SEC Proposes Hedging Disclosure Rules

February 18th, 2015

Earlier this month, the Securities and Exchange Commission (SEC) published a proposed rule to govern hedging disclosures as required by Section 955 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). In accordance with the statutory language, the proposed rules would require corporations to disclose whether directors, officers and other employees are allowed to hedge against decreases in the value of company shares.  Disclosures would be made available through corporate proxy and information statements.

SEC Chair Mary Jo White applauded the rule, saying, “The proposed rules would provide investors with additional information about the governance practices of the companies in which they invest … Increasing transparency into hedging policies will help investors better understand the alignment of the interests of employees and directors with their own.” The proposed rule will now be open for public comment for 60 days.  The rule was approved by the SEC commissioners. However, Republican commissioners have expressed concern with the proposed rule’s failure to exempt all together or curb the requirements for employees whose actions cannot affect the stock price, emerging growth companies and smaller reporting companies.

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