Self-Regulatory Organizations; Long-Term Stock Exchange, Inc.; Notice of Filing of Amendment No. 2 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment Nos. 1 and 2, To Establish Listing Standards Related to Recovery of Erroneously Awarded Incentive-Based Executive Compensation, 39290-39295 [2023-12763]
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Federal Register / Vol. 88, No. 115 / Thursday, June 15, 2023 / Notices
arguments concerning whether the
proposed rule change, as modified by
Amendment No. 2, is consistent with
the Exchange 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–
CboeBZX–2023–013 on the subject line.
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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–CboeBZX–2023–013. 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
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–CboeBZX–2023–013, and should be
submitted on or before July 6, 2023.
V. Accelerated Approval of Proposed
Rule Change, as Modified by
Amendment No. 2
The Commission finds good cause to
approve the proposed rule change, as
modified by Amendment No. 2, prior to
the thirtieth day after the date of
publication of notice of the filing of
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Amendment No. 2 in the Federal
Register. In Amendment No. 2, the
Exchange amended the proposal to: (i)
provide that the effective date of Rule
14.10(k) would be October 2, 2023; (ii)
clarify, consistent with the requirements
of Rule 10D–1, that each company must
adopt and comply with its recovery
policy required by proposed Rule
14.10(k); and (iii) make other nonsubstantive, clarifying changes.53 The
changes in Amendment No. 2 provide
greater clarity to the proposal. The
proposed clarifying changes will ensure
that the proposal conforms to the
requirements of Rule 10D–1. The change
to the effective date of the listing
standards is consistent with Rule 10D–
1 and language in the Adopting Release.
Accordingly, the Commission finds
good cause, pursuant to section 19(b)(2)
of the Exchange Act,54 to approve the
proposed rule change, as modified by
Amendment No. 2, on an accelerated
basis.
VI. Conclusion
It is therefore ordered, pursuant to
section 19(b)(2) of the Act,55 that the
proposed rule change (SR–CboeBZX–
2023–013), as modified by Amendment
No. 2, be, and hereby is, approved on an
accelerated basis.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.56
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–12762 Filed 6–14–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–97693; File No. SR–LTSE–
2023–01]
(‘‘Commission’’), pursuant to section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to
amend LTSE Rule 14.207(f) to establish
listing standards for the recovery of
erroneously awarded compensation, as
required by Rule 10D–1 under the Act
(‘‘Rule 10D–1’’). On March 10, 2023, the
Exchange filed Amendment No. 1 to the
proposed rule change, which replaced
and superseded the proposed rule
change as originally filed. The proposed
rule change, as modified by Amendment
No. 1, was published for comment in
the Federal Register on March 17,
2023.3 On April 24, 2023, the
Commission extended the time period
within which to approve the proposed
rule change, disapprove the proposed
rule change, or institute proceedings to
determine whether to approve or
disapprove the proposed rule change.4
On June 8, 2023, the Exchange filed
partial Amendment No. 2 to the
proposed rule change.5 The Commission
is publishing this notice to solicit
comments on the proposed rule change,
as modified by Amendment Nos. 1 and
2, from interested persons and is
approving the proposed rule change, as
modified by Amendment Nos. 1 and 2,
on an accelerated basis.
II. Background and Description of the
Proposal, as Modified by Amendment
Nos. 1 and 2
On October 26, 2022, the Commission
adopted final Rule 10D–1 6 to
implement section 954 of the DoddFrank Wall Street Reform and Consumer
Protection Act of 2010 (‘‘Dodd-Frank
Act’’), which added section 10D to the
Act. Section 10D of the Act requires the
Commission to adopt rules directing the
national securities exchanges to prohibit
1 15
Self-Regulatory Organizations; LongTerm Stock Exchange, Inc.; Notice of
Filing of Amendment No. 2 and Order
Granting Accelerated Approval of a
Proposed Rule Change, as Modified by
Amendment Nos. 1 and 2, To Establish
Listing Standards Related to Recovery
of Erroneously Awarded IncentiveBased Executive Compensation
June 9, 2023.
I. Introduction
On February 27, 2023, Long-Term
Stock Exchange, Inc. (‘‘LTSE’’ or the
‘‘Exchange’’) filed with the Securities
and Exchange Commission
53 See
Amendment No. 2, supra note 5.
U.S.C. 78s(b)(2).
55 15 U.S.C. 78s(b)(2).
56 17 CFR 200.30–3(a)(12).
54 15
PO 00000
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Sfmt 4703
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 97123
(March 13, 2023), 88 FR 16487 (‘‘Notice’’). No
comments were received in response to this Notice.
4 See Securities Exchange Act Release No. 97365,
88 FR 26349 (April 28, 2023).
5 Amendment No. 2 is available on the
Commission’s website at https://www.sec.gov/
comments/sr-ltse-2023-01/srltse202301-202019404742.pdf. In Amendment No. 2, the Exchange
amends proposed LTSE Rule 14.207(f)(10) to (i)
provide that the effective date of LTSE Rule
14.207(f) would be October 2, 2023; (ii) clarify,
consistent with the requirements of Rule 10D–1 and
the rule language as originally proposed, that each
listed issuer is required to comply with its recovery
policy for all incentive-based compensation
received (as such term is defined in proposed LTSE
Rule14.207(f)(1)) by executive officers on or after
October 2, 2023; and (iii) clarify, consistent with the
language of Rule 10D–1, that notwithstanding the
look-back requirements in LTSE Rule 14.207(f), a
company is only required to apply the recovery
policy to incentive-based executive compensation
received on or after the effective date.
6 17 CFR 240.10D–1.
2 17
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Federal Register / Vol. 88, No. 115 / Thursday, June 15, 2023 / Notices
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the listing of any security of an issuer
that is not in compliance with the
requirements of section 10D of the Act.
Rule 10D–1 requires national securities
exchanges that list securities to establish
listing standards that require each issuer
to adopt and comply with a written
executive compensation recovery policy
and to provide the disclosures required
by Rule 10D–1 and in the applicable
Commission filings.7 Under Rule 10D–
1, listed companies must recover from
current and former executive officers
incentive-based compensation received
during the three completed fiscal years
preceding the date on which the issuer
is required to prepare an accounting
restatement.
As required by Rule 10D–1, the
Exchange proposed to amend LTSE Rule
14.207, Obligations for Companies
Listed on the Exchange, paragraph (f), to
establish listing standards for the
recovery of erroneously awarded
compensation. Proposed LTSE Rule
14.207(f), entitled ‘‘Recovery of
Erroneously Awarded Compensation to
Executive Officers’’ (the ‘‘Rule’’),
incorporates the requirements of Rule
10D–1. Specifically, the Rule would
require companies 8 to adopt a
compensation recovery policy, comply
with that policy, and provide the
compensation recovery policy
disclosures required by the Rule and in
the applicable Commission filings.9
Proposed LTSE Rule 14.207(f)(2) sets
forth the requirements for companies to
adopt, implement and disclose a
recovery policy for incentive-based
execution compensation. Specifically,
Proposed LTSE Rule 14.207(f)(2)(A)
would require that each company that
lists its securities on the Exchange must
adopt and comply with a written policy
providing that the company will recover
reasonably promptly the amount of
erroneously awarded incentive-based
compensation to any executive officer in
the event that the company is required
7 See Securities Exchange Act Release No. 96159,
87 FR 73076 (November 28, 2022) (‘‘Adopting
Release’’). Rule 10D–1 requires such exchange
listing rules to be effective no later than one year
after November 28, 2022. Rule 10D–1 further
requires that each listed issuer: (i) adopt the
required recovery policy no later than 60 days
following the effective date of the listing standard;
(ii) comply with the recovery policy for all
incentive-based compensation received by
executive officers on or after the effective date of
the applicable listing standard; and (iii) provide the
required disclosures on or after the effective date of
the listing standard.
8 For purposes of this order, ‘‘companies’’ or
‘‘company’’ refers to the issuer of a security listed
or an issuer who is applying to list on the Exchange.
See, e.g., LTSE Rule 14.002(a)(5).
9 The Exchange proposes to reposition the current
text of paragraph (f) of LTSE Rule 14.207
(Obligation to Pay Fees) into new paragraph (g) of
Rule 14.207.
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to prepare an accounting restatement
due to material non-compliance of the
company with any financial reporting
requirement under the securities laws,
including any required accounting
restatement to correct an error in
previously issued financial statements
that is material to the previously issued
financial statements, or that would
result in a material misstatement if the
error were corrected in the current
period or left uncorrected in the current
period.
Proposed LTSE Rule 14.207(f)(2)(B)
would require that each company listed
on the Exchange disclose its written
recovery policy related to the recovery
of erroneously awarded compensation
as part of its reporting obligations to the
Commission, as an exhibit to its Annual
Report, and to the Exchange. A
company applying for initial listing
must include its written recovery policy
as part of its listing application.
Proposed LTSE Rule 14.207(f)(3)
would provide that the company’s
recovery policy must apply to all
incentive-based compensation received
by a person: (A) after beginning service
as an executive officer of the company;
(B) who served as an executive officer
at any time during the performance
period for that incentive-based
compensation; (C) while the company
had a class of securities listed on a
national securities exchange or a
national securities association; and (D)
during the three completed fiscal years
immediately preceding the date that the
company is required to prepare an
accounting restatement as described in
paragraph (f) the Rule.10 A company’s
obligation to recover erroneously
awarded compensation is not dependent
on if or when the restated financial
statements are filed.
Proposed 14.207(f)(4) would provide
that, for purposes of determining the
relevant recovery period, the date that a
company is required to prepare an
accounting restatement as described in
the Rule is the earlier to occur of: (A)
the date the company’s board of
directors, a committee of the board of
directors, or the officer or officers of the
company authorized to take such action
if board action is not required,
concludes, or reasonably should have
concluded, that the company is required
to prepare an accounting restatement as
10 In addition to the last three completed fiscal
years, the recovery policy must apply to any
transition period (that results from a change in the
company’s fiscal year) within or immediately
following those three completed fiscal years.
However, a transition period between the last day
of the company’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.
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39291
described in the Rule; or (B) the date a
court, regulator, or other legally
authorized body directs the company to
prepare an accounting restatement as
described in the Rule.
Proposed LTSE Rule 14.207(f)(5) sets
forth requirements for determining the
amount of incentive-based
compensation subject to the company’s
recover policy. Subparagraph (A) states
that the amount of incentive-based
compensation that must be subject to
the company’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.
Subparagraph (B) states that, 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: (i) 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 (ii) the
company must maintain documentation
of the determination of that reasonable
estimate and provide such
documentation to the Exchange.
Proposed LTSE Rule 14.207(f)(6) sets
forth certain exceptions to the
requirement to recover erroneously
awarded compensation. Proposed LTSE
Rule 14.207(f)(6) would provide that
companies must recover erroneously
awarded compensation in compliance
with its recovery policy except to the
extent that one of the conditions set
forth below is met and the company’s
Compensation Committee, 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.
• 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 company 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.
• Recovery would violate home
country law where that law was adopted
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Federal Register / Vol. 88, No. 115 / Thursday, June 15, 2023 / Notices
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 company 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.
• 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.
Proposed LTSE Rule 14.207(f)(7)
would provide that a company is
prohibited from indemnifying any
executive officer or former executive
officer against the loss of erroneously
awarded compensation.
Proposed LTSE Rule 14.207(f)(8)
would provide that companies are
required to file all disclosures with
respect to their recovery policy in
accordance with the requirements of the
federal securities laws, including the
disclosure required by applicable
Commission filings, and the rules of the
Exchange.
Proposed LTSE Rule 14.207(f)(9)
would provide that the requirements of
the Rule do not apply to the listing of
any security issued by a unit investment
trust as defined in 15 U.S.C 80a–4(2)
and any security issued by a
management company as defined in 15
U.S.C. 80(a)–4(3) that is registered under
section 8 of the Investment Company
Act of 1940 (15 U.S.C. 80a–8) 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
less than three fiscal years, since the
listing of the company.
Proposed LTSE Rule 14.207(f)(1)
would provide that, unless the context
otherwise requires, the following
definitions apply for purposes of the
Rule (and only for purposes of LTSE
Rule 14.207(f)):
• Executive Officer: An executive
officer is the company’s president,
principal financial officer, principal
accounting officer (or if there is no such
accounting officer, the controller), any
vice-president of the company 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
company. Executive officers of the
company’s parent(s) or subsidiaries are
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17:54 Jun 14, 2023
Jkt 259001
deemed executive officers of the
company if they perform such policy
making functions for the company. In
addition, when the company is a limited
partnership, officers or employees of the
general partner(s) who perform policymaking functions for the limited
partnership are deemed officers of the
limited partnership. When the company
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 the
Rule would include at a minimum
executive officers identified pursuant to
17 CFR 229.401(b).
• Financial reporting measures:
Financial reporting measures are those
that are determined and presented in
accordance with the accounting
principles used in preparing the
company’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
company’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 incentivebased compensation occurs after the end
of that period.
Proposed LTSE Rule 14.207(f)(10)
would provide that the effective date of
the Rule (‘‘effective date’’) is October 2,
2023, and that each company is required
to (i) adopt a policy governing the
recovery of erroneously awarded
compensation as required by the Rule
no later than 60 days following October
2, 2023; (ii) comply with its recovery
policy for all incentive-based
compensation received (as such term is
defined in Rule 14.207(f)(1)) by
executive officers on or after October 2,
2023; and (iii) provide the disclosures
required by the Rule and in the
applicable Commission filings on or
after October 2, 2023.11 Proposed LTSE
11 See Amendment No. 2, supra note 5. In support
of proposing an effective date of October 2, 2023,
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Fmt 4703
Sfmt 4703
Rule 14.701(f)(10) also states that
notwithstanding the look-back
requirement in proposed Rule 14.207(f),
a company is only required to apply the
recovery policy to incentive-based
compensation received on or after
October 2, 2023.12
LTSE also proposes an additional
clarifying change to LTSE Rule 14.203
(Prerequisites for Applying to List on
the Exchange) to make clear that any
company applying to list on LTSE must
comply with the requirements of
proposed LTSE Rule 14.207(f).13
LTSE states that the new requirements
described above will help foster
effective oversight of executive
compensation and provide increased
accountability and transparency to
investors by not allowing executive
officers to retain compensation that they
were awarded erroneously.14
As described above, Rule 10D–1
requires national securities exchanges to
prohibit the initial or continued listing
of any security of an issuer not in
compliance with its rules adopted to
comply with Rule 10D–1. LTSE
proposes therefore to require that a
company will be subject to delisting if
it does not adopt a compensation
recovery policy that complies with the
applicable listing standard, disclose the
policy in accordance with Commission
rules or comply with its recovery policy.
LTSE states that the process for a
company that fails to comply with
proposed LTSE Rule 14.207(f) will
follow the established pattern used for
similar corporate governance
deficiencies.15 Specifically, LTSE
proposes to amend LTSE Rule
14.501(d)(2)(A)(iii) to provide that a
company that fails to comply with
proposed LTSE Rule 14.207(f) may
the Exchange states it believes this is consistent
with section 10D ‘‘and the goal of implementing the
proposed rule promptly while also being consistent
with the expectations of listed issuers that the
proposed rules would take effect a year after the
adoption of SEC Rule 10D–1 based on the issuers’
understanding of a statement made . . . in the
Adopting Release.’’ See id.
12 See Amendment No. 2, supra note 5. As
described above, a LTSE listed company would
have to comply with its recovery policy for all
incentive-based compensation received by
executive officers on or after the effective date of
the applicable listing standard (i.e., LTSE Rule
14.207(f)). Incentive-based compensation that is the
subject of a compensation contract or arrangement
that existed prior to the effective date of Rule 10D–
1 would still be subject to recovery under the
Exchange’s rule if such compensation was received
after the effective date of the Rule, as required by
Rule 10D–1. See Adopting Release, supra note 6,
and also definitions of ‘‘incentive based
compensation’’ and ‘‘received’’ in proposed LTSE
Rule 14.207(f)(1).
13 See proposed LTSE Rule 14.203(j). See also
Notice, supra note 3, 88 FR at 16487.
14 See Notice, supra note 3, 88 FR at 16490.
15 See id.
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Federal Register / Vol. 88, No. 115 / Thursday, June 15, 2023 / Notices
submit to LTSE Regulation 16 a plan to
regain compliance and, consistent with
its process for similar corporate
governance deficiencies, LTSE Staff 17
may, after review of the compliance
plan, provide the issuer up to 180 days
to cure the deficiency.18 LTSE Rule
14.501(d)(2)(B) further provides that
notifications of deficiencies that allow
for submission of a compliance plan
may also result, after review of the
compliance plan, in issuance of a Staff
Delisting Determination or a Public
Reprimand Letter. However, LTSE
proposes to amend LTSE Rules
14.501(a)(4), 14.501(d)(4), and
14.502(b)(1)(C) to provide that a Public
Reprimand Letter may not be issued for
violations of proposed LTSE Rule
14.207(f) or of a listing standard
required by Rule 10D–1 or upon appeal
of such violations.19 If LTSE Staff
provides the issuer with a period to cure
the deficiency, and if the issuer does not
regain compliance within the time
period provided, LTSE Staff would be
required to issue a Staff Delisting
Determination,20 which the issuer could
appeal to the Listings Review
Committee, as provided in LTSE Rule
14.502. The Listings Review Committee
could allow the issuer up to an
additional 180 days to cure the
deficiency.21
III. Discussion and Commission
Findings
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After careful review, the Commission
finds that the proposed rule change, as
modified by Amendment Nos. 1 and 2,
is consistent with the requirements of
the Act and the rules and regulations
thereunder applicable to a national
securities exchange.22 In particular, the
Commission finds that the proposed
16 LTSE Rule 1.160(u) defines the term ‘‘LTSE
Regulation’’ as ‘‘the department of LTSE or
designated employees of LTSE that supervise,
administer, or perform the regulatory functions of
LTSE, including the administration of any
regulatory services agreements with another selfregulatory organization to which LTSE is a party.’’
17 LTSE Rule 14.500(b)(6) defines the term ‘‘Staff’’
as employees of LTSE Regulation.
18 See LTSE Rule 14.501(d)(2)(B).
19 LTSE also proposes to amend the definition of
‘‘Public Reprimand Letter’’ in Rule 14.500(b)(5) to
provide that a Public Reprimand Letter may not be
issued for violations of a listing standard required
by Rule 10D–1. Under the existing definition in
LTSE Rule 14.500(b)(5), Public Reprimand Letters
can be issued for violations of LTSE corporate
governance or notification listing standards except
for violations of a listing standard required by Rule
10A–3 of the Act.
20 See LTSE Rule 14.501(d)(2)(E).
21 See LTSE Rule 14.502(b).
22 15 U.S.C. 78f(b). In approving this proposed
rule change, the Commission has considered the
proposed rule change’s impact on efficiency,
competition, and capital formation. See 15 U.S.C.
78c(f).
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rule change is consistent with the
requirements of section 6(b) of the
Act.23 Specifically, the Commission
finds that the proposed rule change is
consistent with section 6(b)(5) of the
Act,24 which requires, among other
things, that the rules of a national
securities exchange be designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, 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 are not designed to
permit unfair discrimination between
customers, issuers, brokers, or dealers.
In addition, the Commission finds that
the proposed rule change is consistent
with section 6(b)(7) of the Act,25 which
requires, among other things, that the
rules of a national securities exchange
provide a fair procedure for the
prohibition or limitation by the
exchange of any person with respect to
access to services offered by the
exchange. The proposed rule change, as
modified by Amendment Nos. 1 and 2,
is also consistent with section 10D of
the Act 26 and Rule 10D–1 thereunder,
as further described below.27
The development and enforcement of
meaningful listing standards for a
national securities exchange is of
substantial importance to financial
markets and the investing public.
Meaningful listing standards are
especially important given investor
expectations regarding the nature of
companies that have achieved an
exchange listing for their securities, and
the role of an exchange in overseeing its
market and assuring compliance with its
listing standards.28 The corporate
governance standards embodied in the
listing rules of national securities
exchanges, in particular, play an
important role in assuring that
companies listed for trading on the
exchanges’ markets observe good
governance practices, including a fair
approach and greater accountability for
23 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
25 15 U.S.C. 78(b)(7).
26 15 U.S.C. 78j–4.
27 17 CFR 240.10D–1.
28 See, e.g., Securities Exchange Release Nos.
65708 (November 8, 2011), 76 FR 70799 70802
(November 15, 2011) (SR–NASDAQ–2011–073);
63607 (December 23, 2010), 75 FR 82420, 82422
(December 30, 2010) (SR–NASDAQ–2010–137);
57785 (May 6, 2008), 73 FR 27597, 27599 (May 13,
2008) (SR–NYSE–2008–17); and 93256 (October 4,
2021), 86 FR 56338 (October 8, 2021) (SR–
NASDAQ–2021–007).
24 15
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39293
the recovery of erroneously awarded
compensation.29
In enacting section 10D of the Act,30
Congress resolved to require national
securities exchanges to establish listing
standards to require listed issuers to
develop and comply with a policy to
recover incentive-based compensation
erroneously awarded on the basis of
financial information that requires an
accounting restatement.31 In October
2022, as required by this legislation, the
Commission adopted Rule 10D–1 under
the Act, which directs the national
securities exchanges to establish listing
standards that require issuers to: (i)
develop and comply with written
policies for recovery of incentive-based
compensation based on financial
information required to be reported
under the securities laws, applicable to
the issuers’ executive officers, during
the three completed fiscal years
immediately preceding the date that the
issuer is required to prepare an
accounting restatement; and (ii) disclose
those compensation recovery policies in
accordance with Commission rules. In
response, the Exchange has filed the
proposed rule change, which includes
rules intended to comply with the
requirements of Rule 10D–1.
The Exchange’s proposed LTSE Rule
14.207(f) incorporates the requirements
of Rule 10D–1. The Commission
29 See, e.g., Securities Exchange Release No.
68639 (January 11, 2013), 78 FR 4570, 4579 (January
22, 2013) (SR–NYSE–2012–49) (stating, in
connection with the modification of exchange rules
for compensation committees of listed issuers to
comply with Rule 10C–1 of the Act, that corporate
governance listing standards ‘‘play an important
role in assuring that companies listed for trading on
the exchanges’ markets observe good governance
practices, including a reasoned, fair, and impartial
approach for determining the compensation of
corporate executives’’ and stating that the proposal
would foster ‘‘greater transparency, accountability
and objectivity’’ in oversight of compensation
practices.).
30 Public Law 111–203, 954, 124 Stat. 1376, 1904
(2010) (codified at 15 U.S.C. 78j–4).
31 As a part of the Dodd-Frank Act legislative
process, in a 2010 report, the Senate Committee on
Banking, Housing and Urban Affairs stated that it
is ‘‘unfair to shareholders for corporations to allow
executive officers to retain compensation that they
were awarded erroneously.’’ See Report of the
Senate Committee on Banking, Housing, and Urban
Affairs, S.3217, Report No. 111–176 at 135–36 (Apr.
30, 2010) (‘‘Senate Report’’) at 135. See also
Adopting Release, supra note 7, 87 FR at 73077
(citing to the Senate Report) (‘‘The language and
legislative history of the Dodd-Frank Act make clear
that section 10D is premised on the notion that an
executive officer should not retain incentive-based
compensation that, had the issuer’s accounting been
correct in the first instance, would not have been
received by the executive officer, regardless of any
fault of the executive officer for the accounting
errors. The Senate Report also indicates that
shareholders should not ‘have to embark on costly
legal expenses to recoup their losses’ and that
‘executives must return monies that should belong
to the shareholders.’ ’’).
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Federal Register / Vol. 88, No. 115 / Thursday, June 15, 2023 / Notices
believes that the Exchange’s proposal
will foster greater fairness,
accountability, and transparency to
shareholders of listed issuers by
advancing the recovery of incentivebased compensation that was
erroneously awarded on the basis of
financial information that requires an
accounting restatement, consistent with
section 10D of the Act 32 and Rule 10D–
1 thereunder,33 and will therefore
further the protection of investors
consistent with section 6(b)(5) of the
Act.34 In addition, as the Commission
stated in the Adopting Release, the
recovery requirements 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 can further discourage such
behavior.35 The Commission believes
that these benefits of the Exchange’s
new rules on the recovery of
erroneously awarded compensation will
protect investors and the public interest
as required under section 6(b)(5) of the
Act.
Rule 10D–1 and proposed LTSE Rule
14.207(f) require that a listed issuer
recover the amount of erroneously
awarded incentive-based compensation
‘‘reasonably promptly.’’ The Adopting
Release stated that whether an issuer is
acting reasonably promptly ‘‘will
depend on the particular facts and
circumstances applicable to that issuer’’
and ‘‘the final rules do not restrict
exchanges from adopting more
prescriptive approaches to the timing
and method of recovery under their
rules in compliance with section 19(b)
of the Exchange Act . . . .’’ 36 Rule
10D–1 also does not compel the
exchanges to adopt a more prescriptive
approach to the timing and method of
recovery. In its Notice, LTSE stated that
‘‘the [c]ompany’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 [c]ompany’’
and that ‘‘[i]n evaluating whether the
[c]ompany is recovering erroneously32 15
U.S.C. 78j–4.
CFR 240.10D–1.
34 15 U.S.C. 78f(b)(5).
35 See Adopting Release, supra note 7. See also
Notice, supra note 3, 88 FR at 16490, agreeing with
the Commission’s statement on the benefits of the
recovery policy.
36 See Adopting Release, supra note 7, 87 FR at
73104. For example, the Commission stated that
after the exchanges have observed issuer
performance they can use any resulting data to
assess the need for further guidelines to ensure
prompt and effective recovery. See id.
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33 17
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awarded executive compensation
reasonably promptly, the Exchange will
consider whether the [c]ompany is
pursuing the appropriate balance of cost
and speed in determining the
appropriate means to seek recovery, and
whether the [c]ompany is securing
recovery through means that are
appropriate based on the particular facts
and circumstances of each executive
officer that owes a recoverable
amount.’’ 37 The Commission believes
this guidance provided by the Exchange
is consistent with the Commission’s
statements regarding when an issuer is
acting ‘‘reasonably promptly’’ as
expressed in the Adopting Release, with
Rule 10D–1 and with the Act.38
Rule 10D–1 requires issuers subject to
the listing standards to adopt a recovery
policy no later than 60 days following
the date on which the applicable listing
standards become effective and to
comply with their recovery policy, and
provide the required disclosures, on or
after the effective date. The Exchange, in
Amendment No. 2, is proposing that the
effective date of Rule 14.207(f) be
October 2, 2023.39 The Exchange
believes that setting this date as the
effective date will ensure that issuers
have more than a year from the date
Rule 10D–1 was published in the
Federal Register to adopt recovery
policies.40 This is consistent with
language in Rule 10D–1 and the
Adopting Release, while also ensuring
prompt implementation of this
proposed rule.
With respect to a listed issuer that
fails to comply with proposed LTSE
Rule 14.207(f), the Exchange has
proposed to apply its current
procedures applicable to companies
with similar corporate governance
deficiencies in addition to prohibiting
the use of a Public Reprimand Letter for
violations of a listing standard required
by Rule 10D–1.41 The Commission
believes that these procedures for listed
37 See
38 See
Notice, supra note 3, 88 FR at 16489.
Adopting Release, supra note 7, 87 FR
73104.
39 See proposed LTSE Rule 14.207(f)(10). See also
Amendment No. 2, supra note 5.
40 Listed issuers will need to have their recovery
policy in place no later than 60 days following the
effective date of October 2, 2023, which would be
more than a year after publication of Rule 10D–1
in the Federal Register. Listed issuers will also
have to comply with their recovery policy for all
incentive-based compensation received by
executive officers on or after the effective date of
October 2, 2023, and provide the required
disclosures in the applicable Commission filings on
or after the effective date of October 2, 2023. See
Adopting Release, supra note 6, and also definitions
of ‘‘incentive-based compensation’’ and ‘‘received’’
in proposed Rule 14.201(f)(1). See also supra notes
11–12 and accompanying text.
41 See supra notes 15–21 and accompanying text.
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issuers out of compliance with proposed
LTSE Rule 14.207(f), which are
consistent with the procedures for
similar corporate governance
deficiencies, adequately meet the
mandate of Rule 10D–1 and are
consistent with investor protection and
the public interest, since they give a
listed issuer a reasonable time period to
cure non-compliance with these
important requirements before the listed
issuer will be delisted while helping to
ensure that listed issuers that are noncompliant will not remain listed for an
inappropriate amount of time.
Additionally, the proposed delisting
process, including the cure period and
the right to appeal a delisting
determination to the Exchange’s Listings
Review Committee, is consistent with
section 6(b)(7) of the Act in that it
provides a fair procedure for the review
of delisting determinations based on
violations of the Exchange’s rules for
recovering erroneous compensation.
IV. Solicitation of Comments on
Amendment No. 2 to the Proposed Rule
Change
Interested persons are invited to
submit written data, views, and
arguments concerning whether the
proposed rule change, as modified by
Amendment Nos. 1 and 2, is consistent
with the Exchange 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–
LTSE–2023–01 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–LTSE–2023–01. 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
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Federal Register / Vol. 88, No. 115 / Thursday, June 15, 2023 / Notices
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
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–LTSE–2023–01, and should be
submitted on or before July 6, 2023.
lotter on DSK11XQN23PROD with NOTICES1
V. Accelerated Approval of Proposed
Rule Change, as Modified by
Amendment Nos. 1 and 2
43 15
Amendment No. 2, supra note 5.
U.S.C. 78s(b)(2).
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VI. Conclusion
It is therefore ordered, pursuant to
section 19(b)(2) of the Act,44 that the
proposed rule change (SR–LTSE–2023–
01), as modified by Amendment Nos. 1
and 2, be, and hereby is, approved on
an accelerated basis.
For the Commission, by the Division
of Trading and Markets, pursuant to
delegated authority.45
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–12763 Filed 6–14–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–97687; File No. SR–
NASDAQ–2023–005]
The Commission finds good cause to
approve the proposed rule change, as
modified by Amendment Nos. 1 and 2,
prior to the thirtieth day after the date
of publication of notice of the filing of
Amendment No. 2 in the Federal
Register. In Amendment No. 2, the
Exchange amended the proposal to (i)
propose that the effective date of LTSE
Rule 14.207(f) be October 2, 2023; (ii)
clarify, consistent with the requirements
of Rule 10D–1 and the rule language as
originally proposed, that each listed
issuer is required to comply with its
recovery policy for all incentive-based
compensation received (as such term is
defined in proposed 14.207(f)(1)) by
executive officers on or after October 2,
2023; and (iii) clarify, consistent with
the language of Rule 10D–1, that
notwithstanding the look-back
requirements in LTSE Rule 14.207(f), a
company is only required to apply the
recovery policy to incentive-based
executive compensation received on or
after the effective date.42 The changes in
Amendment No. 2 provide greater
clarity to the proposal. In addition, the
change to the effective date of the listing
standards is consistent with Rule 10D–
1 and language in the Adopting Release.
The additional clarifications to Rule
14.207(f)(10) will ensure that the
requirements of that Rule conform to the
requirements of Rule 10D–1.
Accordingly, the Commission finds
good cause, pursuant to section 19(b)(2)
of the Exchange Act,43 to approve the
proposed rule change, as modified by
42 See
Amendment Nos. 1 and 2, on an
accelerated basis.
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Filing of Amendment No. 1 and Order
Granting Accelerated Approval of a
Proposed Rule Change, as Modified by
Amendment No. 1, To Establish Listing
Standards Related to Recovery of
Erroneously Awarded Executive
Compensation
June 9, 2023.
I. Introduction
On February 22, 2023, The Nasdaq
Stock Market LLC (‘‘Nasdaq’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to
adopt Nasdaq Rule 5608 to establish
listing standards related to recovery of
erroneously awarded executive
compensation as required by Rule 10D–
1 under the Act (‘‘Rule 10D–1’’). The
proposed rule change was published for
comment in the Federal Register on
March 13, 2023.3 On April 24, 2023, the
Commission extended the time period
within which to approve the proposed
rule change, disapprove the proposed
rule change, or institute proceedings to
determine whether to approve or
44 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 97060
(March 7, 2023), 88 FR 15500 (‘‘Notice’’). Comments
received on the proposed rule change are available
at: https://www.sec.gov/comments/sr-nasdaq-2023005/srnasdaq2023005.htm.
45 17
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39295
disapprove the proposed rule change.4
On June 6, 2023, the Exchange filed
partial Amendment No. 1 to the
proposed rule change.5 The Commission
is publishing this notice to solicit
comments on the proposed rule change,
as modified by Amendment No. 1, from
interested persons and is approving the
proposed rule change, as modified by
Amendment No. 1, on an accelerated
basis.
II. Background and Description of the
Proposal, as Modified by Amendment
No. 1
On October 26, 2022, the Commission
adopted final Rule 10D–1 6 to
implement Section 954 of the DoddFrank Wall Street Reform and Consumer
Protection Act of 2010 (‘‘Dodd-Frank
Act’’), which added Section 10D to the
Act. Section 10D of the Act requires the
Commission to adopt rules directing the
national securities exchanges to prohibit
the listing of any security of an issuer
that is not in compliance with the
requirements of Section 10D of the Act.
Rule 10D–1 requires national securities
exchanges that list securities to establish
listing standards that require each issuer
to adopt and comply with a written
executive compensation recovery policy
and to provide the disclosures required
by Rule 10D–1 and in the applicable
Commission filings.7 Under Rule 10D–
1, listed companies must recover from
current and former executive officers
incentive-based compensation received
during the three completed fiscal years
preceding the date on which the issuer
is required to prepare an accounting
restatement.
As required by Rule 10D–1, Nasdaq
proposed to adopt Nasdaq Rule 5608
4 See Securities Exchange Act Release No. 97353,
88 FR 26369 (April 28, 2023).
5 Amendment No. 1 is available on the
Commission’s website at https://www.sec.gov/
comments/sr-nasdaq-2023-005/srnasdaq2023005200459-401302.pdf. In Amendment No. 1, the
Exchange proposes to amend Rule 5608(e) to (i)
provide that the effective date of Rule 5608 would
be October 2, 2023; and (ii) clarify, consistent with
the requirements of Rule 10D–1 and the rule
language as originally proposed, that each company
is required to comply with its recovery policy for
all incentive-based compensation received (as such
term is defined in proposed Rule 5608(d)) by
executive officers on or after October 2, 2023.
6 17 CFR 240.10D–1.
7 See Securities Exchange Act Release No. 96159,
87 FR 73076 (November 28, 2022) (‘‘Adopting
Release’’). Rule 10D–1 requires such exchange
listing rules to be effective no later than one year
after November 28, 2022. Rule 10D–1 further
requires that each listed issuer: (i) adopt the
required recovery policy no later than 60 days
following the effective date of the listing standard;
(ii) comply with the recovery policy for all
incentive-based compensation received by
executive officers on or after the effective date of
the applicable listing standard; and (iii) provide the
required disclosures on or after the effective date of
the listing standard.
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]]>Agencies
[Federal Register Volume 88, Number 115 (Thursday, June 15, 2023)]
[Notices]
[Pages 39290-39295]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-12763]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-97693; File No. SR-LTSE-2023-01]
Self-Regulatory Organizations; Long-Term Stock Exchange, Inc.;
Notice of Filing of Amendment No. 2 and Order Granting Accelerated
Approval of a Proposed Rule Change, as Modified by Amendment Nos. 1 and
2, To Establish Listing Standards Related to Recovery of Erroneously
Awarded Incentive-Based Executive Compensation
June 9, 2023.
I. Introduction
On February 27, 2023, Long-Term Stock Exchange, Inc. (``LTSE'' or
the ``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to amend LTSE Rule 14.207(f) to establish listing
standards for the recovery of erroneously awarded compensation, as
required by Rule 10D-1 under the Act (``Rule 10D-1''). On March 10,
2023, the Exchange filed Amendment No. 1 to the proposed rule change,
which replaced and superseded the proposed rule change as originally
filed. The proposed rule change, as modified by Amendment No. 1, was
published for comment in the Federal Register on March 17, 2023.\3\ On
April 24, 2023, the Commission extended the time period within which to
approve the proposed rule change, disapprove the proposed rule change,
or institute proceedings to determine whether to approve or disapprove
the proposed rule change.\4\ On June 8, 2023, the Exchange filed
partial Amendment No. 2 to the proposed rule change.\5\ The Commission
is publishing this notice to solicit comments on the proposed rule
change, as modified by Amendment Nos. 1 and 2, from interested persons
and is approving the proposed rule change, as modified by Amendment
Nos. 1 and 2, on an accelerated basis.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 97123 (March 13,
2023), 88 FR 16487 (``Notice''). No comments were received in
response to this Notice.
\4\ See Securities Exchange Act Release No. 97365, 88 FR 26349
(April 28, 2023).
\5\ Amendment No. 2 is available on the Commission's website at
https://www.sec.gov/comments/sr-ltse-2023-01/srltse202301-202019-404742.pdf. In Amendment No. 2, the Exchange amends proposed LTSE
Rule 14.207(f)(10) to (i) provide that the effective date of LTSE
Rule 14.207(f) would be October 2, 2023; (ii) clarify, consistent
with the requirements of Rule 10D-1 and the rule language as
originally proposed, that each listed issuer is required to comply
with its recovery policy for all incentive-based compensation
received (as such term is defined in proposed LTSE Rule14.207(f)(1))
by executive officers on or after October 2, 2023; and (iii)
clarify, consistent with the language of Rule 10D-1, that
notwithstanding the look-back requirements in LTSE Rule 14.207(f), a
company is only required to apply the recovery policy to incentive-
based executive compensation received on or after the effective
date.
---------------------------------------------------------------------------
II. Background and Description of the Proposal, as Modified by
Amendment Nos. 1 and 2
On October 26, 2022, the Commission adopted final Rule 10D-1 \6\ to
implement section 954 of the Dodd-Frank Wall Street Reform and Consumer
Protection Act of 2010 (``Dodd-Frank Act''), which added section 10D to
the Act. Section 10D of the Act requires the Commission to adopt rules
directing the national securities exchanges to prohibit
[[Page 39291]]
the listing of any security of an issuer that is not in compliance with
the requirements of section 10D of the Act. Rule 10D-1 requires
national securities exchanges that list securities to establish listing
standards that require each issuer to adopt and comply with a written
executive compensation recovery policy and to provide the disclosures
required by Rule 10D-1 and in the applicable Commission filings.\7\
Under Rule 10D-1, listed companies must recover from current and former
executive officers incentive-based compensation received during the
three completed fiscal years preceding the date on which the issuer is
required to prepare an accounting restatement.
---------------------------------------------------------------------------
\6\ 17 CFR 240.10D-1.
\7\ See Securities Exchange Act Release No. 96159, 87 FR 73076
(November 28, 2022) (``Adopting Release''). Rule 10D-1 requires such
exchange listing rules to be effective no later than one year after
November 28, 2022. Rule 10D-1 further requires that each listed
issuer: (i) adopt the required recovery policy no later than 60 days
following the effective date of the listing standard; (ii) comply
with the recovery policy for all incentive-based compensation
received by executive officers on or after the effective date of the
applicable listing standard; and (iii) provide the required
disclosures on or after the effective date of the listing standard.
---------------------------------------------------------------------------
As required by Rule 10D-1, the Exchange proposed to amend LTSE Rule
14.207, Obligations for Companies Listed on the Exchange, paragraph
(f), to establish listing standards for the recovery of erroneously
awarded compensation. Proposed LTSE Rule 14.207(f), entitled ``Recovery
of Erroneously Awarded Compensation to Executive Officers'' (the
``Rule''), incorporates the requirements of Rule 10D-1. Specifically,
the Rule would require companies \8\ to adopt a compensation recovery
policy, comply with that policy, and provide the compensation recovery
policy disclosures required by the Rule and in the applicable
Commission filings.\9\
---------------------------------------------------------------------------
\8\ For purposes of this order, ``companies'' or ``company''
refers to the issuer of a security listed or an issuer who is
applying to list on the Exchange. See, e.g., LTSE Rule 14.002(a)(5).
\9\ The Exchange proposes to reposition the current text of
paragraph (f) of LTSE Rule 14.207 (Obligation to Pay Fees) into new
paragraph (g) of Rule 14.207.
---------------------------------------------------------------------------
Proposed LTSE Rule 14.207(f)(2) sets forth the requirements for
companies to adopt, implement and disclose a recovery policy for
incentive-based execution compensation. Specifically, Proposed LTSE
Rule 14.207(f)(2)(A) would require that each company that lists its
securities on the Exchange must adopt and comply with a written policy
providing that the company will recover reasonably promptly the amount
of erroneously awarded incentive-based compensation to any executive
officer in the event that the company is required to prepare an
accounting restatement due to material non-compliance of the company
with any financial reporting requirement under the securities laws,
including any required accounting restatement to correct an error in
previously issued financial statements that is material to the
previously issued financial statements, or that would result in a
material misstatement if the error were corrected in the current period
or left uncorrected in the current period.
Proposed LTSE Rule 14.207(f)(2)(B) would require that each company
listed on the Exchange disclose its written recovery policy related to
the recovery of erroneously awarded compensation as part of its
reporting obligations to the Commission, as an exhibit to its Annual
Report, and to the Exchange. A company applying for initial listing
must include its written recovery policy as part of its listing
application.
Proposed LTSE Rule 14.207(f)(3) would provide that the company's
recovery policy must apply to all incentive-based compensation received
by a person: (A) after beginning service as an executive officer of the
company; (B) who served as an executive officer at any time during the
performance period for that incentive-based compensation; (C) while the
company had a class of securities listed on a national securities
exchange or a national securities association; and (D) during the three
completed fiscal years immediately preceding the date that the company
is required to prepare an accounting restatement as described in
paragraph (f) the Rule.\10\ A company's obligation to recover
erroneously awarded compensation is not dependent on if or when the
restated financial statements are filed.
---------------------------------------------------------------------------
\10\ In addition to the last three completed fiscal years, the
recovery policy must apply to any transition period (that results
from a change in the company's fiscal year) within or immediately
following those three completed fiscal years. However, a transition
period between the last day of the company'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.
---------------------------------------------------------------------------
Proposed 14.207(f)(4) would provide that, for purposes of
determining the relevant recovery period, the date that a company is
required to prepare an accounting restatement as described in the Rule
is the earlier to occur of: (A) the date the company's board of
directors, a committee of the board of directors, or the officer or
officers of the company authorized to take such action if board action
is not required, concludes, or reasonably should have concluded, that
the company is required to prepare an accounting restatement as
described in the Rule; or (B) the date a court, regulator, or other
legally authorized body directs the company to prepare an accounting
restatement as described in the Rule.
Proposed LTSE Rule 14.207(f)(5) sets forth requirements for
determining the amount of incentive-based compensation subject to the
company's recover policy. Subparagraph (A) states that the amount of
incentive-based compensation that must be subject to the company'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. Subparagraph (B) states
that, 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: (i) 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 (ii) the company
must maintain documentation of the determination of that reasonable
estimate and provide such documentation to the Exchange.
Proposed LTSE Rule 14.207(f)(6) sets forth certain exceptions to
the requirement to recover erroneously awarded compensation. Proposed
LTSE Rule 14.207(f)(6) would provide that companies must recover
erroneously awarded compensation in compliance with its recovery policy
except to the extent that one of the conditions set forth below is met
and the company's Compensation Committee, 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.
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
company 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.
Recovery would violate home country law where that law was
adopted
[[Page 39292]]
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 company 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.
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.
Proposed LTSE Rule 14.207(f)(7) would provide that a company is
prohibited from indemnifying any executive officer or former executive
officer against the loss of erroneously awarded compensation.
Proposed LTSE Rule 14.207(f)(8) would provide that companies are
required to file all disclosures with respect to their recovery policy
in accordance with the requirements of the federal securities laws,
including the disclosure required by applicable Commission filings, and
the rules of the Exchange.
Proposed LTSE Rule 14.207(f)(9) would provide that the requirements
of the Rule do not apply to the listing of any security issued by a
unit investment trust as defined in 15 U.S.C 80a-4(2) and any security
issued by a management company as defined in 15 U.S.C. 80(a)-4(3) that
is registered under section 8 of the Investment Company Act of 1940 (15
U.S.C. 80a-8) 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 less than three fiscal years, since the listing of the company.
Proposed LTSE Rule 14.207(f)(1) would provide that, unless the
context otherwise requires, the following definitions apply for
purposes of the Rule (and only for purposes of LTSE Rule 14.207(f)):
Executive Officer: An executive officer is the company's
president, principal financial officer, principal accounting officer
(or if there is no such accounting officer, the controller), any vice-
president of the company 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 company.
Executive officers of the company's parent(s) or subsidiaries are
deemed executive officers of the company if they perform such policy
making functions for the company. In addition, when the company is a
limited partnership, officers or employees of the general partner(s)
who perform policy-making functions for the limited partnership are
deemed officers of the limited partnership. When the company 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 the Rule would include at a minimum executive
officers identified pursuant to 17 CFR 229.401(b).
Financial reporting measures: Financial reporting measures
are those that are determined and presented in accordance with the
accounting principles used in preparing the company'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 company'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.
Proposed LTSE Rule 14.207(f)(10) would provide that the effective
date of the Rule (``effective date'') is October 2, 2023, and that each
company is required to (i) adopt a policy governing the recovery of
erroneously awarded compensation as required by the Rule no later than
60 days following October 2, 2023; (ii) comply with its recovery policy
for all incentive-based compensation received (as such term is defined
in Rule 14.207(f)(1)) by executive officers on or after October 2,
2023; and (iii) provide the disclosures required by the Rule and in the
applicable Commission filings on or after October 2, 2023.\11\ Proposed
LTSE Rule 14.701(f)(10) also states that notwithstanding the look-back
requirement in proposed Rule 14.207(f), a company is only required to
apply the recovery policy to incentive-based compensation received on
or after October 2, 2023.\12\
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\11\ See Amendment No. 2, supra note 5. In support of proposing
an effective date of October 2, 2023, the Exchange states it
believes this is consistent with section 10D ``and the goal of
implementing the proposed rule promptly while also being consistent
with the expectations of listed issuers that the proposed rules
would take effect a year after the adoption of SEC Rule 10D-1 based
on the issuers' understanding of a statement made . . . in the
Adopting Release.'' See id.
\12\ See Amendment No. 2, supra note 5. As described above, a
LTSE listed company would have to comply with its recovery policy
for all incentive-based compensation received by executive officers
on or after the effective date of the applicable listing standard
(i.e., LTSE Rule 14.207(f)). Incentive-based compensation that is
the subject of a compensation contract or arrangement that existed
prior to the effective date of Rule 10D-1 would still be subject to
recovery under the Exchange's rule if such compensation was received
after the effective date of the Rule, as required by Rule 10D-1. See
Adopting Release, supra note 6, and also definitions of ``incentive
based compensation'' and ``received'' in proposed LTSE Rule
14.207(f)(1).
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LTSE also proposes an additional clarifying change to LTSE Rule
14.203 (Prerequisites for Applying to List on the Exchange) to make
clear that any company applying to list on LTSE must comply with the
requirements of proposed LTSE Rule 14.207(f).\13\
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\13\ See proposed LTSE Rule 14.203(j). See also Notice, supra
note 3, 88 FR at 16487.
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LTSE states that the new requirements described above will help
foster effective oversight of executive compensation and provide
increased accountability and transparency to investors by not allowing
executive officers to retain compensation that they were awarded
erroneously.\14\
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\14\ See Notice, supra note 3, 88 FR at 16490.
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As described above, Rule 10D-1 requires national securities
exchanges to prohibit the initial or continued listing of any security
of an issuer not in compliance with its rules adopted to comply with
Rule 10D-1. LTSE proposes therefore to require that a company will be
subject to delisting if it does not adopt a compensation recovery
policy that complies with the applicable listing standard, disclose the
policy in accordance with Commission rules or comply with its recovery
policy. LTSE states that the process for a company that fails to comply
with proposed LTSE Rule 14.207(f) will follow the established pattern
used for similar corporate governance deficiencies.\15\ Specifically,
LTSE proposes to amend LTSE Rule 14.501(d)(2)(A)(iii) to provide that a
company that fails to comply with proposed LTSE Rule 14.207(f) may
[[Page 39293]]
submit to LTSE Regulation \16\ a plan to regain compliance and,
consistent with its process for similar corporate governance
deficiencies, LTSE Staff \17\ may, after review of the compliance plan,
provide the issuer up to 180 days to cure the deficiency.\18\ LTSE Rule
14.501(d)(2)(B) further provides that notifications of deficiencies
that allow for submission of a compliance plan may also result, after
review of the compliance plan, in issuance of a Staff Delisting
Determination or a Public Reprimand Letter. However, LTSE proposes to
amend LTSE Rules 14.501(a)(4), 14.501(d)(4), and 14.502(b)(1)(C) to
provide that a Public Reprimand Letter may not be issued for violations
of proposed LTSE Rule 14.207(f) or of a listing standard required by
Rule 10D-1 or upon appeal of such violations.\19\ If LTSE Staff
provides the issuer with a period to cure the deficiency, and if the
issuer does not regain compliance within the time period provided, LTSE
Staff would be required to issue a Staff Delisting Determination,\20\
which the issuer could appeal to the Listings Review Committee, as
provided in LTSE Rule 14.502. The Listings Review Committee could allow
the issuer up to an additional 180 days to cure the deficiency.\21\
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\15\ See id.
\16\ LTSE Rule 1.160(u) defines the term ``LTSE Regulation'' as
``the department of LTSE or designated employees of LTSE that
supervise, administer, or perform the regulatory functions of LTSE,
including the administration of any regulatory services agreements
with another self-regulatory organization to which LTSE is a
party.''
\17\ LTSE Rule 14.500(b)(6) defines the term ``Staff'' as
employees of LTSE Regulation.
\18\ See LTSE Rule 14.501(d)(2)(B).
\19\ LTSE also proposes to amend the definition of ``Public
Reprimand Letter'' in Rule 14.500(b)(5) to provide that a Public
Reprimand Letter may not be issued for violations of a listing
standard required by Rule 10D-1. Under the existing definition in
LTSE Rule 14.500(b)(5), Public Reprimand Letters can be issued for
violations of LTSE corporate governance or notification listing
standards except for violations of a listing standard required by
Rule 10A-3 of the Act.
\20\ See LTSE Rule 14.501(d)(2)(E).
\21\ See LTSE Rule 14.502(b).
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III. Discussion and Commission Findings
After careful review, the Commission finds that the proposed rule
change, as modified by Amendment Nos. 1 and 2, is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to a national securities exchange.\22\ In particular, the
Commission finds that the proposed rule change is consistent with the
requirements of section 6(b) of the Act.\23\ Specifically, the
Commission finds that the proposed rule change is consistent with
section 6(b)(5) of the Act,\24\ which requires, among other things,
that the rules of a national securities exchange be designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, 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 are not
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers. In addition, the Commission finds that the
proposed rule change is consistent with section 6(b)(7) of the Act,\25\
which requires, among other things, that the rules of a national
securities exchange provide a fair procedure for the prohibition or
limitation by the exchange of any person with respect to access to
services offered by the exchange. The proposed rule change, as modified
by Amendment Nos. 1 and 2, is also consistent with section 10D of the
Act \26\ and Rule 10D-1 thereunder, as further described below.\27\
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\22\ 15 U.S.C. 78f(b). In approving this proposed rule change,
the Commission has considered the proposed rule change's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
\23\ 15 U.S.C. 78f(b).
\24\ 15 U.S.C. 78f(b)(5).
\25\ 15 U.S.C. 78(b)(7).
\26\ 15 U.S.C. 78j-4.
\27\ 17 CFR 240.10D-1.
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The development and enforcement of meaningful listing standards for
a national securities exchange is of substantial importance to
financial markets and the investing public. Meaningful listing
standards are especially important given investor expectations
regarding the nature of companies that have achieved an exchange
listing for their securities, and the role of an exchange in overseeing
its market and assuring compliance with its listing standards.\28\ The
corporate governance standards embodied in the listing rules of
national securities exchanges, in particular, play an important role in
assuring that companies listed for trading on the exchanges' markets
observe good governance practices, including a fair approach and
greater accountability for the recovery of erroneously awarded
compensation.\29\
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\28\ See, e.g., Securities Exchange Release Nos. 65708 (November
8, 2011), 76 FR 70799 70802 (November 15, 2011) (SR-NASDAQ-2011-
073); 63607 (December 23, 2010), 75 FR 82420, 82422 (December 30,
2010) (SR-NASDAQ-2010-137); 57785 (May 6, 2008), 73 FR 27597, 27599
(May 13, 2008) (SR-NYSE-2008-17); and 93256 (October 4, 2021), 86 FR
56338 (October 8, 2021) (SR-NASDAQ-2021-007).
\29\ See, e.g., Securities Exchange Release No. 68639 (January
11, 2013), 78 FR 4570, 4579 (January 22, 2013) (SR-NYSE-2012-49)
(stating, in connection with the modification of exchange rules for
compensation committees of listed issuers to comply with Rule 10C-1
of the Act, that corporate governance listing standards ``play an
important role in assuring that companies listed for trading on the
exchanges' markets observe good governance practices, including a
reasoned, fair, and impartial approach for determining the
compensation of corporate executives'' and stating that the proposal
would foster ``greater transparency, accountability and
objectivity'' in oversight of compensation practices.).
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In enacting section 10D of the Act,\30\ Congress resolved to
require national securities exchanges to establish listing standards to
require listed issuers to develop and comply with a policy to recover
incentive-based compensation erroneously awarded on the basis of
financial information that requires an accounting restatement.\31\ In
October 2022, as required by this legislation, the Commission adopted
Rule 10D-1 under the Act, which directs the national securities
exchanges to establish listing standards that require issuers to: (i)
develop and comply with written policies for recovery of incentive-
based compensation based on financial information required to be
reported under the securities laws, applicable to the issuers'
executive officers, during the three completed fiscal years immediately
preceding the date that the issuer is required to prepare an accounting
restatement; and (ii) disclose those compensation recovery policies in
accordance with Commission rules. In response, the Exchange has filed
the proposed rule change, which includes rules intended to comply with
the requirements of Rule 10D-1.
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\30\ Public Law 111-203, 954, 124 Stat. 1376, 1904 (2010)
(codified at 15 U.S.C. 78j-4).
\31\ As a part of the Dodd-Frank Act legislative process, in a
2010 report, the Senate Committee on Banking, Housing and Urban
Affairs stated that it is ``unfair to shareholders for corporations
to allow executive officers to retain compensation that they were
awarded erroneously.'' See Report of the Senate Committee on
Banking, Housing, and Urban Affairs, S.3217, Report No. 111-176 at
135-36 (Apr. 30, 2010) (``Senate Report'') at 135. See also Adopting
Release, supra note 7, 87 FR at 73077 (citing to the Senate Report)
(``The language and legislative history of the Dodd-Frank Act make
clear that section 10D is premised on the notion that an executive
officer should not retain incentive-based compensation that, had the
issuer's accounting been correct in the first instance, would not
have been received by the executive officer, regardless of any fault
of the executive officer for the accounting errors. The Senate
Report also indicates that shareholders should not `have to embark
on costly legal expenses to recoup their losses' and that
`executives must return monies that should belong to the
shareholders.' '').
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The Exchange's proposed LTSE Rule 14.207(f) incorporates the
requirements of Rule 10D-1. The Commission
[[Page 39294]]
believes that the Exchange's proposal will foster greater fairness,
accountability, and transparency to shareholders of listed issuers by
advancing the recovery of incentive-based compensation that was
erroneously awarded on the basis of financial information that requires
an accounting restatement, consistent with section 10D of the Act \32\
and Rule 10D-1 thereunder,\33\ and will therefore further the
protection of investors consistent with section 6(b)(5) of the Act.\34\
In addition, as the Commission stated in the Adopting Release, the
recovery requirements 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
can further discourage such behavior.\35\ The Commission believes that
these benefits of the Exchange's new rules on the recovery of
erroneously awarded compensation will protect investors and the public
interest as required under section 6(b)(5) of the Act.
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\32\ 15 U.S.C. 78j-4.
\33\ 17 CFR 240.10D-1.
\34\ 15 U.S.C. 78f(b)(5).
\35\ See Adopting Release, supra note 7. See also Notice, supra
note 3, 88 FR at 16490, agreeing with the Commission's statement on
the benefits of the recovery policy.
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Rule 10D-1 and proposed LTSE Rule 14.207(f) require that a listed
issuer recover the amount of erroneously awarded incentive-based
compensation ``reasonably promptly.'' The Adopting Release stated that
whether an issuer is acting reasonably promptly ``will depend on the
particular facts and circumstances applicable to that issuer'' and
``the final rules do not restrict exchanges from adopting more
prescriptive approaches to the timing and method of recovery under
their rules in compliance with section 19(b) of the Exchange Act . . .
.'' \36\ Rule 10D-1 also does not compel the exchanges to adopt a more
prescriptive approach to the timing and method of recovery. In its
Notice, LTSE stated that ``the [c]ompany'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 [c]ompany'' and that ``[i]n
evaluating whether the [c]ompany is recovering erroneously-awarded
executive compensation reasonably promptly, the Exchange will consider
whether the [c]ompany is pursuing the appropriate balance of cost and
speed in determining the appropriate means to seek recovery, and
whether the [c]ompany is securing recovery through means that are
appropriate based on the particular facts and circumstances of each
executive officer that owes a recoverable amount.'' \37\ The Commission
believes this guidance provided by the Exchange is consistent with the
Commission's statements regarding when an issuer is acting ``reasonably
promptly'' as expressed in the Adopting Release, with Rule 10D-1 and
with the Act.\38\
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\36\ See Adopting Release, supra note 7, 87 FR at 73104. For
example, the Commission stated that after the exchanges have
observed issuer performance they can use any resulting data to
assess the need for further guidelines to ensure prompt and
effective recovery. See id.
\37\ See Notice, supra note 3, 88 FR at 16489.
\38\ See Adopting Release, supra note 7, 87 FR 73104.
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Rule 10D-1 requires issuers subject to the listing standards to
adopt a recovery policy no later than 60 days following the date on
which the applicable listing standards become effective and to comply
with their recovery policy, and provide the required disclosures, on or
after the effective date. The Exchange, in Amendment No. 2, is
proposing that the effective date of Rule 14.207(f) be October 2,
2023.\39\ The Exchange believes that setting this date as the effective
date will ensure that issuers have more than a year from the date Rule
10D-1 was published in the Federal Register to adopt recovery
policies.\40\ This is consistent with language in Rule 10D-1 and the
Adopting Release, while also ensuring prompt implementation of this
proposed rule.
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\39\ See proposed LTSE Rule 14.207(f)(10). See also Amendment
No. 2, supra note 5.
\40\ Listed issuers will need to have their recovery policy in
place no later than 60 days following the effective date of October
2, 2023, which would be more than a year after publication of Rule
10D-1 in the Federal Register. Listed issuers will also have to
comply with their recovery policy for all incentive-based
compensation received by executive officers on or after the
effective date of October 2, 2023, and provide the required
disclosures in the applicable Commission filings on or after the
effective date of October 2, 2023. See Adopting Release, supra note
6, and also definitions of ``incentive-based compensation'' and
``received'' in proposed Rule 14.201(f)(1). See also supra notes 11-
12 and accompanying text.
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With respect to a listed issuer that fails to comply with proposed
LTSE Rule 14.207(f), the Exchange has proposed to apply its current
procedures applicable to companies with similar corporate governance
deficiencies in addition to prohibiting the use of a Public Reprimand
Letter for violations of a listing standard required by Rule 10D-1.\41\
The Commission believes that these procedures for listed issuers out of
compliance with proposed LTSE Rule 14.207(f), which are consistent with
the procedures for similar corporate governance deficiencies,
adequately meet the mandate of Rule 10D-1 and are consistent with
investor protection and the public interest, since they give a listed
issuer a reasonable time period to cure non-compliance with these
important requirements before the listed issuer will be delisted while
helping to ensure that listed issuers that are non-compliant will not
remain listed for an inappropriate amount of time. Additionally, the
proposed delisting process, including the cure period and the right to
appeal a delisting determination to the Exchange's Listings Review
Committee, is consistent with section 6(b)(7) of the Act in that it
provides a fair procedure for the review of delisting determinations
based on violations of the Exchange's rules for recovering erroneous
compensation.
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\41\ See supra notes 15-21 and accompanying text.
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IV. Solicitation of Comments on Amendment No. 2 to the Proposed Rule
Change
Interested persons are invited to submit written data, views, and
arguments concerning whether the proposed rule change, as modified by
Amendment Nos. 1 and 2, is consistent with the Exchange 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-LTSE-2023-01 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-LTSE-2023-01. 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
[[Page 39295]]
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
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-LTSE-2023-01, and should be
submitted on or before July 6, 2023.
V. Accelerated Approval of Proposed Rule Change, as Modified by
Amendment Nos. 1 and 2
The Commission finds good cause to approve the proposed rule
change, as modified by Amendment Nos. 1 and 2, prior to the thirtieth
day after the date of publication of notice of the filing of Amendment
No. 2 in the Federal Register. In Amendment No. 2, the Exchange amended
the proposal to (i) propose that the effective date of LTSE Rule
14.207(f) be October 2, 2023; (ii) clarify, consistent with the
requirements of Rule 10D-1 and the rule language as originally
proposed, that each listed issuer is required to comply with its
recovery policy for all incentive-based compensation received (as such
term is defined in proposed 14.207(f)(1)) by executive officers on or
after October 2, 2023; and (iii) clarify, consistent with the language
of Rule 10D-1, that notwithstanding the look-back requirements in LTSE
Rule 14.207(f), a company is only required to apply the recovery policy
to incentive-based executive compensation received on or after the
effective date.\42\ The changes in Amendment No. 2 provide greater
clarity to the proposal. In addition, the change to the effective date
of the listing standards is consistent with Rule 10D-1 and language in
the Adopting Release. The additional clarifications to Rule
14.207(f)(10) will ensure that the requirements of that Rule conform to
the requirements of Rule 10D-1. Accordingly, the Commission finds good
cause, pursuant to section 19(b)(2) of the Exchange Act,\43\ to approve
the proposed rule change, as modified by Amendment Nos. 1 and 2, on an
accelerated basis.
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\42\ See Amendment No. 2, supra note 5.
\43\ 15 U.S.C. 78s(b)(2).
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VI. Conclusion
It is therefore ordered, pursuant to section 19(b)(2) of the
Act,\44\ that the proposed rule change (SR-LTSE-2023-01), as modified
by Amendment Nos. 1 and 2, be, and hereby is, approved on an
accelerated basis.
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\44\ 15 U.S.C. 78s(b)(2).
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For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\45\
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\45\ 17 CFR 200.30-3(a)(12).
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-12763 Filed 6-14-23; 8:45 am]
BILLING CODE 8011-01-P
