The SEC approved final rules that require companies to disclose practices or policies on the ability of employees or directors to engage in hedging transactions with respect to company equity securities. The final rules implement Exchange Act Section 14(j), which was enacted by Section 955 of the Dodd-Frank Act.
Specifically, the final rules require disclosure of hedging practices in full, or a summary of those practices or policies that include hedging transactions that are permitted. Under the final rules, if the company does not have any policies or practices, the company must disclose that fact or note that hedging transactions are generally allowed. The final rules also specify that the equity securities for which disclosure is required include equity securities of the company, any parent or subsidiary of the company, or any subsidiary of any parent of the company.
The SEC stated that companies generally must comply with the disclosure requirements for the election of directors during fiscal years after July 1, 2019. Companies that qualify as "smaller reporting companies" or "emerging growth companies" must abide by the new disclosure requirements in proxy and information statements for the election of directors after July 1, 2020. The SEC stated that listed closed-end funds and foreign private issuers will not have to comply with the new disclosure requirements.
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