On February 9, 2015 the Securities and Exchange Commission (the “SEC”) announced the issuance of proposed rules (the “Proposed Rules”) implementing the mandate of Section 955 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). Section 955 of the Dodd-Frank Act added Section 14(j) to the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Under Section 14(j), the SEC is directed to promulgate rules requiring issuers to disclose whether any employee or member of the board of directors, or any designee of such employee or director, is permitted to purchase financial instruments that are designed to hedge or offset any decrease in the market value of equity securities either (1) granted to the employee or director by the issuer as part of the compensation of the employee or director; or (2) held, directly or indirectly, by the employee or director. The disclosure would be required in any proxy or consent solicitation material for an annual meeting of the shareholders of the issuer.
The Proposed Rules implement Section 14(j) by adding new paragraph (i) to Item 407 of Regulation S-K under the Exchange Act. We note that comments on the Proposed Rules are due on or before April 20, 2015 and that the Proposed Rules will not affect the 2015 proxy season. This memo summarizes the requirements of the Proposed Rules.
