August 26, 2021
Authored by: Eliot Robinson and Katherine Ashton
Reverses Position on $120,000 Threshold
On August 19, 2021, the New York Stock Exchange further revised its definition of a “related party transaction” to include the $120,000 quantitative threshold under Item 404 of SEC Regulation S-K that had been expressly excluded from the definition approved four months earlier.
In April, the Securities and Exchange Commission approved revisions to Section 314.00 of the NYSE Listed Company Manual requiring the audit committee of NYSE listed companies to conduct a reasonable prior review and oversight of all related party transactions for potential conflicts of interest. See NYSE Revises Related Party Transaction Approval Rule. The NYSE rule approved in April defined related party transactions as “transactions required to be disclosed pursuant to Item 404 of Regulation S-K under the Securities Exchange Act (but without applying the transaction value threshold of that provision).” As a result of the exclusion of the $120,000 transaction value threshold from the rule approved in April, the universe of related party transactions requiring review and approval by the audit committee of NYSE listed companies could have been broader than related party transactions requiring proxy statement disclosure under Item 404.
Recognizing this, on August 19, 2021 the NYSE further revised Section 314.00 to delete the parenthetical underlined above, thereby providing that the $120,000 value threshold for disclosure purposes also applies to the prior review and approval requirement under the NYSE rules. The NYSE noted that:
In the period since the adoption of [the April] amendment, it has