Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change To Adopt New NYSE Arca Rule 5.3-E(p) To Establish Listing Standards Related to Recovery of Erroneously Awarded Incentive-Based Executive Compensation, 15495-15499 [2023-05033]
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Federal Register / Vol. 88, No. 48 / Monday, March 13, 2023 / Notices
they can more easily navigate and
understand the governing documents.
As noted, the proposed text is more
comprehensive than the provision it
would replace and would set forth
additional detail regarding the
compensation that directors may
receive, such as whether directors may
receive compensation on a per-meeting
basis or as a salary and what form of
compensation may be granted. The
Exchange believes that the greater
additional detail would add
transparency and clarity to the
Exchange’s governing documents and
would not be inconsistent with the
public interest and the protection of
investors because investors will not be
harmed and in fact would benefit from
increased transparency and clarity,
thereby reducing potential confusion.
Finally, the proposed non-substantive
technical and conforming changes
would remove impediments to and
perfect the mechanism of a free and
open market by ensuring that persons
subject to the Exchange’s jurisdiction,
regulators, and the investing public can
more easily navigate and understand the
governing documents. The proposed
non-substantive amendments also
would not be inconsistent with the
public interest and the protection of
investors because investors will not be
harmed and in fact would benefit from
increased transparency and clarity,
thereby reducing potential confusion.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Exchange Act.
The proposed rule change is not
intended to address competitive issues
but rather is concerned solely with the
corporate governance of the Exchange.
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C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
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become effective pursuant to Section
19(b)(3)(A) of the Act 24 and Rule 19b–
4(f)(6) thereunder.25
At any time within 60 days of the
filing of such proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
under Section 19(b)(2)(B) 26 of the Act to
determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSENAT–2023–08 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSENAT–2023–08. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
24 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires a self-regulatory organization to
give the Commission written notice of its intent to
file the proposed rule change, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Exchange
has satisfied this requirement.
26 15 U.S.C. 78s(b)(2)(B).
25 17
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15495
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–NYSENAT–2023–08, and
should be submitted on or before April
3, 2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.27
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–05039 Filed 3–10–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–97053; File No. SR–
NYSEARCA–2023–20]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing of Proposed
Rule Change To Adopt New NYSE Arca
Rule 5.3–E(p) To Establish Listing
Standards Related to Recovery of
Erroneously Awarded Incentive-Based
Executive Compensation
March 7, 2023.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that on February
24, 2023, NYSE Arca, Inc. (‘‘NYSE
Arca’’ or the ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
27 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
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Federal Register / Vol. 88, No. 48 / Monday, March 13, 2023 / Notices
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to adopt new
Rule 5.3–E(p) to require issuers to
develop and implement a policy
providing for the recovery of
erroneously awarded incentive-based
compensation received by current or
former executive officers. The proposed
rule change is available on the
Exchange’s website at www.nyse.com, at
the principal office of the Exchange, and
at the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
On October 26, 2022, the Securities
and Exchange Commission (‘‘SEC’’)
adopted a new rule and rule
amendments 4 to implement Section 954
of the Dodd-Frank Wall Street Reform
and Consumer Protection Act of 2010
(‘‘Dodd-Frank Act’’),5 which added
Section 10D to the Act.6 In accordance
with Section 10D of the Act, the final
rules direct the national securities
exchanges and associations that list
securities to establish listing standards
that require each issuer to develop and
implement a policy providing for the
recovery, in the event of a required
accounting restatement, of incentivebased compensation received by current
or former executive officers where that
compensation is based on the
erroneously reported financial
information. The listing standards must
also require the disclosure of the policy.
Additionally, the final rules require a
listed issuer to file the policy as an
exhibit to its annual report and to
4 See Release Nos. 33–11126; 34–96159; IC–
34732; File No. S7–12–15; 87 FR 73076 (November
28, 2022).
5 2 Public Law 111–203, 124 Stat. 1900 (2010).
6 15 U.S.C. 78j–4.
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include other disclosures in the event a
recovery analysis is triggered under the
policy.
Specifically, the rule amendments the
SEC adopted pursuant to Section 10D of
the Act 7 require specific disclosure of
the listed issuer’s policy on recovery of
incentive-based compensation and
information about actions taken
pursuant to such recovery policy. Rule
10D–1 requires listing exchanges to
require that listed issuers file all
disclosures with respect to their
recovery policies in accordance with the
requirements of the Federal securities
laws, including the disclosures required
by the applicable SEC filings. The rule
amendments require listing exchanges
to require each listed issuer to: (i) file
their written recovery policies as
exhibits to their annual reports; (ii)
indicate by check boxes on their annual
reports whether the financial statements
included in the filings reflect correction
of an error to previously issued financial
statements and whether any of those
error corrections are restatements that
required a recovery analysis; and (iii)
disclose any actions they have taken
pursuant to such recovery policies.
Rule 10D–1 requires that the issuer
will recover reasonably promptly the
amount of erroneously awarded
incentive-based compensation in the
event that the issuer is required to
prepare an accounting restatement due
to the material noncompliance of the
issuer with any financial reporting
requirements under the securities laws.
In the adopting release for Rule 10D–1,
the SEC states that the issuer and its
directors and officers must comply with
this requirement in a manner that is
consistent with the exercise of their
fiduciary duty to safeguard the assets of
the issuer (including the time value of
any potentially recoverable
compensation). The 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.
7 See
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Rule 10D–1 became effective on
January 27, 2023. Exchanges are
required to file proposed listing
standards no later than February 27,
2023, and the listing standards must be
effective no later than November 28,
2023. Issuers subject to such listing
standards will be required to adopt a
recovery policy no later than 60 days
following the date on which the
applicable listing standards become
effective.
Proposed NYSE Arca Rule
NYSE Arca proposes to comply with
Rule 10D–1 by adopting proposed Rule
5.3–E(p). Proposed Rule 5.3–E(p) is
designed to conform closely to the
applicable language of Rule 10D–1.
Proposed Rule 5.3–E(p) would prohibit
the initial or continued listing of any
security of an issuer that is not in
compliance with the requirements of
any portion thereof.
Implementation
Proposed Rule 5.3–E(p)(B) would
establish the timeframe within which
listed companies must comply with
proposed Rule 5.3–E(p). Specifically:
• Each listed issuer must adopt the
recovery policy required by proposed
Rule 5.3–E(p) (‘‘Recovery Policy’’) no
later than 60 days from the adoption of
the proposed listing standard (‘‘Effective
Date’’).
• Each listed issuer must comply
with its Recovery Policy for all
incentive-based compensation Received
(as such term is defined in proposed
Rule 5.3–E(p)(E) as set forth below) by
executive officers on or after the
Effective Date that results from
attainment of a financial reporting
measure based on or derived from
financial information for any fiscal
period ending on or after the Effective
Date.
• Each listed issuer must provide the
required disclosures in the applicable
SEC filings required on or after the
Effective Date.
Requirements of Proposed Rule
The requirements of proposed Rule
5.3–E(p) would be as follows:
• The issuer must adopt and comply
with a written Recovery Policy
providing that the issuer will recover
reasonably promptly the amount of
erroneously awarded incentive-based
compensation in the event that the
issuer is required to prepare an
accounting restatement due to the
material noncompliance of the issuer
with any financial reporting
requirement under the securities laws,
including any required accounting
restatement to correct an error in
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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.
• The issuer’s Recovery Policy must
apply to all incentive-based
compensation received by a person:
Æ After beginning service as an
executive officer;
Æ Who served as an executive officer
at any time during the performance
period for that incentive-based
compensation;
Æ While the issuer has a class of
securities listed on a national securities
exchange or a national securities
association; and
Æ During the three completed fiscal
years immediately preceding the date
that the issuer is required to prepare an
accounting restatement as described in
paragraph (C)(1) of proposed Rule 5.3–
E(p). In addition to these last three
completed fiscal years, the Recovery
Policy must apply to any transition
period (that results from a change in the
issuer’s fiscal year) within or
immediately following those three
completed fiscal years. However, a
transition period between the last day of
the issuer’s previous fiscal year end and
the first day of its new fiscal year that
comprises a period of nine to 12 months
would be deemed a completed fiscal
year. An issuer’s obligation to recover
erroneously awarded compensation is
not dependent on if or when the
restated financial statements are filed.
• For purposes of determining the
relevant recovery period, the date that
an issuer is required to prepare an
accounting restatement as described in
paragraph (C)(1) of Rule 5.3–E(p) is the
earlier to occur of:
Æ The date the issuer’s board of
directors, a committee of the board of
directors, or the officer or officers of the
issuer authorized to take such action if
board action is not required, concludes,
or reasonably should have concluded,
that the issuer is required to prepare an
accounting restatement as described in
paragraph (C)(1) of proposed Rule 5.3–
E(p); or
Æ The date a court, regulator, or other
legally authorized body directs the
issuer to prepare an accounting
restatement as described in paragraph
(C)(1) of proposed Rule 5.3–E(p).
• The amount of incentive-based
compensation that must be subject to
the issuer’s Recovery Policy
(‘‘erroneously awarded compensation’’)
is the amount of incentive-based
compensation received that exceeds the
amount of incentive-based
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compensation that otherwise would
have been received had it been
determined based on the restated
amounts, and must be computed
without regard to any taxes paid. For
incentive-based compensation based on
stock price or total shareholder return,
where the amount of erroneously
awarded compensation is not subject to
mathematical recalculation directly
from the information in an accounting
restatement:
Æ The amount must be based on a
reasonable estimate of the effect of the
accounting restatement on the stock
price or total shareholder return upon
which the incentive-based
compensation was received; and
Æ The issuer must maintain
documentation of the determination of
that reasonable estimate and provide
such documentation to the Exchange.
• The issuer must recover
erroneously awarded compensation in
compliance with its Recovery Policy
except to the extent that the conditions
in one of the three bullets set forth
below are met, and the issuer’s
committee of independent directors
responsible for executive compensation
decisions, or in the absence of such a
committee, a majority of the
independent directors serving on the
board, has made a determination that
recovery would be impracticable.
Æ The direct expense paid to a third
party to assist in enforcing the policy
would exceed the amount to be
recovered. Before concluding that it
would be impracticable to recover any
amount of erroneously awarded
compensation based on expense of
enforcement, the issuer must make a
reasonable attempt to recover such
erroneously awarded compensation,
document such reasonable attempt(s) to
recover, and provide that
documentation to the Exchange.
Æ Recovery would violate home
country law where that law was adopted
prior to November 28, 2022. Before
concluding that it would be
impracticable to recover any amount of
erroneously awarded compensation
based on violation of home country law,
the issuer must obtain an opinion of
home country counsel, acceptable to the
Exchange, that recovery would result in
such a violation, and must provide such
opinion to the Exchange.
Æ Recovery would likely cause an
otherwise tax-qualified retirement plan,
under which benefits are broadly
available to employees of the registrant,
to fail to meet the requirements of 26
U.S.C. 401(a)(13) or 26 U.S.C. 411(a) and
regulations thereunder.
• The issuer is prohibited from
indemnifying any executive officer or
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15497
former executive officer against the loss
of erroneously awarded compensation.
Disclosure in SEC Filings
The issuer must file all disclosures
with respect to such Recovery Policy in
accordance with the requirements of the
Federal securities laws, including the
disclosure required by the applicable
Commission filings.
General Exemptions
The requirements of proposed Rule
5.3–E(p) would not apply to the listing
of:
• A security futures product cleared
by a clearing agency that is registered
pursuant to section 17A of the Act 8 or
that is exempt from the registration
requirements of section 17A(b)(7)(A); 9
• A standardized option, as defined
in 17 CFR 240.9b–1(a)(4), issued by a
clearing agency that is registered
pursuant to section 17A of the Act; 10
• Any security issued by a unit
investment trust, as defined in 15 U.S.C.
80a–4(2); (4) Any security issued by a
management company, as defined in 15
U.S.C. 80a–4(3), that is registered under
section 8 of the Investment Company
Act of 1940,11 if such management
company has not awarded incentivebased compensation to any executive
officer of the company in any of the last
three fiscal years, or in the case of a
company that has been listed for less
than three fiscal years, since the listing
of the company.
Definitions Under Proposed Rule 5.3–
E(p)
Unless the context otherwise requires,
the following definitions apply for
purposes of proposed Rule 5.3–E(p):
Executive Officer. An executive
officer is the issuer’s president,
principal financial officer, principal
accounting officer (or if there is no such
accounting officer, the controller), any
vice-president of the issuer in charge of
a principal business unit, division, or
function (such as sales, administration,
or finance), any other officer who
performs a policy-making function, or
any other person who performs similar
policy-making functions for the issuer.
Executive officers of the issuer’s
parent(s) or subsidiaries are deemed
executive officers of the issuer if they
perform such policy making functions
for the issuer. In addition, when the
issuer is a limited partnership, officers
or employees of the general partner(s)
who perform policy-making functions
8 15
U.S.C. 78q–1.
U.S.C. 78q–1(b)(7)(A).
10 15 U.S.C. 78q–1.
11 15 U.S.C. 80a–8.
9 15
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Federal Register / Vol. 88, No. 48 / Monday, March 13, 2023 / Notices
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for the limited partnership are deemed
officers of the limited partnership.
When the issuer is a trust, officers, or
employees of the trustee(s) who perform
policy-making functions for the trust are
deemed officers of the trust. Policymaking function is not intended to
include policy-making functions that
are not significant. Identification of an
executive officer for purposes of Rule
5.3–E(p) would include at a minimum
executive officers identified pursuant to
17 CFR 229.401(b).
Financial reporting measures.
Financial reporting measures are
measures that are determined and
presented in accordance with the
accounting principles used in preparing
the issuer’s financial statements, and
any measures that are derived wholly or
in part from such measures. Stock price
and total shareholder return are also
financial reporting measures. A
financial reporting measure need not be
presented within the financial
statements or included in a filing with
the Commission.
Incentive-based compensation.
Incentive-based compensation is any
compensation that is granted, earned, or
vested based wholly or in part upon the
attainment of a financial reporting
measure.
Received. Incentive-based
compensation is deemed received in the
issuer’s fiscal period during which the
financial reporting measure specified in
the incentive-based compensation
award is attained, even if the payment
or grant of the incentive-based
compensation occurs after the end of
that period.
Delisting
The Exchange proposes to adopt new
Rule 5.3–E(p)(F) (‘‘Noncompliance with
Rule 5.3–E(p) (Erroneously Awarded
Compensation)’’).
Proposed Rule 5.3–E(p)(F)(i) would
provide that in any case where the
Exchange determines that a listed issuer
has not recovered erroneously-awarded
compensation as required by its
Recovery Policy reasonably promptly
after such obligation is incurred, trading
in all listed securities of such listed
issuer would be immediately suspended
and the Exchange would immediately
commence delisting procedures with
respect to all such listed securities. Rule
10D–1 does not specify the time by
which the issuer must complete the
recovery of excess incentive-based
compensation, NYSE Arca would
however determine whether the steps an
issuer is taking constitute compliance
with its compensation Recovery Policy.
A listed issuer will be subject to the
procedures outlined in Rule 5.5–E(a)
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with respect to such a delisting
determination.
Proposed Rule 5.3–E(p)(F)(ii) would
deem a listed issuer to be below
standards in the event of any failure by
such listed issuer to adopt its required
Recovery Policy by the Effective Date (a
‘‘Late Recovery Policy Adoption
Delinquency’’). The listed issuer would
be required to notify the Exchange in
writing within five days of the Effective
Date if it fails to adopt its Recovery
Policy by that date.
Upon the occurrence of a Late
Recovery Policy Adoption Delinquency,
the Exchange will promptly send
written notification (the ‘‘Late Recovery
Policy Adoption Delinquency
Notification’’) to a listed issuer of the
procedures set forth below. Within five
days of the date of the Late Recovery
Policy Adoption Delinquency
Notification, the listed issuer will be
required to (a) contact the Exchange to
discuss the status of the delayed
Recovery Policy and (b) issue a press
release disclosing the occurrence of the
Late Recovery Policy Adoption
Delinquency, the reason for the Late
Recovery Policy Adoption Delinquency
and, if known, the anticipated date such
Late Recovery Policy Adoption
Delinquency will be cured. If the listed
issuer has not issued the required press
release within five days of the date of
the Late Recovery Policy Adoption
Delinquency Notification, the Exchange
will issue a press release stating that the
issuer has incurred a Late Recovery
Policy Adoption Delinquency.
During the six-month period from the
date of the Late Recovery Policy
Adoption Delinquency (the ‘‘Initial Late
Recovery Policy Adoption Cure
Period’’), the Exchange will monitor the
listed issuer and the status of the
delayed Recovery Policy, including
through contact with the company, until
the Late Recovery Policy Adoption
Delinquency is cured. If the listed issuer
fails to cure the Late Recovery Policy
Adoption Delinquency within the Initial
Late Recovery Policy Adoption Cure
Period, the Exchange may, in the
Exchange’s sole discretion, allow the
company’s securities to be traded for up
to an additional six-month period (the
‘‘Additional Late Recovery Policy
Adoption Cure Period’’) depending on
the company’s specific circumstances. If
the Exchange determines that an
Additional Late Recovery Policy
Adoption Cure Period is not
appropriate, suspension and delisting
procedures will commence in
accordance with the procedures set out
in Rule 5.5–E(a). Notwithstanding the
foregoing, however, the Exchange may
in its sole discretion decide (i) not to
PO 00000
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Fmt 4703
Sfmt 4703
afford a listed issuer any Initial Late
Recovery Policy Adoption Cure Period
or Additional Late Recovery Policy
Adoption Cure Period, as the case may
be, at all or (ii) at any time during the
Initial Late Recovery Policy Adoption
Cure Period or Additional Late Recovery
Policy Adoption Cure Period, to
truncate the Initial Cure Period or
Additional Cure Period, as the case may
be, and immediately commence
suspension and delisting procedures if
the listed issuer is subject to delisting
pursuant to any other provision of the
Rules, including if the Exchange
believes, in the Exchange’s sole
discretion, that continued listing and
trading of a company’s securities on the
Exchange is inadvisable or unwarranted.
The Exchange may also commence
suspension and delisting procedures
without affording any cure period at all
or at any time during the Initial Late
Recovery Policy Adoption Cure Period
or Additional Late Recovery Policy
Adoption Cure Period if the Exchange
believes, in the Exchange’s sole
discretion, that it is advisable to do so
on the basis of an analysis of all relevant
factors.
In determining whether an Additional
Late Recovery Policy Adoption Cure
Period after the expiration of the Initial
Late Recovery Policy Adoption Cure
Period is appropriate, the Exchange will
consider the likelihood that the delayed
Recovery Policy can be adopted during
the Additional Late Recovery Policy
Adoption Cure Period. If the Exchange
determines that an Additional Late
Recovery Policy Adoption Cure Period
is appropriate and the listed issuer fails
to adopt a Recovery Policy by the end
of such Additional Late Recovery Policy
Adoption Cure Period, suspension and
delisting procedures will commence
immediately in accordance with the
procedures set out in Rule 5.5–E(a). In
no event will the Exchange continue to
trade a company’s securities if that
listed issuer has failed to cure its Late
Recovery Policy Adoption Delinquency
on the date that is twelve months after
the commencement of the company’s
Late Recovery Policy Adoption
Delinquency.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act,12 in general, and
furthers the objectives of Section 6(b)(5)
of the Act 13 in particular, in that it is
designed to promote just and equitable
principles of trade, to foster cooperation
and coordination with persons engaged
12 15
13 15
E:\FR\FM\13MRN1.SGM
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
13MRN1
Federal Register / Vol. 88, No. 48 / Monday, March 13, 2023 / Notices
ddrumheller on DSK120RN23PROD with NOTICES1
in regulating, clearing, settling,
processing information with respect to,
and facilitating transactions in
securities, to remove impediments to
and perfect the mechanism of a free and
open market and a national market
system, and, in general, to protect
investors and the public interest and is
not designed to permit unfair
discrimination between customers,
issuers, brokers, or dealers. The
Exchange believes that proposed new
Rule 5.3–E(p) is consistent with the
protection of investors and the public
interest because it furthers the goal of
ensuring the accuracy of the financial
disclosure of listed issuers. Specifically,
the Exchange believes the recovery
requirement may provide executive
officers with an increased incentive to
take steps to reduce the likelihood of
inadvertent misreporting and will
reduce the financial benefits to
executive officers who choose to pursue
impermissible accounting methods,
which we expect will further discourage
such behavior. The Exchange believes
that these increased incentives may
improve the overall quality and
reliability of financial reporting, which
further benefits investors. The new
proposed Rule 5.3–E(p) is also
consistent with the requirements of
Section 10D of the Act and Rule 10D–
1 thereunder, as it would establish a
listing standard that is consistent with
the requirements of Rule 10D–1.
The Exchange proposes to adopt
continued listing standards for proposed
Rule 5.3–E(p) in proposed Rule 5.3–
E(p)(F). Pursuant to proposed Rule 5.3–
E(p)(F)(i), a listed issuer would be
subject to immediate suspension and
delisting without eligibility for cure
periods if the Exchange has determined
that the listed issuer has failed to
recover reasonably promptly
erroneously-awarded compensation as
requited by its Recovery Policy.
Proposed Rule 5.3–E(p)(F)(ii) would
provide compliance periods of up to 12
months for a listed issuer that is delayed
in adopting its Recovery Policy. The
Exchange believes that the compliance
procedures set forth in proposed Rule
5.3–E(p)(F) are appropriately rigorous
and are consistent with the public
interest and the interests of investors.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange notes that Rule 10D–1 under
the Act requires all listing exchanges to
adopt rules with respect to the recovery
VerDate Sep<11>2014
19:32 Mar 10, 2023
Jkt 259001
of erroneously awarded compensation
that are substantively identically to
proposed Rule 5.3–E(p).
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the self-regulatory organization
consents, the Commission will:
(A) by order approve or disapprove
the proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSEARCA–2023–20 on the subject
line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSEARCA–2023–20. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
PO 00000
Frm 00131
Fmt 4703
Sfmt 4703
15499
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–NYSEARCA–2023–20, and
should be submitted on or before April
3, 2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–05033 Filed 3–10–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meetings
Notice is hereby given,
pursuant to the provisions of the
Government in the Sunshine Act, Public
Law 94–409, that the Securities and
Exchange Commission will hold an
Open Meeting on Wednesday, March
15, 2023 at 10:00 a.m.
PLACE: The meeting will be webcast on
the Commission’s website at
www.sec.gov.
STATUS: This meeting will begin at 10:00
a.m. and will be open to the public via
webcast on the Commission’s website at
www.sec.gov.
MATTERS TO BE CONSIDERED:
1. The Commission will consider
whether to propose amendments to
rules under Regulation S–P to require
brokers and dealers, investment
companies, and investment advisers
registered with the Commission to adopt
written policies and procedures for
incident response programs to address
unauthorized access to or use of
customer information, including
procedures for providing timely
notification to certain affected
TIME AND DATE:
14 17
E:\FR\FM\13MRN1.SGM
CFR 200.30–3(a)(12).
13MRN1
]]>Agencies
[Federal Register Volume 88, Number 48 (Monday, March 13, 2023)]
[Notices]
[Pages 15495-15499]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-05033]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-97053; File No. SR-NYSEARCA-2023-20]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change To Adopt New NYSE Arca Rule 5.3-E(p) To
Establish Listing Standards Related to Recovery of Erroneously Awarded
Incentive-Based Executive Compensation
March 7, 2023.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that on February 24, 2023, NYSE Arca, Inc. (``NYSE Arca'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
[[Page 15496]]
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to adopt new Rule 5.3-E(p) to require issuers
to develop and implement a policy providing for the recovery of
erroneously awarded incentive-based compensation received by current or
former executive officers. The proposed rule change is available on the
Exchange's website at www.nyse.com, at the principal office of the
Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
On October 26, 2022, the Securities and Exchange Commission
(``SEC'') adopted a new rule and rule amendments \4\ to implement
Section 954 of the Dodd-Frank Wall Street Reform and Consumer
Protection Act of 2010 (``Dodd-Frank Act''),\5\ which added Section 10D
to the Act.\6\ In accordance with Section 10D of the Act, the final
rules direct the national securities exchanges and associations that
list securities to establish listing standards that require each issuer
to develop and implement a policy providing for the recovery, in the
event of a required accounting restatement, of incentive-based
compensation received by current or former executive officers where
that compensation is based on the erroneously reported financial
information. The listing standards must also require the disclosure of
the policy. Additionally, the final rules require a listed issuer to
file the policy as an exhibit to its annual report and to include other
disclosures in the event a recovery analysis is triggered under the
policy.
---------------------------------------------------------------------------
\4\ See Release Nos. 33-11126; 34-96159; IC- 34732; File No. S7-
12-15; 87 FR 73076 (November 28, 2022).
\5\ 2 Public Law 111-203, 124 Stat. 1900 (2010).
\6\ 15 U.S.C. 78j-4.
---------------------------------------------------------------------------
Specifically, the rule amendments the SEC adopted pursuant to
Section 10D of the Act \7\ require specific disclosure of the listed
issuer's policy on recovery of incentive-based compensation and
information about actions taken pursuant to such recovery policy. Rule
10D-1 requires listing exchanges to require that listed issuers file
all disclosures with respect to their recovery policies in accordance
with the requirements of the Federal securities laws, including the
disclosures required by the applicable SEC filings. The rule amendments
require listing exchanges to require each listed issuer to: (i) file
their written recovery policies as exhibits to their annual reports;
(ii) indicate by check boxes on their annual reports whether the
financial statements included in the filings reflect correction of an
error to previously issued financial statements and whether any of
those error corrections are restatements that required a recovery
analysis; and (iii) disclose any actions they have taken pursuant to
such recovery policies.
---------------------------------------------------------------------------
\7\ See footnote 5 supra.
---------------------------------------------------------------------------
Rule 10D-1 requires that the issuer will recover reasonably
promptly the amount of erroneously awarded incentive-based compensation
in the event that the issuer is required to prepare an accounting
restatement due to the material noncompliance of the issuer with any
financial reporting requirements under the securities laws. In the
adopting release for Rule 10D-1, the SEC states that the issuer and its
directors and officers must comply with this requirement in a manner
that is consistent with the exercise of their fiduciary duty to
safeguard the assets of the issuer (including the time value of any
potentially recoverable compensation). The 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.
Rule 10D-1 became effective on January 27, 2023. Exchanges are
required to file proposed listing standards no later than February 27,
2023, and the listing standards must be effective no later than
November 28, 2023. Issuers subject to such listing standards will be
required to adopt a recovery policy no later than 60 days following the
date on which the applicable listing standards become effective.
Proposed NYSE Arca Rule
NYSE Arca proposes to comply with Rule 10D-1 by adopting proposed
Rule 5.3-E(p). Proposed Rule 5.3-E(p) is designed to conform closely to
the applicable language of Rule 10D-1. Proposed Rule 5.3-E(p) would
prohibit the initial or continued listing of any security of an issuer
that is not in compliance with the requirements of any portion thereof.
Implementation
Proposed Rule 5.3-E(p)(B) would establish the timeframe within
which listed companies must comply with proposed Rule 5.3-E(p).
Specifically:
Each listed issuer must adopt the recovery policy required
by proposed Rule 5.3-E(p) (``Recovery Policy'') no later than 60 days
from the adoption of the proposed listing standard (``Effective
Date'').
Each listed issuer must comply with its Recovery Policy
for all incentive-based compensation Received (as such term is defined
in proposed Rule 5.3-E(p)(E) as set forth below) by executive officers
on or after the Effective Date that results from attainment of a
financial reporting measure based on or derived from financial
information for any fiscal period ending on or after the Effective
Date.
Each listed issuer must provide the required disclosures
in the applicable SEC filings required on or after the Effective Date.
Requirements of Proposed Rule
The requirements of proposed Rule 5.3-E(p) would be as follows:
The issuer must adopt and comply with a written Recovery
Policy providing that the issuer will recover reasonably promptly the
amount of erroneously awarded incentive-based compensation in the event
that the issuer is required to prepare an accounting restatement due to
the material noncompliance of the issuer with any financial reporting
requirement under the securities laws, including any required
accounting restatement to correct an error in
[[Page 15497]]
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.
The issuer's Recovery Policy must apply to all incentive-
based compensation received by a person:
[cir] After beginning service as an executive officer;
[cir] Who served as an executive officer at any time during the
performance period for that incentive-based compensation;
[cir] While the issuer has a class of securities listed on a
national securities exchange or a national securities association; and
[cir] During the three completed fiscal years immediately preceding
the date that the issuer is required to prepare an accounting
restatement as described in paragraph (C)(1) of proposed Rule 5.3-E(p).
In addition to these last three completed fiscal years, the Recovery
Policy must apply to any transition period (that results from a change
in the issuer's fiscal year) within or immediately following those
three completed fiscal years. However, a transition period between the
last day of the issuer's previous fiscal year end and the first day of
its new fiscal year that comprises a period of nine to 12 months would
be deemed a completed fiscal year. An issuer's obligation to recover
erroneously awarded compensation is not dependent on if or when the
restated financial statements are filed.
For purposes of determining the relevant recovery period,
the date that an issuer is required to prepare an accounting
restatement as described in paragraph (C)(1) of Rule 5.3-E(p) is the
earlier to occur of:
[cir] The date the issuer's board of directors, a committee of the
board of directors, or the officer or officers of the issuer authorized
to take such action if board action is not required, concludes, or
reasonably should have concluded, that the issuer is required to
prepare an accounting restatement as described in paragraph (C)(1) of
proposed Rule 5.3-E(p); or
[cir] The date a court, regulator, or other legally authorized body
directs the issuer to prepare an accounting restatement as described in
paragraph (C)(1) of proposed Rule 5.3-E(p).
The amount of incentive-based compensation that must be
subject to the issuer's Recovery Policy (``erroneously awarded
compensation'') is the amount of incentive-based compensation received
that exceeds the amount of incentive-based compensation that otherwise
would have been received had it been determined based on the restated
amounts, and must be computed without regard to any taxes paid. For
incentive-based compensation based on stock price or total shareholder
return, where the amount of erroneously awarded compensation is not
subject to mathematical recalculation directly from the information in
an accounting restatement:
[cir] The amount must be based on a reasonable estimate of the
effect of the accounting restatement on the stock price or total
shareholder return upon which the incentive-based compensation was
received; and
[cir] The issuer must maintain documentation of the determination
of that reasonable estimate and provide such documentation to the
Exchange.
The issuer must recover erroneously awarded compensation
in compliance with its Recovery Policy except to the extent that the
conditions in one of the three bullets set forth below are met, and the
issuer's committee of independent directors responsible for executive
compensation decisions, or in the absence of such a committee, a
majority of the independent directors serving on the board, has made a
determination that recovery would be impracticable.
[cir] The direct expense paid to a third party to assist in
enforcing the policy would exceed the amount to be recovered. Before
concluding that it would be impracticable to recover any amount of
erroneously awarded compensation based on expense of enforcement, the
issuer must make a reasonable attempt to recover such erroneously
awarded compensation, document such reasonable attempt(s) to recover,
and provide that documentation to the Exchange.
[cir] Recovery would violate home country law where that law was
adopted prior to November 28, 2022. Before concluding that it would be
impracticable to recover any amount of erroneously awarded compensation
based on violation of home country law, the issuer must obtain an
opinion of home country counsel, acceptable to the Exchange, that
recovery would result in such a violation, and must provide such
opinion to the Exchange.
[cir] Recovery would likely cause an otherwise tax-qualified
retirement plan, under which benefits are broadly available to
employees of the registrant, to fail to meet the requirements of 26
U.S.C. 401(a)(13) or 26 U.S.C. 411(a) and regulations thereunder.
The issuer is prohibited from indemnifying any executive
officer or former executive officer against the loss of erroneously
awarded compensation.
Disclosure in SEC Filings
The issuer must file all disclosures with respect to such Recovery
Policy in accordance with the requirements of the Federal securities
laws, including the disclosure required by the applicable Commission
filings.
General Exemptions
The requirements of proposed Rule 5.3-E(p) would not apply to the
listing of:
A security futures product cleared by a clearing agency
that is registered pursuant to section 17A of the Act \8\ or that is
exempt from the registration requirements of section 17A(b)(7)(A); \9\
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78q-1.
\9\ 15 U.S.C. 78q-1(b)(7)(A).
---------------------------------------------------------------------------
A standardized option, as defined in 17 CFR 240.9b-
1(a)(4), issued by a clearing agency that is registered pursuant to
section 17A of the Act; \10\
---------------------------------------------------------------------------
\10\ 15 U.S.C. 78q-1.
---------------------------------------------------------------------------
Any security issued by a unit investment trust, as defined
in 15 U.S.C. 80a-4(2); (4) Any security issued by a management company,
as defined in 15 U.S.C. 80a-4(3), that is registered under section 8 of
the Investment Company Act of 1940,\11\ if such management company has
not awarded incentive-based compensation to any executive officer of
the company in any of the last three fiscal years, or in the case of a
company that has been listed for less than three fiscal years, since
the listing of the company.
---------------------------------------------------------------------------
\11\ 15 U.S.C. 80a-8.
---------------------------------------------------------------------------
Definitions Under Proposed Rule 5.3-E(p)
Unless the context otherwise requires, the following definitions
apply for purposes of proposed Rule 5.3-E(p):
Executive Officer. An executive officer is the issuer's president,
principal financial officer, principal accounting officer (or if there
is no such accounting officer, the controller), any vice-president of
the issuer in charge of a principal business unit, division, or
function (such as sales, administration, or finance), any other officer
who performs a policy-making function, or any other person who performs
similar policy-making functions for the issuer. Executive officers of
the issuer's parent(s) or subsidiaries are deemed executive officers of
the issuer if they perform such policy making functions for the issuer.
In addition, when the issuer is a limited partnership, officers or
employees of the general partner(s) who perform policy-making functions
[[Page 15498]]
for the limited partnership are deemed officers of the limited
partnership. When the issuer is a trust, officers, or employees of the
trustee(s) who perform policy-making functions for the trust are deemed
officers of the trust. Policy-making function is not intended to
include policy-making functions that are not significant.
Identification of an executive officer for purposes of Rule 5.3-E(p)
would include at a minimum executive officers identified pursuant to 17
CFR 229.401(b).
Financial reporting measures. Financial reporting measures are
measures that are determined and presented in accordance with the
accounting principles used in preparing the issuer's financial
statements, and any measures that are derived wholly or in part from
such measures. Stock price and total shareholder return are also
financial reporting measures. A financial reporting measure need not be
presented within the financial statements or included in a filing with
the Commission.
Incentive-based compensation. Incentive-based compensation is any
compensation that is granted, earned, or vested based wholly or in part
upon the attainment of a financial reporting measure.
Received. Incentive-based compensation is deemed received in the
issuer's fiscal period during which the financial reporting measure
specified in the incentive-based compensation award is attained, even
if the payment or grant of the incentive-based compensation occurs
after the end of that period.
Delisting
The Exchange proposes to adopt new Rule 5.3-E(p)(F)
(``Noncompliance with Rule 5.3-E(p) (Erroneously Awarded
Compensation)'').
Proposed Rule 5.3-E(p)(F)(i) would provide that in any case where
the Exchange determines that a listed issuer has not recovered
erroneously-awarded compensation as required by its Recovery Policy
reasonably promptly after such obligation is incurred, trading in all
listed securities of such listed issuer would be immediately suspended
and the Exchange would immediately commence delisting procedures with
respect to all such listed securities. Rule 10D-1 does not specify the
time by which the issuer must complete the recovery of excess
incentive-based compensation, NYSE Arca would however determine whether
the steps an issuer is taking constitute compliance with its
compensation Recovery Policy. A listed issuer will be subject to the
procedures outlined in Rule 5.5-E(a) with respect to such a delisting
determination.
Proposed Rule 5.3-E(p)(F)(ii) would deem a listed issuer to be
below standards in the event of any failure by such listed issuer to
adopt its required Recovery Policy by the Effective Date (a ``Late
Recovery Policy Adoption Delinquency''). The listed issuer would be
required to notify the Exchange in writing within five days of the
Effective Date if it fails to adopt its Recovery Policy by that date.
Upon the occurrence of a Late Recovery Policy Adoption Delinquency,
the Exchange will promptly send written notification (the ``Late
Recovery Policy Adoption Delinquency Notification'') to a listed issuer
of the procedures set forth below. Within five days of the date of the
Late Recovery Policy Adoption Delinquency Notification, the listed
issuer will be required to (a) contact the Exchange to discuss the
status of the delayed Recovery Policy and (b) issue a press release
disclosing the occurrence of the Late Recovery Policy Adoption
Delinquency, the reason for the Late Recovery Policy Adoption
Delinquency and, if known, the anticipated date such Late Recovery
Policy Adoption Delinquency will be cured. If the listed issuer has not
issued the required press release within five days of the date of the
Late Recovery Policy Adoption Delinquency Notification, the Exchange
will issue a press release stating that the issuer has incurred a Late
Recovery Policy Adoption Delinquency.
During the six-month period from the date of the Late Recovery
Policy Adoption Delinquency (the ``Initial Late Recovery Policy
Adoption Cure Period''), the Exchange will monitor the listed issuer
and the status of the delayed Recovery Policy, including through
contact with the company, until the Late Recovery Policy Adoption
Delinquency is cured. If the listed issuer fails to cure the Late
Recovery Policy Adoption Delinquency within the Initial Late Recovery
Policy Adoption Cure Period, the Exchange may, in the Exchange's sole
discretion, allow the company's securities to be traded for up to an
additional six-month period (the ``Additional Late Recovery Policy
Adoption Cure Period'') depending on the company's specific
circumstances. If the Exchange determines that an Additional Late
Recovery Policy Adoption Cure Period is not appropriate, suspension and
delisting procedures will commence in accordance with the procedures
set out in Rule 5.5-E(a). Notwithstanding the foregoing, however, the
Exchange may in its sole discretion decide (i) not to afford a listed
issuer any Initial Late Recovery Policy Adoption Cure Period or
Additional Late Recovery Policy Adoption Cure Period, as the case may
be, at all or (ii) at any time during the Initial Late Recovery Policy
Adoption Cure Period or Additional Late Recovery Policy Adoption Cure
Period, to truncate the Initial Cure Period or Additional Cure Period,
as the case may be, and immediately commence suspension and delisting
procedures if the listed issuer is subject to delisting pursuant to any
other provision of the Rules, including if the Exchange believes, in
the Exchange's sole discretion, that continued listing and trading of a
company's securities on the Exchange is inadvisable or unwarranted. The
Exchange may also commence suspension and delisting procedures without
affording any cure period at all or at any time during the Initial Late
Recovery Policy Adoption Cure Period or Additional Late Recovery Policy
Adoption Cure Period if the Exchange believes, in the Exchange's sole
discretion, that it is advisable to do so on the basis of an analysis
of all relevant factors.
In determining whether an Additional Late Recovery Policy Adoption
Cure Period after the expiration of the Initial Late Recovery Policy
Adoption Cure Period is appropriate, the Exchange will consider the
likelihood that the delayed Recovery Policy can be adopted during the
Additional Late Recovery Policy Adoption Cure Period. If the Exchange
determines that an Additional Late Recovery Policy Adoption Cure Period
is appropriate and the listed issuer fails to adopt a Recovery Policy
by the end of such Additional Late Recovery Policy Adoption Cure
Period, suspension and delisting procedures will commence immediately
in accordance with the procedures set out in Rule 5.5-E(a). In no event
will the Exchange continue to trade a company's securities if that
listed issuer has failed to cure its Late Recovery Policy Adoption
Delinquency on the date that is twelve months after the commencement of
the company's Late Recovery Policy Adoption Delinquency.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\12\ in general, and furthers the
objectives of Section 6(b)(5) of the Act \13\ in particular, in that it
is designed to promote just and equitable principles of trade, to
foster cooperation and coordination with persons engaged
[[Page 15499]]
in regulating, clearing, settling, processing information with respect
to, and facilitating transactions in securities, to remove impediments
to and perfect the mechanism of a free and open market and a national
market system, and, in general, to protect investors and the public
interest and is not designed to permit unfair discrimination between
customers, issuers, brokers, or dealers. The Exchange believes that
proposed new Rule 5.3-E(p) is consistent with the protection of
investors and the public interest because it furthers the goal of
ensuring the accuracy of the financial disclosure of listed issuers.
Specifically, the Exchange believes the recovery requirement may
provide executive officers with an increased incentive to take steps to
reduce the likelihood of inadvertent misreporting and will reduce the
financial benefits to executive officers who choose to pursue
impermissible accounting methods, which we expect will further
discourage such behavior. The Exchange believes that these increased
incentives may improve the overall quality and reliability of financial
reporting, which further benefits investors. The new proposed Rule 5.3-
E(p) is also consistent with the requirements of Section 10D of the Act
and Rule 10D-1 thereunder, as it would establish a listing standard
that is consistent with the requirements of Rule 10D-1.
---------------------------------------------------------------------------
\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange proposes to adopt continued listing standards for
proposed Rule 5.3-E(p) in proposed Rule 5.3-E(p)(F). Pursuant to
proposed Rule 5.3-E(p)(F)(i), a listed issuer would be subject to
immediate suspension and delisting without eligibility for cure periods
if the Exchange has determined that the listed issuer has failed to
recover reasonably promptly erroneously-awarded compensation as
requited by its Recovery Policy. Proposed Rule 5.3-E(p)(F)(ii) would
provide compliance periods of up to 12 months for a listed issuer that
is delayed in adopting its Recovery Policy. The Exchange believes that
the compliance procedures set forth in proposed Rule 5.3-E(p)(F) are
appropriately rigorous and are consistent with the public interest and
the interests of investors.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange notes that Rule
10D-1 under the Act requires all listing exchanges to adopt rules with
respect to the recovery of erroneously awarded compensation that are
substantively identically to proposed Rule 5.3-E(p).
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) by order approve or disapprove the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NYSEARCA-2023-20 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEARCA-2023-20. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NYSEARCA-2023-20, and should be
submitted on or before April 3, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-05033 Filed 3-10-23; 8:45 am]
BILLING CODE 8011-01-P
