Foreign Private Issuers (FPIs) listed on the Nasdaq enjoy exemptions from several corporate governance requirements but must comply with others. While Nasdaq imposes corporate governance standards, FPIs can often opt to follow their home country rules in certain areas. Here’s a breakdown of the key Nasdaq corporate governance standards FPIs must and can choose to follow.

Corporate Governance Standards for Which FPIs are Exempt:

1. Majority of Independent Directors: FPIs are not required to have a majority of independent directors (Listing Rule 5605(b)(1)). However, they must disclose which directors are considered independent.
2. Regular Meetings of Independent Directors: FPIs do not need to hold regular meetings that only independent directors attend (Listing Rule 5605(b)(2)).
3. Compensation and Nomination Committees: FPIs are not required to have compensation (Listing Rule 5605(d)) or nomination committees (Listing Rule 5605(e)).
4. Director Compensation Disclosure: FPIs can follow home country practices regarding the disclosure of director and nominee compensation (Listing Rule 5250(b)(3)).
5. Shareholder Meetings and Quorum: Nasdaq's quorum requirements (33.33%) do not apply if home country law provides for a lower quorum (Listing Rule 5620).
6. Shareholder Approval Requirements: FPIs may follow home country rules concerning shareholder approval for equity-based compensation and other matters (Listing Rule 5635).

Corporate Governance Standards FPIs Must Follow:

1. Audit Committee: FPIs must maintain an audit committee with at least three independent members (Listing Rule 5602(c)).
2. Board Diversity: FPIs must either have a diverse board or explain why they do not. Nasdaq allows FPIs to meet the requirement by appointing two female directors (Listing Rule 5605(f)).
3. Clawback Policies: FPIs must adopt a compensation recovery policy (clawback policy), though they may be exempt if it violates home country law (Listing Rule 5608).
4. Code of Conduct: FPIs are required to establish a code of conduct and disclose waivers in a timely manner (Listing Rule 5610).
5. Related Party Transactions: FPIs must oversee and review related party transactions for potential conflicts of interest (Listing Rule 5630).
6. Disclosure of Material Information: FPIs must promptly disclose any material information affecting the value of their securities. They can choose to disclose through a Form 6-K or on their website (Listing Rule 5250(b)(1)).

Conclusion

Nasdaq provides FPIs with flexibility regarding corporate governance by allowing them to adhere to their home country practices for several governance rules. However, FPIs still have to comply with certain core Nasdaq requirements, ensuring a balance between flexibility and investor protection.

For a detailed discussion on Nasdaq's corporate governance requirements for Foreign Private Issuers (FPIs), you can visit the blog post titled "Foreign Private Issuers: SEC Registration and Reporting and Nasdaq Corporate Governance (Part 3)" on the Securities Law Blog. This post covers both the exemptions FPIs can take advantage of and the key corporate governance requirements they must follow under Nasdaq’s rules.

Read more on the Securities Law Blog here: Foreign Private Issuers: SEC Registration and Reporting and Nasdaq Corporate Governance (Part 3).