Last week, I blogged on the SEC’s recently released rules on hedging policy disclosure, “Details on the SEC's Final Rules on Hedging Policies,” but realize that I neglected to address directly the important question: What do companies and boards need to do now?

What to Do Now:

For most companies, the new rules are not effective this year. And, nearly every company in America already maintains and discloses that it prohibits hedging by its officers and directors. Therefore, for many companies the short answer to the question of what to do now is: nothing. Well, not exactly nothing, someone from the legal or compensation function should:

  • Alert the board and management to the existence of the new rules (they probably already have heard),
  • Be prepared to explain the new rules to the board and management, to the extent possible given the indeterminate definition of hedging in the rules,
  • Review the company’s current policy and disclosure, and
  • Place on the agenda for a future meeting at which someone from the legal or compensation function probably should make a recommendation or provide alternatives for a revised policy and disclosure.

The Clarification: Previous blogs focused on the fact that the rules will not require calendar year companies (other than SRCs and EGCs) to make this disclosure until the proxy statements filed for the 2019 fiscal year, i.e., proxy statements filed in 2020. However, the rules appear to require that companies with fiscal years ending June 30 or September 30, 2019 (for example) make this disclosure in the proxy statement they will file in 2019, e.g., later this year.