SEC Proposes New Rules on Executive Compensation Disclosure

The U.S. Securities and Exchange Commission has proposed new disclosure rules for executive and director compensation and related party transactions in response to investors’ calls for more transparent disclosure.¹The SEC believes that the current rules are out of date and manipulable, and its overriding objective is to ensure that companies provide clearer and more thorough disclosure.

The SEC’s proposals apply only to U.S. domestic companies, not to Canadian or other foreign private issuers that file annual reports with the SEC on Form 20-F or Form 40-F.

This memo is based on a recent SEC webcast. The actual text of the SEC’s proposals will be posted to the SEC’s website at www.sec.gov, under "Proposed Rules". There will be a public comment period of at least 60 days before the rules are finalized, and the new regime will be effective in 2007 at the earliest. However, the SEC staff has stated that the proposals will include interpretive guidance on the existing rules that are