As has been widely reported, the Securities and Exchange Commission last week finally adopted rules requiring the securities exchanges to adopt listing standards requiring listed companies to develop and implement policies providing for the recovery of erroneously awarded incentive-based compensation received by current or former executive officers.  The road to adoption of the final rules was overly long and procedurally flawed. 

The SEC first proposed the rules in 2015 and as Commissioner Mark Uyeda observed "A lot has changed since 2015 – arguably, a full business cycle has passed since that time" (footnote omitted).   This is no cavil.  Statutory provisions added by the National Securities Market Improvement Act of 1996 and the Gramm-Leach-Bliley Act of 1999 to the 1933, 1934, and 1940 require the SEC to consider efficiency, competition, and capital formation whenever it is engaged in rule making.   As the SEC staff has noted, "An economic analysis of a proposed regulatory action compares the current state of the world, including the problem that the rule is designed to address, to the expected state of the world with the proposed regulation (or regulatory alternatives) in effect".  Memo to Staff or Rulewriting Divisions and Offices from the Division of Risk, Strategy, and Financial Innovation and the Office of the General Counsel (March 16, 2022) (footnote omitted, emphasis added).  Commissioner Uyeda points out that the proposing release included some 60 pages of impact analysis.  Rather than update this analysis, the SEC supplemented the analysis in 2022 with a 9 page memorandum despite the considerable passage of time and the expansion of the rule.

Happy Nevada Day!

Long-time readers of this space will know that October 31 is the original Nevada Day.  See Happy Nevada Day!  This year, I celebrated Nevada Day by running in a 10.31 mile (the distance reflects the date of the holiday) in the spectacular Cathedral Gorge State Park.