The NYSE Changes Its Related Party Transaction Rule: 4 Things to Do Now

This one may be a "sleeper" rule change for you. I didn't pay much attention to it initially as it was adopted along with the relaxed requirements for shareholder approval of related-party equity issuances - but some companies may need to make changes to their audit committee charters and/or related party transaction policies. A few months ago, the SEC approved an amendment to the NYSE's related party transactions rule (in Section 314 of the Listed Company Manual). The prior version of the rule required reviews of related party transactions by an appropriate group within the company. It suggested the audit committee was an appropriate body - but didn't require it. It also contained a somewhat ambiguous definition of "related party transaction." The amended rule now:

• Requires that the audit committee (or another independent body of the board) conduct a prior review and oversight of all related party transactions for potential conflicts of interest and prohibit them if the transaction is inconsistent with the interests of the company and its shareholders.
• Defines related party transaction with reference to Reg S-K Item 404, but without regard to the $120,000 transaction value threshold.