On November 26, 2013, NASDAQ issued immediately effective amendments to NASDAQ Rule 5605(d)(2) and IM-5606-6, its independence standards for members of listed company compensation committees. The amendments, which come in response to concerns raised by listed companies to standards adopted in early 2013, relax the prohibition on a compensation committee member receiving compensatory fees from the listed company.

NASDAQ adopted compensation committee independence standards, as well as other new listing standards related to compensation committees, in early 2013. These listing standards implement Rule 10C-1 under the Exchange Act, which itself implements Section 10C of the Exchange Act, which was added by the Dodd-Frank Act (see Legal Update, SEC Approves NASDAQ Listing Standards Relating to Independence of Compensation Committees). As adopted, the standards precluded a compensation committee member from accepting, directly or indirectly, any consulting, advisory or other compensatory fee from the listed company or any subsidiary, except for:

The amendments replace this prohibition with a requirement that a listed company's board of directors, when determining that director's eligibility to serve on the compensation committee, consider the source of compensation of a director, including any consulting, advisory or other compensatory fee paid by the company to the director. The proposal would also:

Companies must comply with NASDAQ's compensation committee standards by the earlier of their first annual meeting after January 15, 2014 or October 31, 2014.

For more information on NASDAQ's requirements for compensation committees, see Practice Note, Corporate Governance Standards: Compensation Committee.