The U.S. Securities and Exchange Commission recently announced that at its upcoming meeting scheduled for Wednesday, December 19, 2018, it will vote on whether to adopt a rule requiring disclosure by companies of policies permitting or prohibiting hedging by employees (including officers) and directors of their company’s equity securities. The rule was originally proposed by the SEC in February 2015, and it is part of the SEC’s unfinished business to implement under the Dodd-Frank Wall Street Reform and Consumer Protection Act.
As proposed in 2015, the purpose of the rule was to provide transparency to shareholders about whether employees and directors are permitted by the company to engage in transactions that mitigate or avoid the incentive alignment associated with ownership of company equity securities — whether these securities are acquired through company compensatory arrangements, in the open market or otherwise. The rule would not prohibit hedging transactions and would not require disclosure of such transactions unless required by existing SEC rules. Moreover, the proposed rule would not require companies to adopt a policy, but only to describe whether or not they have a policy and, if so, what it provides.
We discussed the rule, as proposed in 2015, in our Alert available here.
More to come after the SEC meeting, when we see the revised text of a final rule.