NASDAQ Corporate Governance Rule Update

July 6, 2010

Rules Amended to Require Notification of "Any" Noncompliance

NASDAQ has amended its rules to require a NASDAQ listed company to promptly notify NASDAQ after an executive officer becomes aware of "any noncompliance" with its corporate governance rules. NASDAQ's corporate governance rules previously said that notification was required in instances of "any material noncompliance" (emphasis added). The NYSE made a comparable change to its corporate governance rules earlier this year.

Although NASDAQ has said that it has historically considered any instances of noncompliance to be "material" and the rule amendment simply makes that clear, in light of the change to the text of the rule, companies should confirm that they have procedures in place to monitor and report "any" instances of noncompliance.

See the NASDAQ Rule Filing Removing the Materiality Qualifier from its Corporate Governance Noncompliance Notification Requirement

Pending Proposal to Conform Corporate Governance Disclosure Requirements with Form 8-K and Regulation S-K Requirements

NASDAQ has also filed a proposal with the SEC to:

  • replace certain disclosure requirements currently spelled out in the NASDAQ rules with references to comparable disclosure requirements in Regulation S-K;
  • require the same disclosure as is currently required by Exchange Act Rule 10A-3 regarding a company's use of certain exceptions to audit committee independence requirements, and
  • permit a company to disclose on its website rather than in a SEC filing:
    • its reliance on exceptions to NASDAQ's director independence rules that allow companies to have one compensation committee member and/or one nominating committee member who is not independent, and
    • waivers of the company's code of ethics, but only if such disclosure is consistent with the waiver disclosure requirements in Form 8-K. Companies would also be permitted to disclose waivers by press release in certain circumstances.

The proposal is subject to a comment period ending July 8, 2010 and SEC approval.

See NASDAQ's Proposal to Conform Certain Corporate Governance Disclosure Requirements with Form 8-K and Regulation S-K


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