SEC Rule Feedback

Mike Kesner

The SEC held a meeting with the American Bar Association/Joint Committee on Employee Benefits on May 2, 2023, to solicit feedback on recent SEC rules.

Here is a brief recap:


The SEC staff was asked if the effective date of the new clawback rules might be extended beyond June 11, 2023.

  • The staff was unwilling to go into a lot of detail, but indicated a further extension might be difficult.
  • They also did not seem very sympathetic, as they believe the required policy is very prescriptive and the stock exchanges closely followed the SEC’s final rule.
  • They also clarified that since June 11th is a Sunday, the actual effective date will be June 9th absent another extension.
  • Assuming a June 9th effective date, companies will have 60 days to implement a compliant clawback policy (August 8th, 2023) and may require that companies schedule special compensation committee meetings or modify meeting agendas to approve the new policy and any related changes to clawback provisions that are included in incentive plans or employment agreements.

Pay Versus Performance

  • The SEC staff indicated they are not going to play “gotcha” with this year’s PVP disclosures.
  • Companies that made a good faith effort to comply with the rules should be okay, even if their interpretation of the rules differs from the SEC’s.
  • The staff has not conducted a deep dive on the disclosures yet and has not decided if they will issue a special “PVP recap” report like the 2007 report that assessed the first year’s compliance with the CD&A disclosure requirement.
  • Several unresolved interpretative issues were discussed, and it is likely some form of additional guidance will be provided before next year.
  • When asked if the SEC staff has seen anything in the early disclosures that caused them pause, they indicated nothing has stood out so far, other than a handful of companies that omitted the disclosed altogether.

Rule 10b5-1

The SEC staff was asked if a sell to cover trading plan that directed the sale of shares be based on the highest marginal tax rate would qualify as an exempt plan under 10b5-1.

  • The current exemption applies to sell to cover transactions that instruct shares be sold on the vesting of RSUs and PSUs using the minimum required withholding.
  • The SEC staff indicated they would consider the implications of allowing the sell to cover at the highest marginal rate.

Note: This only applies to open market sales, not share withholding, which is not considered a trading plan, thus there is no issue having executives elect to have shares withheld to cover taxes based on the top marginal rate.

For further information, please contact Mike Kesner ( at Pay Governance LLC.

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