The Securities and Exchange Commission published its final rule implementing say-on-pay for financial institutions that took government funds under the Troubled Asset Relief Program.

The 23-page final rule, published Jan. 12, clarifies the requirements for U.S. registrants subject to Section 111(e) of the Emergency Economic Stabilization Act of 2008, which requires TARP recipients to permit a separate shareholder advisory vote to approve the compensation of executives, as disclosed pursuant to the SEC’s compensation disclosure rules, while any obligation under TARP remains outstanding.

New Rule 14a-20 under the Exchange Act clarifies that the separate shareholder vote required under EESA will only be required on a proxy solicited for an annual meeting of security holders for which proxies will be solicited for the election of directors, or special meeting in lieu of the annual meeting. Under the final rule, TARP recipients aren’t required to file a preliminary proxy statement.

The final rule also clarifies that smaller reporting companies won’t be required to provide a Compensation Discussion & Analysis in order to comply with the rule requirements. As noted in a footnote in the adopting release, the Commission’s compensation disclosure rules under Item 402 of Regulation S-K allow smaller reporting companies to provide scaled disclosure that doesn’t include a CD&A.

TARP companies that have to provide an SOP vote will be required to disclose in their proxy statement that they are providing a separate shareholder vote on executive compensation pursuant to the requirements of the EESA and to briefly explain the general effect of the vote, such as whether the vote is non-binding.

Also, the adopting release notes that the Proxy Disclosure Enhancements rule adopted by the SEC on Dec. 16, 2009, which requires accelerated reporting of shareholder vote results in a Form 8-K within four business days will apply to reporting results of the SOP vote required by under the EESA.

The rule takes effect 30 days after publication in the Federal Register.

Meanwhile, the House has passed legislation that would require mandatory SOP for public companies—most recently in its Wall Street reform bill approved in December and in a separate bill passed last July. However, the Senate has yet to do so.

At the same time, shareholder support for say-on-pay proposals has increased. Average support for the proposals increased to 46 percent in 2009, up roughly 4 percent over 2008, according to data tracked by RiskMetrics Group. The resolutions received majority support at 22 firms last year, and a steady trickle of companies have adopted the advisory votes voluntarily.