On December 14, 2022, the SEC adopted final rules amending Rule 10b5-1 under the Securities Exchange Act of 1934 (the âExchange Actâ), which provides an affirmative defense to insider trading for trades made under a written plan adopted when not aware of material nonpublic information (âMNPIâ). The final rules add several new conditions for the availability of the affirmative defense and require new quarterly and Form 4 disclosures regarding the Rule 10b5-1 trading arrangements of…
On December 16, 2022, Institutional Shareholder Services (âISSâ) released its updated FAQs on Equity Compensation Plans, which will apply to its âEquity Plan Scorecardâ evaluation of equity plan proposals in shareholder meetings held on or after February 1, 2023. Under the Equity Plan Scorecard, ISS scores a proposed equity plan based on factors relating to (i) plan âcostâ under a âShareholder Value Transferâ model, (ii) plan features and (iii) company grant practices. Although the only…
On October 26, 2022, the SEC adopted its much-anticipated final clawback rules requiring U.S. listed issuers to: âThe rule, known as Rule 10D-1, directs national securities exchanges to establish implementing listing standards within 90 days from publication of the final rule in the Federal Register. Companies that fail to comply with the rule may be delisted. U.S. listed issuers who do not already have a clawback policy should begin preparations to design, adopt and implement…
It’s been 12 years in the making, but the SEC has finally released rules to implement the “pay versus performance” disclosure required by Section 953(a) of the Dodd-Frank Act. The new disclosure of the relationship between executive compensation “actually paid” and financial performance is required to be included in proxy statements or information statements for fiscal years ending on or after December 16, 2022 and is therefore effective for the upcoming 2023 proxy season. For a…
In welcome news, Delaware recently amended its General Corporation Law (DGCL) to increase flexibility for delegating share award granting authority. The amendments became effective on August 1, 2022. The changes expand the elements of granting share awards that a board of directors may delegate, including, and most notably, the authority to determine the terms and conditions of the awards. If a board of directors wants to take advantage of the increased flexibility provided by the…
The question of mid-offering period changes to employee stock purchase plans (ESPPs) has been coming up with unusual frequency, in some cases due to stock price volatility causing an earlier-than-expected shortage of shares and in others due to companies desiring to quickly make their plans more competitive in the ongoing battle for talent. Impact of a Modification of a Section 423 ESPP Option But a mid-offering change to the terms of a Code[1] Section 423…
On December 15, 20211, the Securities and Exchange Commission (âSECâ) issued proposed rules that would significantly impact Rule 10b5-1 trading plans. Among other things, the proposed rules impose new conditions on the availability of the affirmative defense to insider trading afforded by 10b5-1 plans, require quarterly disclosure of the adoption, modification and termination of trading plans by directors, officers and issuers and require identification of transactions made pursuant to such plans on Forms 4 and…
On Nov. 29, 2021, the staff of the U.S. Securities and Exchange Commission (SEC)âs Office of the Chief Accountant and the Division of Corporation Finance released Staff Accounting Bulletin No. 120 (SAB 120), which is effective immediately and provides guidance on how to properly recognize and disclose the compensation cost for âspring-loadedâ awards made to executives of public companies subject to reporting requirements under US securities laws. SAB 120 describes spring-loaded awards as share-based compensation…
California nonresident board members of companies based in California may soon be subject to income tax in California, regardless of whether they perform services within the state, if a newly proposed tax regulation is adopted. The proposed regulation â new section 17951-8 of Title 18 of the California Code of Regulations â released by the Franchise Tax Board of California on September 24, 2020, treats the compensation of a California nonresident, non-employee director of a…
Large companies doing business in San Francisco may soon be subject to an additional tax if voters approve the so-called âOverpaid Executive Gross Receipts Taxâ this coming November. Joining a minority of municipal governments that have imposed an âexecutive pay ratio taxâ on the heels of the SECâs CEO pay ratio disclosure rules, the San Francisco Board of Supervisors recently approved a ballot initiative for this Novemberâs election that calls for the imposition of a…