SEC Finalizes Guidance to Stock Exchanges on Compensation Committee and Adviser Independence: Exchanges Still Responsible for Key Details, Including Definition of Independence, and Have 90 Days to Propose Rules; New Disclosure Requirement on Compensation Consultant Conflicts of Interest Will Apply to 2013 Proxy Statements

Sullivan & Cromwell LLP - June 22, 2012

On Wednesday, the Securities and Exchange Commission issued final rules to implement Section 952 of the Dodd-Frank Act, under which the SEC must direct national securities exchanges to incorporate compensation committee and compensation adviser independence requirements into their equity listing standards. The national securities exchanges will have 90 days from publication of the final rules in the Federal Register to submit their own proposed listing standards to the SEC and one year from publication to issue final listing standards. Like the proposed rules, the final rules leave most of the important details, including the definition of “independence,” to the exchanges to propose.

The final rules also implement the Section 952 requirements for disclosure about compensation consultants, which will generally apply to U.S. proxies filed in 2013, in a simpler manner than had originally been proposed. A small number of additional changes and SEC guidance are summarized below.