SEC Proposes Rules For Hedging Disclosure

Introduction

On February 9, 2015, the SEC proposed rules that would require domestic public companies to disclose in proxy and information statements whether the company permits any of its directors or employees (including officers) to purchase financial instruments or otherwise engage in transactions designed to "hedge" or offset any decrease in the market value of any equity securities owned by the employees or directors. Comments are due 60 days after the proposed rules are published in the Federal Register.

Supporters of this change contend that allowing company employees and officials to engage in hedging transactions results in a misalignment between their personal interests as equity holders and the interests of shareholders generally, and that shareholders should know what company policies are in this regard.