SEC Approves Nasdaq’s Revised Corporate Governance Rules

The U.S. Securities and Exchange Commission (SEC) has approved Nasdaq’s proposed revisions to its corporate governance rules, specifically targeting the phase-in schedules for Independent Directors and committee requirements under various scenarios. These revisions impact companies undergoing initial public offerings (IPOs), spin-offs, carve-outs, bankruptcies, changes in Foreign Private Issuer (FPI) status, and other situations.

The SEC’s approval aligns with its previous endorsement of similar rules for the New York Stock Exchange (NYSE). Notably, the SEC emphasised that the phase-in periods, particularly for Audit Committees, do not exempt companies from key requirements. Newly listed companies must have at least one independent Audit Committee member with financial expertise from the listing date, even during the phase-in period.

For FPIs losing their status, the SEC allowed a six-month phase-in period for meeting certain governance standards but maintained strict requirements for Audit Committees. The SEC’s decision underscores the importance of ensuring adequate oversight during transitions.

Additionally, the SEC supported Nasdaq’s proposal to limit cure periods for companies that fail to meet compliance during their phase-in, promoting greater accountability in Corporate Governance practices.