SEC: Additional audit committee disclosure likely

SEC: HEDGING BATTLE

It may not come as a surprise that the Council of Institutional Investors (CII) and the Business Roundtable are at odds on corporate reporting of hedging policies. The CII represents large investors who read corporate disclosures including proxy statements, which are at issue. The Business Roundtable represents the companies issuing the proxies. The Securities & Exchange Commission (SEC) proposed a rule on that subject, which stems from §955 of the Dodd-Frank Act. Under the proposed rule, any proxy or content solicitation material for an annual meeting is required 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.

There are a number of flash points in the SEC’s proposed rule. The Business Roundtable wants to limit disclosure to directors and executive officers, and the CII is pushing disclosure for everyone employed by an issuer, including its officers. The Roundtable and other business groups also want changes to the definition of “equity securities” and what constitutes a “designee.”