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Victor Flores

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T+1 is Right Around the Corner – Time to Confirm Your Equity Award Tax Readiness

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The Securities and Exchange Commission (SEC) last year amended rules under the Securities Exchange Act of 1934 to shorten the securities transaction settlement cycle for most broker-dealer securities transactions, from “T+2” to “T+1,” meaning that securities transactions will need to be settled within one business day of the transaction date (“T”), effective as of May 28, 2024. Impact on Equity Awards The new SEC-required settlement timing will directly impact equity awards that are settled through…

Don’t Miss California’s New Noncompete Notice Requirement (Deadline 2/14/24): Review Equity Award Agreements + Other Employment-Related Contracts ASAP to Avoid Costly Penalties

By , , and 4 Mins Read

As many readers likely know, last fall California doubled-down on the state’s hostility to noncompete agreements. Assembly Bill 1076 codified the landmark 2008 Edward v. Arthur Andersen decision that invalidated all employment noncompetes, including narrowly tailored ones, unless they satisfy a statutory exception.AB 1076 also added new Business & Professions Code §16600.1, requiring California employers to notify current (and certain former) employees that any noncompete agreement or clause to which they may be subject is void (unless it falls within one of…

Stock Exchanges Extend Proposed Effective Date for Dodd-Frank Clawback Rule

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In welcome news for U.S. listed companies, both the New York Stock Exchange (NYSE) and NASDAQ have extended the effective date of their proposed listing standards to implement the Dodd-Frank clawback requirement to October 2, 2023 (see the NYSE Amendment and Nasdaq Amendment, filed with the Securities and Exchange Commission (SEC) on June 5, 2023 and June 6, 2023, respectively). If the SEC approves the listing rules as proposed, listed companies will have until December…

Implications of SEC’s Final 10b5-1 Rules for Equity and Benefit Plans

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On December 14, 2022, the SEC adopted final rules amending Rule 10b5-1 under the Securities Exchange Act of 1934 (the “Exchange Act”), which provides an affirmative defense to insider trading for trades made under a written plan adopted when not aware of material nonpublic information (“MNPI”). 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…

Updated ISS Equity Plan FAQs for the 2023 Proxy Season

By and 4 Mins Read

On December 16, 2022, Institutional Shareholder Services (“ISS”) released its updated FAQs on Equity Compensation Plans, which will apply to its “Equity Plan Scorecard” 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 “cost” under a “Shareholder Value Transfer” model, (ii) plan features and (iii) company grant practices. Although the only…

SEC Releases Final Rule on Clawback of Incentive Compensation

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On October 26, 2022, the SEC adopted its much-anticipated final clawback rules requiring U.S. listed issuers to: ​The 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…

New Pay Versus Performance Disclosure Rule Effective for 2023 Proxy Season

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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…

Delaware Law Amendments Increase Flexibility for Delegating Share Award Authority

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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…

Think Twice Before Changing your ESPP Mid-Offering

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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…

Equity Award Considerations Under SEC’s Proposed Changes to 10b5-1 Plans and Disclosures

By and 4 Mins Read

On December 15, 20211, the Securities and Exchange Commission (“SEC”) 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…

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