Dodd-Frank Update: SEC Adopts Final Compensation Committee Rules

On June 20, 2012, the Securities and Exchange Commission adopted final rules “that affect the composition of compensation committees, the use of compensation advisers by companies listed on national securities exchanges, and disclosure provided by companies regarding their use of compensation consultants.”

For your reference, here’s what leading law firms are writing on the matter:

SEC Adopts Dodd-Frank Compensation Committee and Adviser Independence Rules (Morrison & Foerster LLP):

“Under the rules as adopted, the national securities exchanges are directed to adopt listing standards regarding the independence of the members of the compensation committee, as well as the independence of advisers engaged by the compensation committee. Moreover, the rules require additional disclosure under Item 407 of Regulation S-K regarding any conflicts of interest raised by the work of compensation consultants…” Read on>>

SEC Adopts Final Rules on Compensation Committee Listing Standards and Consultant Conflicts of Interest (Ropes & Gray LLP)

“Section 952 requires the SEC to direct the national securities exchanges to adopt rules prohibiting the listing of companies that do not have independent compensation committee members. In determining independence, the exchanges are to consider the sources of compensation of a committee member, including any consulting or advisory fees paid by the issuer, and whether the committee member is an affiliate of the issuer…” Read on>>

SEC Mandates Listing Standards Related to Compensation Committees (Ballard Spahr LLP):

“Each national securities exchange and national securities association must provide the SEC, no later than 90 days after publication, proposed rule change submissions to implement the listing standards and such rule changes or amendments must be effective no later than one year after publication in the Federal Register…” Read on>>

SEC Adopts New Rules Calling For Greater Independence Standards For Compensation Committees And Their Advisers (Sheppard Mullin):

“The Final Rules will compel the Exchanges to establish listing standards that require each member of a listed issuer’s compensation committee to be: (i) a member of the board of directors and (ii) ‘independent.’  The term ‘independent’ is not defined in the Final Rules  Instead, the Final Rules provide that ‘independent’ is to be defined by the Exchanges after taking into consideration ‘relevant factors’ …” Read on>>

SEC Adopts Final Rules Requiring Listing Standards for Compensation Committees and Advisers (Katten):

“Rule 10C-1 exempts controlled companies and smaller reporting companies from all of the requirements of the new listing standards and authorizes the exchanges to exempt other categories of issuers. Further, Rule 10C-1 requires the exchanges to exempt from the compensation committee independence requirements (i) limited partnerships, (ii) companies in bankruptcy proceedings, (iii) open-end management investment companies registered under the Investment Company Act of 1940 and (iv) any foreign private issuer that discloses in its annual report the reasons that it does not have an independent compensation committee…” Read on>>

Also see:

SEC Mandates Listing Standards Related to Compensation Committees (Orrick)

Additional Securities Law advisories on JD Supra>>