Nasdaq Requires Disclosure of Third-Party Payments to Directors

The National Association of Securities Dealers Automated Quotations (NASDAQ) now requires all issuers to publicly disclose any type of third party compensation made to any director or director nominee in connection with their service. These arrangements, commonly known as “golden leash”, are special incentives offered to directors to act in the interests of a major shareholder, typically an activist hedge fund or other institution seeking change. Failure to disclose these arrangements in a timely manner and/or failure to submit a plan to assure future compliance will result in a delisting determination.

Key Takeaways:

  • Issuers listed on Nasdaq on or after August 1, 2016 must publicly disclose the material terms of all agreements and arrangements involving third-party compensation or other payments received by any director or director nominee in connection with his or her service
  • The NYSE has yet to propose a similar disclosure requirement.
  • Despite acknowledging concerns raised by some opponents of the rule that existing SEC rules may, in some circumstances, apply to third-party director payments,2 Nasdaq believes that the nature, scope and timing of the SEC’s disclosure requirements may not always mirror the new Nasdaq disclosure requirements.

“Issuers listed on Nasdaq on or after August 1, 2016 must publicly disclose the material terms of all agreements and arrangements involving third-party compensation or other payments received by any director or director nominee in connection with his or her service as a director or director candidacy, respectively (commonly referred to as “golden leash” arrangements).”

http://www.natlawreview.com/article/nasdaq-requires-disclosure-third-party-payments-to-directors

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Robert Flow is a legal writer and content marketer who investigates leads and tracks down interesting stories.