Companies must now disclose their policies about employees or directors engaging in hedging transactions involving company stock, in rules finalized Tuesday by the Securities and Exchange Commission.
The rules, mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, will require disclosure of practices or policies including a description of any categories of hedging transactions that are specifically permitted or disallowed. Companies without practices or policies should state that hedging is generally permitted. The information must be disclosed in proxy or information statements for the election of directors, stating any practices or policies regarding the ability of employees or directors to engage in certain hedging transactions.
SEC Chairman Jay Clayton said the new rules will provide for clear disclosure of company policies regarding hedging. "These disclosures in themselves, and in combination with our officer and director purchase and sale disclosure requirements, should bring increased clarity to share ownership and incentives that will benefit our investors, registrants, and our markets," Mr. Clayton said in a statement.
Companies generally must comply with the new disclosure requirements in proxy and information statements for directors' elections during fiscal years beginning July 1, 2019. Companies that qualify as smaller reporting companies or emerging growth companies have until July 1, 2020. Listed closed-end funds and foreign private issuers will not be subject to the new disclosure requirements.