The NYSE has proposed a change to Section 303A.00 of the Listed Company Manual related to the exemption from the compensation committee requirements applicable to smaller reporting companies. (See this Cooley Alert.) The amendment is intended to conform the Section to the new SEC rules related to SRCs.

Under the NYSE listing requirements, SRCs are not required to comply with

  • the enhanced requirements in Section 303A.02(a)(ii) and the second paragraph of the Commentary to Section 303A.02(a) of the Manual with respect to the independence of compensation committee members or
  • the requirements in Section 303A.05(c)(iv) of the Manual with respect to the analysis of the independence of any compensation consultant, legal counsel or other adviser to the compensation committee.

Under Section 303A.00, when a company ceases to be an SRC, it must then comply with those requirements within the prescribed timeframe. However, the current provision uses the outdated language of the old SEC rule, expressly referring to a smaller reporting company “with a public float of $75 million or more as of the last business day of its second fiscal quarter.” To conform to the recent SEC rule changes, the NYSE has proposed to delete this obsolete reference and instead to state that a “smaller reporting company which ceases to meet the requirements for smaller reporting company status as of the last business day of its second fiscal quarter will cease to be a smaller reporting company” as of the beginning of the following fiscal year, which will then trigger the compliance requirements within the phased-in time requirements.