The Securities and Exchange Commission (SEC) recently released
proposed rules to implement Section 955 of the
Dodd-Frank Wall Street Reform and Consumer Protection Act
(Dodd-Frank), which calls for disclosure of whether employees or
members of boards of directors are permitted to purchase financial
instruments that are designed to hedge or offset any decrease in
the market value of company equity securities. Neither Dodd-Frank
nor the proposed rules require that a company actually have a
hedging policy or that a hedging policy contain any particular
terms.
The proposed rules come on the heels of efforts by the major
proxy advisory firms in recent years to have companies adopt
hedging policies (by treating the absence of such a policy as a
basis for recommending "against" votes for sitting
directors). In response to these efforts, many companies have begun
disclosing in their proxy statements that they have anti-hedging
policies for executive officers. If the SEC's
