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SEC rule targets hedging of equity compensation

Joe Mont | December 19, 2018

Digging back into its Dodd-Frank Act “to-do” list—and a proposal that has lingered since 2015—the Securities and Exchange Commission on Wednesday approved final rules that require companies to file an annual meeting proxy statement that discloses whether employees and directors are allowed to hedge or offset any decrease in the market value of equity securities granted as compensation.

The intent is to inform shareholders if executives are permitted to purchase financial instruments that allow them to avoid compensation restrictions and receive their compensation even if the firm's performance fails to meet expectations.

The disclosure requirement would apply to companies subject to the federal proxy rules, including smaller reporting companies, emerging growth companies, business development companies, and registered closed-end investment companies with shares listed and registered on a national securities...

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