New Disclosure Requirements to Consider for 2022 Fiscal Year End, the 2023 Proxy Season and Beyond

New Disclosure

Disclosure Location(s)

Compliance Date(s)

☐ Disclose Universal Proxy Nomination Deadline for the Next Annual Meeting

Source: New Rule 14a-5(e)(4) of the Securities Exchange Act (Exchange Act); Proxy Rules C&DI #139.03

Action Item: Disclose the deadline for dissident shareholder(s) to provide notice of director nominees for election at the next annual meeting. The default deadline is “no later than 60-calendar days prior to the anniversary of the previous year’s annual meeting date.”

However, this 60-calendar day period is a minimum, not a maximum, notice period. Accordingly, if a company’s advance notice bylaw provides a deadline of 61 calendar days or more for such notice, disclosure of the earlier advance notice bylaw deadline (instead of the default 60-calendar day deadline) will satisfy this Rule 14a-5(e)(4) obligation.

Additionally, if the advance notice bylaw has not been amended to reflect the Universal Proxy Rules, the proxy statement disclosure must also state the need for a dissident shareholder to comply with the Universal Proxy Rules. A sample statement is shown below, which could be included where the other deadlines required by Rule 14a-5(e) are disclosed:

“Shareholders who intend to solicit proxies in support of director nominees other than the company’s nominees must comply with the additional requirements of Rule 14a-19(b).”

Schedule 14A, Item 1. Date, Time and Place Information.

Include in proxy statements for shareholder meetings held after August 31, 2022.

☐ Disclose Effect of a “Withhold” Vote, If Applicable

Source: Amended Schedule 14A, Item 21. Voting Procedures, Section (b)

Action Item: Ensure voting procedures disclosure conforms with amended Schedule 14A, Item 21. Voting Procedures, Section (b). Specifically, ensure the voting procedures disclosure now addresses the treatment and effect under applicable state law and company charter and bylaw provisions of a “withhold” vote in an uncontested director election or as otherwise applicable.

Schedule 14A, Item 21. Voting Procedures.

Include in proxy statements for shareholder meetings held after August 31, 2022.

☐ Ensure Appropriate Presentation of Director Voting Options on Proxy Card

Source: Amended Rule 14a-4(b)

Action Item: Ensure voting options on proxy card conform with amended Rule14a-4(b), specifically:

• Where voting standards do not give legal effect to votes cast against a nominee (such as a plurality voting standard), the proxy card may not include an “against” option and, instead, must provide a “withhold authority to vote” option opposite the name of each nominee;
  
  Example:

• Where voting standards do give legal effect to votes cast against a nominee (such as a majority voting standard), the proxy card must include an “against” and “abstain” voting option instead of a “withhold authority to vote” option.
  
  Example:

Proxy Card (filed as Appendix to Schedule 14A).

See Note to Rule 14a-4(a)(3).

Include in proxy statements for shareholder meetings held after August 31, 2022.

New Disclosure

Disclosure Location(s)

Compliance Date(s)

☐ Provide Pay Versus Performance Disclosure

Source: New Item 402(v) of Regulation S-K

Action Item: Provide annual disclosure consisting of:

• New table, with extensive footnoting, presenting newly defined “executive compensation actually paid” and certain performance measures for the three most recently completed fiscal years (scaling up to the five most recently completed fiscal years by adding another year to the table in each subsequent annual filing);
• As a supplement to the table, provide a clear description of the relationship between the “executive compensation actually paid” and each of the performance measures presented, as well as the relationship between company TSR and the TSR of its selected peer group; and
• A ‘Tabular List’ of up to seven financial performance measures identified as the most important financial performance measures linking “executive compensation actually paid” to company performance for the most recently completed fiscal year.

Permits scaled disclosure for smaller reporting companies.

Schedule 14A, Item 8. Compensation of Directors and Executive Officers.

Not included in other filings requiring disclosure under Item 402 (such as Form10-K and registration statements).

Include in proxy statements that are required to include executive compensation disclosures for fiscal years ending on or after December 16, 2022.

New Disclosure

Disclosure Location(s)

Compliance Date(s)

☐ Add Form 10-K Cover Page Checkboxes^[2]

Source: Amended Form 10-K Cover Page

Action Item: Add the following two checkboxes to the cover of Form 10-K, immediately before the text “Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act)”:

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. □

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). □

Unless the SEC provides guidance otherwise, the addition of these checkboxes is a technical compliance matter only. Companies will not actually need to consider whether the checkboxes must be checked and/or, if appropriate, actually check them until the corresponding disclosure obligations of the Clawback Rules become effective, as explained above.

Cover Page of Form 10-K.

Include in any Form 10-K filed on or after January 27, 2023, unless the SEC provides guidance otherwise.

New Disclosure

Disclosure Location(s)

Compliance Date(s)

☐ Begin Reporting Gifts on Form 4 Within Two Business Days

Source: Amended Exchange Act Rule 16a-3

Action Item: Section 16 reporting persons must begin reporting dispositions of bona fide gifts of equity securities on Form 4 (rather than Form 5) in accordance with Form 4’s filing deadline (that is, before the end of the second business day following the date of execution of the transaction).

Any dispositions of bona fide gifts of equity securities made before February27, 2023, will remain reportable on Form 5 within 45 days after the end of the fiscal year in which the gift is made (not within two business days after February 27).

Form 4.

Effective for gifts made on or after February 27, 2023.

☐ Form 4 and Form 5 Checkboxes and Explanatory Note

Source: Amended Form 4 and Form 5 Instructions

Action Item: Add the following checkbox to the cover of Form 4, immediately below the text “Check this box if no longer subject to Section 16. Form 4 or Form 5 obligations may continue. See Instruction 1(b)”:

□ Check this box to indicate that a transaction was made pursuant to a contract, instruction or written plan that is intended to satisfy the affirmative defense conditions of Rule 10b5-1(c). See Instruction 10.

Add the following checkbox to the cover of Form 5, immediately below the text “Form 4 Transactions Reported” (underline added where text differs from the Form 4 checkbox text):

□ Check this box to indicate that a transaction was made pursuant to a contract, instruction or written plan for the purchase or sale of equity securities of the issuer that is intended to satisfy the affirmative defense conditions of Rule 10b5-1(c). See Instruction 10.

When checked, filers will also be required to provide the date of adoption of the Rule 10b5-1(c) plan in the “Explanation of Responses” portion of Form 4 and Form 5.

Form 4 and Form 5.

Include in any Form 4 or Form5 filed on or after April 1, 2023.

☐ Disclose Insider Use of 10b5-1 Trading Plans

Source: New Item 408(a) of Regulation S-K

Action Item: Provide quarterly disclosure regarding adoption, modification or termination of Rule 10b5-1 plans and certain other trading arrangements by directors and officers during the covered fiscal quarter. Include a description of material terms such as the name and title of the director or officer, the date the arrangement was adopted or terminated, the duration of the arrangement and the number of securities to be purchased or sold pursuant to the arrangement.

Form 10-Q, Part II, Item 5. Other Information.

And

Form 10-K, Part II, Item 9B. Other Information.

Include in 10-Q or 10-K covering first full fiscal quarter beginning on or after April 1, 2023^[3] (for smaller reporting companies: on or after October 1, 2023).

Disclosure

Disclosure Location(s)

Compliance Date(s)

☐ Furnish Annual Report on EDGAR

Source: Amended Exchange Act Rule 14a-3(c)

Action Item: Furnish a PDF copy of the annual report delivered in satisfaction of Exchange Act Rule 14a-3(b) via EDGAR under “Form ARS” no later than the later to occur of (a) the date such report is sent or given to securityholders or (b) the date on which preliminary copies, or definitive copies, if preliminary filing was not required, of the proxy statement and related solicitation materials are filed.

The SEC may have intended for this obligation to apply only to “glossy annual reports” or “10-K wraps” containing Exchange Act Rule 14a-3(b) information. However, absent clarifying guidance from the SEC, the best practice is to furnish any “glossy annual report,” “10-K wrap” or “Integrated Annual Report”^[4] delivered to securityholders.

The SEC announcement, fact sheet and final rule text for this rule are available here, here and here, respectively.

Furnish PDF copy via EDGAR under “Form ARS”.

Effective January 11, 2023.

☐ File Form 144 on EDGAR

Source: Amended Rule 144(h) of the Securities Act of 1933

Action Item: Form 144 for sales of securities of companies subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act must begin to be filed via EDGAR.

The SEC announcement, fact sheet and final rule text for this rule are available here, here and here, respectively. The SEC has also released FAQs and other information about the transition to EDGAR filing of Form 144 here.

File Form 144 via EDGAR.

Effective April 13, 2023.

☐ Expanded Nasdaq Diversity Disclosure^[5]

Source: Nasdaq Rules 5605(f) and 5606

Action Item: Each company listed on The Nasdaq Global Select Market, The Nasdaq Global Market or The Nasdaq Capital Market must now have, or explain why it does not have, at least one diverse (as defined by Nasdaq) director. This disclosure augments the existing requirement to disclose the current year and immediately prior year diversity matrix.^[6]

Annual meeting proxy statement on Schedule 14A, or Web site posting.^[7]

No later than December 31, 2023.

☐ Include Say-on-Frequency Vote

Source: Exchange Act Rule 14a-21(b) and Schedule 14A, Item 24. Shareholder Approval of Executive Compensation

Action Item: Consider the need to include the nonbinding “Say-on-Frequency” proposal, as required by Exchange Act Rule 14a-21(b), to vote on how often the “Say-on-Pay” vote should occur: every one, two or three years.

Generally, this “Say-on-Frequency” vote is required every sixth calendar year after the immediately preceding “Say-on-Frequency” vote. So for companies that held their last “Say-on-Frequency” votes in 2017, the “Say-on-Frequency” vote should likely be on the ballot again during the 2023 proxy season.

Notable Exceptions: Emerging growth companies are exempt.

The SEC announcement, fact sheet and final rule text for this rule are available here, here and here, respectively. An SEC “investor bulletin” about the “Say-on-Pay” and “Say-on-Frequency” votes is available here.

Schedule 14A, Item 24. Shareholder Approval of Executive Compensation.

Every sixth calendar year after the immediately preceding “Say-on-Frequency” vote.

New Disclosure

Disclosure Location(s)

Compliance Date(s)

☐ Disclose Actions to Recover Erroneously Awarded Compensation

Source: New Item 402(w) of Regulation S-K

Action Item: If an accounting restatement occurred during or after the last completed fiscal year, provide annual disclosure about whether and how the company’s executive compensation clawback policy was applied, including any recovery efforts.

For most companies, this disclosure could be incorporated by reference from the annual meeting proxy statement on Schedule 14A, pursuant to General Instruction G(3) of Form 10-K.

Form 10-K, Part III, Item 11. Executive Compensation.

And

Schedule 14A, Item 8. Compensation of Directors and Executive Officers.

Compliance expected to begin no later than January 27, 2024.

☐ Adjust Summary Compensation Table Disclosure

Source: New Instruction 5 to Item 402(c) and Instruction 5 to Item 402(n) of Regulation S-K

Action Item: If any compensation was actually recovered, reduce corresponding Summary Compensation Table amounts to reflect the recovery and identify such recovered amounts by footnote to the Summary Compensation Table.

Form 10-K, Part III, Item 11. Executive Compensation.

And

Schedule 14A, Item 8. Compensation of Directors and Executive Officers.

Same as immediately above.

☐ File Clawback Policy as an Exhibit to Form 10-K

Source: New Item 601(b)(97) of Regulation S-K

Action Item: File a copy of the compensation clawback policy as Exhibit 97 to Form 10-K.

Form 10-K, Part IV, Item 15. Exhibits and Financial Statement Schedules.

Same as immediately above.

New Disclosure

Disclosure Location(s)

Compliance Date(s)

☐ Disclose Whether Insider Trading Policies and Procedures Adopted

Source: New Item 408(b)(1) of Regulation S-K

Action Item: Provide annual disclosure of whether or not (and if not, why not) the company has adopted insider trading policies and procedures that govern the purchase, sale or other disposition of company securities by directors, officers and employees that are reasonably designed to promote compliance with insider trading laws, rules and regulations.

For most companies, this disclosure could be incorporated by reference from the annual meeting proxy statement on Schedule 14A, pursuant to General Instruction G(3) of Form 10-K.

Form 10-K, Part III, Item 10. Directors, Executive Officers and Corporate Governance.

And

Schedule 14A, Item 7. Directors and Executive Officers.

Include in first filing covering first full fiscal year beginning on or after April 1, 2023^[8] (for smaller reporting companies: on or after October 1, 2023).

☐ Disclose Practices Regarding Option Grants Made Close in Time to the Release of MNPI

Source: New Item 402(x) of Regulation S-K

Action Item: Provide annual disclosure consisting of:

• Discussion of policies and practices on the timing of option grants and similar stock appreciation-based equity instruments in relation to disclosure of MNPI; and
• New table summarizing any stock options or similar equity instruments granted to a “named executive officer” beginning four business days before the filing of a periodic report or the filing or furnishing of a current report on Form 8-K that discloses MNPI, including earnings information (other than a Form 8-K that discloses a material new award under Item5.02(e)), and ending one business day after a triggering event.

For most companies, this disclosure could be incorporated by reference from the annual meeting proxy statement on Schedule 14A, pursuant to General Instruction G(3) of Form 10-K.

Form 10-K, Part III, Item 11. Executive Compensation.

And

Schedule 14A, Item 8. Compensation of Directors and Executive Officers.

Same as immediately above.

☐ File Insider Trading Policies and Procedures as an Exhibit to Form 10-K

Source: New Item 408(b)(2) of Regulation S-K and New Item 601(b)(19) of Regulation S-K

Action Item: File a copy of any insider trading policies and procedures, or amendments thereto, as Exhibit 19 to Form 10-K.

Alternatively, if the insider trading policies and procedures are included in a code of ethics, and the code of ethics is filed as an exhibit to the annual report (permitted by 406(c)(1) of Regulation S-K), the filing requirement would be satisfied.

Form 10-K, Part IV, Item 15. Exhibits and Financial Statement Schedules.

Same as immediately above.