On February 9, as mandated by Section 955 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), the Securities and Exchange Commission proposed new rules requiring disclosure by US public companies as to whether directors or employees (including officers), or any of their designees, are permitted to “purchase financial instruments (including prepaid variable forward contracts, equity swaps, dollars and exchange funds) or otherwise engage in transactions designed to or have the effect of hedging or offsetting any decrease in the market value of equity securities” either (1) granted as compensation to the director or employee, or (2) held, directly or indirectly, by the director or employee. Although the Dodd-Frank Act referred to the purchase of financial instruments, the proposed rules take a principles-based approach requiring disclosure as to whether a company permits any transaction establishing “downside price protection.” Under the proposed rules, a company would be required to disclose (1) which categories of transactions it permits and which categories it prohibits, (2) if hedging policies apply differently to directors, employees or their designees and (3) if hedging transactions are permitted, sufficient detail to describe the scope of those permitted transactions. The proposed rules would apply to the equity securities of a public company, its parent, its subsidiaries or any subsidiary of any parent of the company.
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On September 16, the House of Representatives passed H.R. 5405 “Promoting Job Creation and Reducing Small Business Burdens Act.” The bill addresses a number of Jumpstart Our Business Startups Act (JOBS Act)-related matters, and is also intended to make technical corrections to the Dodd-Frank Wall Street Reform and Consumer Protection Act. The bill packaged 11 stand-alone bills, six of which had previously passed the House, into one piece of legislation. It is unclear if the bill will gain traction in the Senate before the completion of midterm elections this November. The full text of H.R. 5405 can be found here
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On August 14, Institutional Shareholders Services Inc. (ISS), a leading proxy advisory firm, announced the launch of a new equity plan data verification portal for all US companies receiving proxy recommendations. The intent of this portal is to ensure that ISS’s voting recommendations for its institutional investor clients reflect the most current and accurate data, and this portal may help to alleviate concerns expressed by issuers that some past voting recommendations may not have been based upon accurate information about the equity plans. This portal follows similar recent ISS verification initiatives, including its Governance QuickScore Data Verification program and S&P 500 Draft Review process. With this portal, a US company that is submitting an equity plan proposal for approval by its shareholders will now have the opportunity to review ISS’s data and resolve any discrepancies before ISS makes its voting recommendation on the proposal. 
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