalent filing and disclosing details relating to restatements that required clawbacks during each prior fiscal year. This likely means that calendar-year reporting companies will first be required to include such clawback disclosure in their proxy statements and annual reports in 2024.

Clawback C&DIs

On January 27, 2023, the SEC staff published an initial set of clawback-related C&DIs. One of these, C&DI 121H.01, notes that, under Rule 10D-1, effective January 27, 2023, clawback-related check boxes were added to the cover pages of Forms 10-K, 20-F and 40-F to indicate whether the form includes the correction of an error in previously issued financial statements and a related recovery analysis. The C&DI clarifies that issuers are not required to provide such disclosure until they are required to have a clawback policy under the applicable listing standard.

Next Steps

Although the proposed standards are not yet final, listed companies should begin drafting or amending clawback policies that are compliant with Rule 10D-1 and the likely applicable listing standards. Because both NYSE’s and Nasdaq’s proposed listing standards are materially consistent with Rule 10D-1, we expect that any changes in the final standards will not have a significant impact on the content of such clawback policies.

If you have any questions concerning the material discussed in this advisory, please contact the members of our Securities and Capital Markets practice group.


[1] NYSE would adopt new Sections 303A.14 and 802.01F of the NYSE Listed Company Manual, and Nasdaq would adopt new listing rule 5608 and amend certain listing rules in the 5800 series. NYSE’s proposal is linked here, and Nasdaq’s proposal is linked here.

[2] In this context, the ameliorative procedures in Sections 802.02 and 802.03 of the NYSE Listed Company Manual will be unavailable. These procedures generally allow for a company that receives a notification of noncompliance to submit a plan detailing actions the company plans to take to regain conformity with NYSE’s listing standards.

[3] “Reasonably promptly” is not defined in Rule 10D-1 or NYSE’s or Nasdaq’s proposed standards. In prefaces to both rule proposals, the exchanges note that “[t]he issuer’s obligation to recover erroneously awarded incentive based compensation reasonably promptly will be assessed on a holistic basis with respect to each such accounting restatement prepared by the issuer. In evaluating whether an issuer is recovering erroneously awarded incentive-based compensation reasonably promptly, the Exchange will consider whether the issuer is pursuing an appropriate balance of cost and speed in determining the appropriate means to seek recovery, and whether the issuer is securing recovery through means that are appropriate based on the particular facts and circumstances of each executive officer that owes a recoverable amount.”

[4] As above, the ameliorative procedures in Sections 802.02 and 802.03 of the NYSE Listed Company Manual will be unavailable.

[5] Companies would still be able to appeal to Nasdaq’s Hearings Panel, which could allow up to an additional 180 days to cure the deficiency.

Photo of Kerry Burke Kerry Burke

Kerry Shannon Burke has been helping public and private companies structure and execute capital markets and finance transactions and navigate the pitfalls of public company reporting and governance for over 20 years. Kerry regularly represents issuers, ranging from development stage ventures to large…

Kerry Shannon Burke has been helping public and private companies structure and execute capital markets and finance transactions and navigate the pitfalls of public company reporting and governance for over 20 years. Kerry regularly represents issuers, ranging from development stage ventures to large public companies, as well as underwriters and other institutional investors, with private and public debt and equity financings. She is a “go-to” advisor for large public companies on corporate governance, SEC reporting, ESG, and compliance program design. Kerry also assists private companies on governance and IPO readiness matters, including with respect to board and committee independence, internal and disclosure controls and similar matters.

Kerry has particular expertise counseling clients on the Investment Advisers Act and assists investment advisers, including private equity funds, hedge funds and venture capital funds, on various status questions and ongoing compliance matters.

Photo of David H. Engvall David H. Engvall

David Engvall advises public companies on a wide range of securities, capital markets, corporate governance, and related matters. In the capital markets area, he has handled a range of transactions, including registered and unregistered offerings of common and preferred stock, investment grade and…

David Engvall advises public companies on a wide range of securities, capital markets, corporate governance, and related matters. In the capital markets area, he has handled a range of transactions, including registered and unregistered offerings of common and preferred stock, investment grade and high yield debt securities, convertible securities, and trust units. He advises companies in a number of industries. David’s transactional experience also includes equity and debt tender offers, investments and M&A transactions.

David advises public company clients on a wide variety of disclosure, SEC compliance, transactional, and corporate governance matters. David is actively engaged in advising clients on a wide range of specific securities law topics, including executive compensation, beneficial ownership reporting, environmental, social and governance (“ESG”) reporting, and specialized disclosures such as those pertaining to conflict minerals. In the corporate governance area, he advises clients on topics such as Board committee charters, shareholder activism, management succession planning, and director independence.

Photo of Matthew Franker Matthew Franker

Matt Franker has nearly twenty years of experience advising public and private companies, underwriters, and boards of directors in capital markets offerings, securities disclosure and compliance, corporate governance and ESG matters, mergers and acquisitions, and general corporate issues. Matt has significant experience representing…

Matt Franker has nearly twenty years of experience advising public and private companies, underwriters, and boards of directors in capital markets offerings, securities disclosure and compliance, corporate governance and ESG matters, mergers and acquisitions, and general corporate issues. Matt has significant experience representing companies from a broad range of industries, including life sciences, financial services, manufacturing, energy, consumer products, and telecommunications. Matt, a former SEC staff member, also has extensive experience advising clients on SEC rulemakings and regulatory proceedings.

Matt has been recognized in Legal 500 for his work on capital markets transactions, and his capital markets experience includes advising companies and underwriters on registered and exempt offerings of common and preferred equity securities and investment grade, high-yield and convertible debt securities, exchange offers, debt tender offers, and consent solicitations. Matt has an extensive securities advisory practice focused on assisting public companies in a wide variety of disclosure, corporate governance, and compliance matters.

Prior to joining Covington, Matt served as an attorney-adviser with the U.S. Securities and Exchange Commission’s Division of Corporation Finance. While at the SEC, he worked on a wide variety of transactional and securities compliance matters, with an emphasis on the manufacturing, construction, and financial services industries. His experience at the SEC focused on IPOs, secondary offerings, mergers and acquisitions, exchange offers, going-private transactions, PIPEs and private equity financings and evaluating no-action requests to exclude shareholder proposals under Exchange Act Rule 14a-8.

Photo of Jason Levy Jason Levy

Jason Levy helps clients navigate complex issues related to employee benefits and executive compensation, including compliance with the Internal Revenue Code and ERISA. Jason utilizes his deep knowledge in the ERISA space and his background as a former litigator to craft advice that…

Jason Levy helps clients navigate complex issues related to employee benefits and executive compensation, including compliance with the Internal Revenue Code and ERISA. Jason utilizes his deep knowledge in the ERISA space and his background as a former litigator to craft advice that is both practical and strategic. His practice includes:

  • counseling on design, establishment, administration, and maintenance of qualified defined contribution and defined benefit retirement plans;
  • designing, drafting, and amending a wide range of executive compensation arrangements, including nonqualified deferred compensation plans, equity incentive plans, and change in control bonus plans;
  • representing employment, human resources, and benefit interests in mergers and acquisitions;
  • advising clients on multiemployer plan operations and risk management, including withdrawal liability and plan funding issues; and
  • providing benefits expertise in legislative initiatives.
Photo of Charlotte May Charlotte May

Advising clients on a broad range of corporate and securities matters, Charlotte May regularly handles capital markets transactions, mergers and acquisitions, and general corporate governance, securities disclosure, and compliance issues.

Charlotte represents a wide range of corporate clients with particular experience in the…

Advising clients on a broad range of corporate and securities matters, Charlotte May regularly handles capital markets transactions, mergers and acquisitions, and general corporate governance, securities disclosure, and compliance issues.

Charlotte represents a wide range of corporate clients with particular experience in the financial services and life sciences industries. She assists clients with respect to various transactional matters, including primary and secondary registered offerings, private placements, exchange offers, tender offers, mergers and acquisitions, FinTech partnerships and acquisitions and similar matters. She also advises various public companies in the preparation of SEC periodic reports, proxy statements, beneficial ownership reports, public company disclosure and on other securities law and stock exchange compliance matters. Charlotte also counsels public companies on a variety of corporate governance matters, including board and committee composition, FinTech governance and organization, environmental, social, and corporate governance (ESG) matters, internal and disclosure controls, insider trading and similar matters.

Charlotte’s recent pro bono work includes advising Humane Rescue Alliance in its acquisition of St. Hubert’s Animal Welfare Center and advising Kitty of Angels, Inc. in its formation as a California nonprofit and 501(c)(3) company. She is also a board member for Kitty of Angels, Inc. In addition to her work at Covington, Charlotte:

  • Acts as the Co-Chair of the American Bar Association’s Women in M&A Subcommittee, which focuses on the participation, promotion, and retention of women in the M&A field
  • Frequently speaks and publishes on topics in M&A for the American Bar Association and is a producer for the ABA Business Law section’s webinars for M&A.
  • Served as a Attorney Working Group Leader on the American Bar Association M&A Market Trends Subcommittee Public Target Deal Points Study
  • Served as a Study Leader for the American Bar Association’s M&A Market Trends Subcommittee Deal Points Study on Carveout Transactions.

Charlotte was a judicial extern for Hon. Judge Consuelo B. Marshall, U.S. District Court, Central District of California prior to joining the firm.

Photo of Brian Rosenzweig Brian Rosenzweig

Brian Rosenzweig is chair of the firm’s Securities and Capital Markets Practice Group. He regularly represents private and public domestic and foreign companies as well as venture capital funds and investment banks in domestic and international capital-raising transactions.

Brian’s practice predominantly involves capital…

Brian Rosenzweig is chair of the firm’s Securities and Capital Markets Practice Group. He regularly represents private and public domestic and foreign companies as well as venture capital funds and investment banks in domestic and international capital-raising transactions.

Brian’s practice predominantly involves capital markets transactions, including initial public offerings and follow-on equity offerings, for domestic and foreign private issuers in the life sciences, technology and financial services, industries. He also regularly represents emerging companies and venture capital funds focused on these industries.

Brian also regularly advises boards and management on securities law issues, corporate governance issues and general corporate matters.

Chambers USA notes “Brian continues to enjoy a great reputation for his capital markets expertise. He maintains a comprehensive practice, centered around the representation of companies and investment banks in varied securities transactions.”