SEC Proposes Hedging Rules for Annual Proxy

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On February 15, 2015 the SEC proposed its hedging rule in accordance with Dodd Frank.[1]  As of June 16, 2015 the rule has not become final.  The proposed guidance does not prohibit hedging but would require disclosure of hedging policies in the proxy for any reporting company, including small companies exempted from certain other disclosure requirements under the JOBS Act.  The company must disclose the practices it permits and the practices if prohibits.  Companies may handle this by listing the practices they expressly permit, or prohibit, and then indicate any practice on the list is prohibited, or permitted as the case might be.

The SEC does not define hedging practices but rather indicates the practices that must be addressed are those which have similar economic consequences to specific instruments, such as short sales or futures.

 

[1] http://www.sec.gov/rules/proposed/2015/33-9723.pdf

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