The New York Stock Exchange and the NASDAQ Stock Market announced recently that they have posted on their websites the forms that listed companies must use to certify their compliance with the revised listing standards concerning compensation committees. As discussed in the SEC Update we issued on June 21, 2013 (availablehere), the NYSE and NASDAQ have amended their listing standards to implement SEC Rule 10C-1 under the Exchange Act requiring national securities exchanges to establish listing standards concerning the independence of compensation committee members and other compensation committee matters. Companies listed on the NYSE and NASDAQ are required to certify their compliance with some of the revised standards.
NYSE certification form
The NYSE is including the applicable certification as part of its existing Annual Written Affirmation that is submitted by NYSE-listed companies every year following their annual stockholder meetings. On January 16, the NYSE updated the Annual Written Affirmation to include representations regarding compliance with its new compensation committee independence requirements. The new version of the form, which is available here, may be submitted electronically through the NYSE’s egovdirect.com electronic filing platform, or alternatively in paper format. The new Annual Written Affirmation is effective for listed companies holding their annual stockholder meetings after January 15, 2014. The deadline for U.S. companies to submit the form generally is the 30th day after the annual stockholder meeting.
With some exceptions, the NYSE form requires each listed company to certify that it has a compensation committee meeting the revised requirements of Section 303A.05 of the NYSE Listed Company Manual. The form also requires the company to describe any source of compensation (including consulting, advisory or other compensatory fees) paid by the company to any member of the compensation committee and to indicate whether any compensation committee member is affiliated with the company, its subsidiaries or an affiliate of its subsidiaries, in each case in accordance with the specifications set forth in revised Section 303A.02 of the NYSE Listed Company Manual.
NASDAQ certification form
NASDAQ has created a new Compensation Committee Certification for its listed companies. In early January, NASDAQ posted this new certification to the NASDAQ OMX Listing Center website in its final form. The blank form is available here in “preview” format. When companies are ready to submit the certification, they must log in and complete it electronically through the NASDAQ OMX Listing Center. The Compensation Committee Certification must be provided to NASDAQ no later than the earlier of 30 calendar days after a listed company’s first annual stockholder meeting occurring after January 15, 2014 or October 31, 2014. The NASDAQ staff has indicated informally that the certification will have to be provided one time only by the foregoing deadline and not on an annual basis.
The NASDAQ form generally requires a listed company to certify its compliance with, or applicable exemption from, the amended compensation committee listing rules as set forth in NASDAQ Listing Rule 5605(d) and discussed in interpretative material IM-5605-6. In a variation from the approach reflected in the NYSE certification, the NASDAQ form includes a representation that, in affirmatively determining the independence of any director who will serve on the compensation committee, the listed company’s board of directors considered all factors specifically relevant to determining whether the director has a relationship to the company that is material to the director’s ability to be independent from management in connection with the duties of a compensation committee member. Consistent with the NASDAQ listing standard, the representation recites as factors considered by the committee (1) the source of the director’s compensation (including any consulting, advisory or other compensatory fee paid by the company to the director) and (2) whether the director is affiliated with the company, its subsidiaries or an affiliate of its subsidiaries.