February 11, 2015

Securities Alert: SEC Issues Proposal Regarding Disclosure of Hedging Policies for Employees, Officers and Directors

Summary: On February 9, 2015, the SEC proposed rule amendments to implement Section 955 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which added new Section 14(j) to the Securities Exchange Act of 1934, as amended (the Exchange Act). Section 14(j) directs the SEC to require, by rule, that each issuer disclose in proxy statements or consent solicitations for annual meetings of shareholders, whether any employee or member of the board of directors of such issuer, or any designee of such employee or director, is permitted to purchase financial instruments (including prepaid variable forward contracts, equity swaps, collars, and exchange funds) that are designed to hedge or offset any decrease in the market value of equity securities either (1) granted to the employee or director by the issuer as part of the compensation of the employee or director; or (2) held, directly or indirectly, by the employee or director. As this is a disclosure item, neither Section 14(j), nor the proposed rule amendment implementing the statutory mandate, requires a company to prohibit hedging transactions or to otherwise adopt practices or a policy addressing hedging by any category of individuals.


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