funds), are currently required under Item 402(b) to disclose their
hedging policies for named executive officers, if material. Companies
are not otherwise currently required to provide information about
whether they have a policy on hedging. They may not be providing such
disclosures, possibly because their hedging policies are not material,
or because they do not have a policy. Table 2 divides covered
companies, which includes both operating companies and listed closed-
end funds, into four categories. The first three categories include
operating companies. The last category includes listed closed-end
funds.

              Table 2--Four Categories of Covered Companies
------------------------------------------------------------------------
         Section 12 Companies Subject to the Proposed Amendments
-------------------------------------------------------------------------
(1) Companies that are subject to Item 402(b) and make disclosures for
 named executive officers.
(2) Companies that are subject to Item 402(b) but make no disclosures.
(3) SRCs and EGCs that are not currently required to make Item 402(b)
 disclosures but must disclose under Item 407(i).
(4) Listed closed-end funds that are not currently required to make Item
 402(b) disclosures but must disclose under Item 407(i).
------------------------------------------------------------------------

    Category 1 refers to the subset of companies subject to Item 402(b)
that currently provide disclosure about hedging policies for named
executive officers. These companies may be unlikely to change such
policies as a result of the proposed amendments. For these companies,
the new disclosures required under proposed Item 407(i) are whether
employees (other than named executive officers) and directors are
permitted to hedge.
    Category 2 refers to companies subject to Item 402(b) that do not
currently disclose information about whether hedging by their named
executive officers is permitted.\97\ New disclosures under the proposed
amendments would confirm for shareholders whether hedging is permitted.
Given that shareholders are likely to view a policy prohibiting hedging
by named executive officers as shareholder friendly,\98\ the
requirement to disclose may prompt some of these companies to adopt new
policies or change their current policies or practices. In light of the
required say-on-pay vote on executive compensation, we believe that
companies prohibiting hedging by named executive officers would already
have an incentive to disclose such a policy. Some shareholders may
believe it is reasonable to infer that a company that is subject to
Item 402(b) but does not disclose a hedging policy in effect may permit
named executive officers to hedge. As a result, because shareholders
either know through affirmative disclosure under Item 402(b)(2)(xiii)
or may believe it is reasonable to infer from the absence of disclosure
that named executive officers are permitted to hedge, the proposed
amendments may not have much effect in reducing uncertainty as it
relates to named executive officers. For Section 12 registrants other
than SRCs, EGCs and listed closed-end funds, the new information
provided by disclosures under the proposed amendments relates primarily
to whether employees (other than named executive officers) and
directors are permitted to hedge.
---------------------------------------------------------------------------

    \97\ For example, as discussed above, we collected data on the
baseline practice of some Section 12(b) registrants other than SRCs
and EGCs. The proxy statements filed during calendar year 2012
indicated that most of the S&P 500 companies disclosed their hedging
policies for named executive officers: 59% of companies prohibited
hedging, while 7% permitted hedging. The rest either made no
disclosure of hedging policy (33% of companies) or disclosed that
they did not have a policy regarding hedging by named executive
officers (1% of companies); we include such companies in category 2.
The incidence of no disclosure tended to be higher among smaller
companies.
    \98\ See, e.g., Institutional Shareholder Services Inc., ``2013
Corporate Governance Policy Updates and Process: Executive
Summary'', Nov. 16, 2012 at http://www.issgovernance.com/file/files/2013ExecutiveSummary.pdf (``Stock-based compensation or open market
purchases of company stock are intended to align executives' or
directors' interests with those of shareholders. Therefore, hedging
of company stock through covered call, collar, or other derivative
transactions severs the ultimate alignment with shareholders'
interests. Any amount hedged will be considered a problematic
practice warranting a negative voting recommendation on the election
of directors.'').
---------------------------------------------------------------------------

    Category 3 refers to SRCs and EGCs, which are currently exempt from
Item 402(b). The new information available to investors under proposed
Item 407(i) would require disclosure, for the first time, about whether
employees (including named executive officers) and directors are
permitted to hedge.
    Category 4 refers to listed closed-end funds. Since these funds are
not currently subject to Item 402(b), the new information that would be
available to shareholders is comparable in type to that of SRCs and
EGCs. However, the new information about listed closed-end funds may in
fact be less substantial than that of SRCs and EGCs for most funds
because almost all listed closed-end funds are externally managed, as
discussed above. Only a small number of internally-managed listed
closed-end funds have employees, which include funds' portfolio
managers.

3. Benefits and Costs
    Investors can benefit from the disclosures under the proposed
amendments in the following ways.\99\ First, as discussed above,
officers', directors', and non-officer critical employees' equity
incentives tend to align their interests with those of the
shareholders. Under the proposed amendments, investors would benefit
from new disclosures that provide more clarity and transparency about
these incentives, thereby reducing the information asymmetry between
corporate insiders and shareholders regarding such incentives. Better
information about equity incentives could be useful for investors'
evaluation of companies, enabling investors to make more informed
investment and voting decisions, thereby encouraging more efficient
capital allocation decisions.
---------------------------------------------------------------------------

    \99\ Our discussion focuses on officers and non-officer critical
employees, not on employees who do not participate in making and
shaping key operating or strategic decisions that influence stock
price. As discussed earlier, information about these other
employees' equity incentives and hedging of their equity holdings is
less relevant for investors.
---------------------------------------------------------------------------

    Second, the proposed amendments may reduce the costs for investors
in researching and analyzing equity-based incentives. Knowledge that
employees and directors are not permitted to hedge could confirm for
investors that the reported equity holdings of officers and directors
in proxy statements and annual reports on Form 10-K represent their
actual incentives.\100\ While Section 16(a) reports provide
transaction-level information on officer and director hedging activity,
Forms 3, 4, and 5 may be costly to search; investors also may incur
costs in analyzing whether a reported transaction is indeed a hedge.
Moreover, hedging activity disclosed on a Form 3, 4, or 5 does not
indicate whether a transaction was conducted in accordance with the
company's hedging policy, and therefore may lead to improper inferences
about the company's hedging policy.
---------------------------------------------------------------------------

    \100\ Between 1996 and 2006, in firms where insiders hedged
their equity ownership, insiders on average used collars, forwards
or swaps to cover about 30% of their ownership and placed about 9%
of their ownership into the exchange funds. See Bettis, C., J.
Bizjak, and S. Kalpathy, 2013, ``Why Do Insiders Hedge Their
Ownership? An Empirical Examination'' working paper (available at
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1364810). There
is limited research on hedging transactions by corporate insiders.
Hedging transactions studied in this paper included those by 10%
owners. In addition, the sample period was 1996-2006, and thus the
findings may not reflect the current situation.
---------------------------------------------------------------------------

    Third, the proposed amendments could also benefit investors if the
public nature of the required disclosures results in changes in hedging
policies that improve incentive alignment between shareholders and
executive officers or directors.\101\ Companies that currently already
disclose whether named executive officers are permitted to hedge may be
unlikely to substantially change their policies as a result of the
proposed amendments. However, this could be different for companies
that do not currently make disclosures on hedging policies for all
employees or directors.\102\ Without disclosed hedging policies, these
companies may in fact implicitly permit hedging. However, permitting
hedging may not necessarily promote efficient investment decisions.
Employees and directors often demand a premium for receiving equity
compensation in lieu of cash. However, through hedging they may be able
to convert the value of that premium into cash. This causes the company
to overpay relative to its opportunity cost.\103\ If, in light of the
disclosure requirement under Item 407(i), the company later chooses to
prohibit hedging, this change could increase shareholder wealth to the
extent that the change better aligns incentives and hence induces
officers and directors to make corporate decisions that are more
beneficial to all shareholders. However, to the extent that changes in
hedging policies reduce incentive alignment between shareholders and
officers or directors, and results in underinvesting in potentially
value-enhancing projects, the opposite effect could result.
---------------------------------------------------------------------------

    \101\ Alternatively, as discussed later, if the change in
hedging policies reduces incentive alignment, such change can reduce
shareholder wealth.
    \102\ Such companies include any company that currently does not
disclose a hedging policy for any category of employees (including
named executive officers) and directors, so could fall under any of
the last three categories of companies in Table 2.
    \103\ See Larcker D. and B. Tayan, 2010,''Pledge (and Hedge)
Allegiance to the Company'', Stanford Closer Look Series, available
at http://ssrn.com/abstract=1690746.
---------------------------------------------------------------------------

    The benefits discussed above are relevant for investors of all
companies affected by proposed Item 407(i), including listed closed-end
funds.\104\ Among operating companies (the first three categories in
Table 2), the new information elicited from the required disclosures
increases, so we expect the benefits from the new disclosures also to
increase similarly. Further, we expect the potential benefits to be
higher for EGCs and SRCs (category 3) than for non-EGCs and non-SRCs
(categories 1 and 2), because EGCs and SRCs potentially face greater
risk of a stock price decline than non-EGCs and non-SRCs. EGCs are
typically younger firms with high growth options but fewer financial
resources and are more likely to face financial distress since firm age
is among the most important determinants of probability of
failure.\105\ Because employees and directors of EGCs and SRCs
potentially face greater downside price risk than those of non-EGCs and
non-SRCs, the former have likely stronger incentives to hedge, thus
making information about permissible hedging activities more relevant
for shareholders of these companies.\106\
---------------------------------------------------------------------------

    \104\ Because listed closed-end funds exhibit salient
differences in organizational structure, and hence incentive
compensation mechanisms, from operating companies, we do not compare
the economic effects of the proposed amendments between listed
closed-end funds and operating companies.
    \105\ See Lane, S., Schary, M.,1991,''Understanding the Business
Failure Rate'', Contemporary Economic Policy 9: 93-105; Kapadia, N.
2011. ``Tracking Down Distress Risk,'' Journal of Financial
Economics 102: 167-182
    \106\ Though no study to our knowledge directly examines whether
insiders of smaller firms tend to hedge more, indirect evidence
suggests that this is likely the case. For example, Bettis et al.
(2001) find a total of 87 zero-cost collar transactions by searching
Forms 3, 4 and 5 filed between January 1996 and December 1998. Firms
in this sample have total assets with a mean (median) value of $3.4
billion ($401 million). These firms are much smaller than S&P 500
companies over the same time period, whose total assets have mean
(median) of $16.15 billion ($3.84 billion) based on our calculation.
This comparison indicates that hedging by zero-cost collars is
disproportionally more frequent in smaller firms. See Bettis, J., J.
Bizjak, and M. Lemmon. 2001. ``Managerial Ownership, Incentive
Contracting, and the Use of Zero-cost Collars and Equity Swaps by
Corporate Insiders'' Journal of Financial and Quantitative Analysis
36 (3): 345-370.
---------------------------------------------------------------------------

    The benefits to investors also depend on the likelihood that
officers and directors engage in hedging transactions. Officers and
directors can hedge by, for example, entering into exchange-traded or
over-the-counter derivative contracts. In either case, however, when
the underlying stock is illiquid, the price of the derivatives
contracts likely reflects the higher risk and cost that would be
required to dynamically replicate the exposure of the derivatives
contracts by trading in the underlying stock. As a result, it is likely
more costly to hedge the risk of more illiquid stock. Though
undiversified officers and directors have strong incentives to
diversify (e.g., through hedging), they may not engage in hedging
transactions if the cost is too high. In companies whose officers and
directors are less likely to hedge due to high hedging cost, the
potential benefits to investors from the required disclosures under the
proposed amendments might be more limited. In the first three
categories of companies, each category includes both exchange-listed
and non-exchange-listed

companies. Since stocks of exchange-listed companies are typically more
liquid than stocks of non-exchange-listed companies, the potential
benefits of the new disclosure to investors of non-exchange-listed
companies may be lower than for exchange-listed ones. It is possible
that stocks of smaller companies are less liquid, and hence these
companies may be subject to the same effect.
    The expected potential benefits from proposed Item 407(i) would not
be achieved without costs. All covered companies would incur costs to
comply with the proposed amendments. Such costs include both disclosure
costs, which stem directly from complying with the proposed amendments,
and potential costs incurred to implement, administer, or revise a
hedging policy.
    We first focus on disclosure costs, which should increase with the
amount of new disclosures required under proposed Item 407(i). As
discussed above, for operating companies (i.e., the three first
categories in Table 2), the new required disclosures are higher in
categories 2 and 3 than in category 1, so disclosure costs should also
be higher in categories 2 and 3. Specifically, category 1 companies
would incur costs to determine whether employees (other than named
executive officers) and directors are permitted to engage in hedging
transactions, and incur costs to provide the required disclosure.
    Category 2 companies are subject to Item 402(b) but do not
currently disclose any information about whether hedging by their named
executive officers is permitted. To the extent that these companies
permit hedging and that required disclosures under the proposed
amendments do not change this practice, this category of companies
would incur small additional costs to disclose their hedging policies
for named executive officers. If these companies instead decide to
prohibit hedging by named executive officers, they would incur a small
additional cost to disclose the revised hedging policies, but they
could incur other costs that could be more significant, which we
discuss separately below. Similar to category 1, these companies would
also incur costs to determine and disclose whether directors and
employees other than named executive officers are permitted to hedge.
    Category 3 companies, i.e., SRCs and EGCs, are not currently
subject to Item 402(b). They may be less likely than companies subject
to Item 402(b) to have policies, or to have articulated their
practices, on whether hedging is permitted for employees (including
named executive officers) and directors. Some SRCs and EGCs may incur
costs in formulating policies for the first time, which will likely
involve obtaining the advice of legal counsel and may also involve
retaining compensation consultants. These companies would also incur
costs in presenting the required disclosures in proxy or information
statements.
    In Category 4, listed closed-end funds, similar to SRCs and EGCs,
would incur costs to disclose, and possibly to formulate, policies
regarding hedging by employees and directors. As noted above, the vast
majority of listed closed-end funds is externally-managed and thus
would incur costs to disclose whether hedging by employees (if any) and
directors is permitted. The limited number of listed closed-end funds
that are internally managed also would incur costs to disclose if
employees and directors are permitted to hedge with the difference,
relative to externally-managed listed closed-end funds, that these
funds will have portfolio managers and others as employees.
    We expect the above disclosure costs to be minimal for these four
categories of companies. A component of these costs (especially initial
costs) may be fixed, which may have a greater impact on the smaller
companies in category 3. While we cannot quantify these disclosure
costs with precision, many of the costs reflect the burden associated
with collection and reporting of information that we estimate for
purposes of the Paperwork Reduction Act (``PRA''). For purposes of the
PRA, we estimate the total annual increase in paperwork burden for all
covered companies to be approximately 19,283 hours of in-house
personnel time and approximately $2,571,200 for the services of outside
professionals.\107\
---------------------------------------------------------------------------

    \107\ See Section V of the release.
---------------------------------------------------------------------------

    These disclosure costs, however, do not include costs incurred to
implement, administer, or revise a hedging policy. For example, under
the proposed amendments, a company that prohibits hedging by directors
may incur additional costs to implement this policy, e.g., by analyzing
whether transactions by a director have the effect of hedging.\108\ If
a company revises its hedging policy as a result of the proposed
amendments, additional costs may also arise. Such costs could involve
obtaining the advice of compensation consultants and legal counsel.
---------------------------------------------------------------------------

    \108\ Such costs are only incremental to the extent that the
company does not already have procedures in place to administer and
make such determination for named executive officers.
---------------------------------------------------------------------------

    Perhaps most importantly, disclosing whether employees and
directors are permitted to hedge might lead to changes in hedging
policies that reduce incentive alignment between shareholders and
officers or directors, if the current compensation arrangement is
already in shareholders' interest. Specifically, a company may
currently permit hedging by executive officers to promote efficient
investments in risky projects. As discussed above, companies in
category 1 currently disclose hedging policy for named executive
officers, and may be unlikely to substantially change their policies
under proposed Item 407(i). However, companies in categories 2 and 3,
which do not disclose their hedging policies for named executive
officers, may currently permit hedging by named executive officers but
could switch to prohibiting hedging as a result of public disclosure
under proposed Item 407(i). Such a change in policy, in certain
instances, could limit executives' ability to arrive at optimal levels
of economic exposure to the company--i.e., one that leads executives to
undertake the optimal level of risk in corporate investment decisions
for the company's shareholders.\109\ To the extent that compensation
incentives materially affect a firm's value, such changes could result
in a reduction in shareholder wealth.
---------------------------------------------------------------------------

    \109\ As discussed above, hedging by officers and directors is
one of the solutions to the underinvestment concern, and the
significance of such a problem depends on the availability and cost-
effectiveness of other solutions.
---------------------------------------------------------------------------

    We expect this cost from distorted investment incentives to be
greater for companies in categories 2 and 3 than those in 1, as the
latter may be unlikely to substantially change their hedging policies.
However, between categories 2 and 3, it is not clear whether category 3
(EGCs and SRCs) would incur a higher cost than category 2. On one hand,
EGCs and SRCs likely have higher growth options than non-EGCs and non-
SRCs. Since the use of equity incentives to induce officers and
directors to make proper corporate investment decisions is more
important for companies with higher growth options, the cost from
distorting investment incentives could be higher for EGCs and SRCs. On
the other hand, as discussed above, such cost is limited by the
availability of other cost-effective solutions to the underinvestment
concern, e.g., requiring an officer to hold stock options. Without
adequate data, it is difficult to determine whether and when hedging
would be more prevalent than stock options in providing incentives for
officers at EGCs and SRCs as compared to non-EGCs and non-SRCs.
Evidence

from academic studies shows that reported hedging transactions by
officers and directors are infrequent; however, officers' option
holdings are much more prevalent, and the magnitude of CEO options
holdings is greater in higher-growth firms to provide risk-taking
incentives.\110\ Taken together, it is not clear whether costs to EGCs
and SRCs are higher than to companies in category 2.
---------------------------------------------------------------------------

    \110\ See Guay, W., 1999, ``The Sensitivity of CEO Wealth to
Equity Risk: An Analysis of the Magnitude and Determinants'',
Journal of Financial Economics 53, 43-71.
---------------------------------------------------------------------------

    The extent of the cost resulting from distorted investment
incentives not only depends on a company' growth opportunities, but
also depends on the likelihood that officers and directors engage in
hedging transactions. As discussed above, we expect officers and
directors are less likely to hedge when the equity security is more
illiquid, because hedging cost is higher. As a result, in these
companies, hedging by officers and directors is less likely to be used
as a way to address the underinvestment concern in the first place.
Thus, the cost to these companies from prohibiting hedging when it
would otherwise be economically beneficial would also likely to be more
limited. In company categories 1, 2, and 3, each category includes both
exchange-listed and non-exchange-listed companies; we expect such cost
to be lower for non-exchange-listed companies than exchange-listed
companies, because equity securities of the former typically are more
liquid than equity securities of non-exchange-listed companies.
Finally, to the extent that equity securities of smaller companies are
less liquid, these companies may be subject to the same effect.
    The effects resulting from distorted incentives are likely to be
different between externally-managed listed closed-end funds and
internally-managed listed closed-end funds. As discussed above,
portfolio managers for these externally managed funds are employees of
the funds' investment advisers and thus are not covered by proposed
Item 407(i). Policies on whether portfolio managers are permitted to
hedge, if any, therefore are unlikely to change as a result of listed
closed-end funds complying with proposed Item 407(i). Since these
portfolio managers directly make investment decisions, their incentives
to make portfolio selections are unlikely to be changed by the proposed
amendments. Directors of listed closed-end funds are covered by
proposed 407(i), however, and so directors' equity incentives could be
affected. To the extent that directors do not influence portfolio
managers' investment decisions, we do not expect listed closed-end
funds to incur any cost from possible distortion of director incentives
by the required disclosure under Item 407(i). However, directors
oversee the fund's investment adviser (and other service providers),
which employs the portfolio managers for the funds. If directors exert
some influence over portfolio managers' investment decisions through
their oversight of the investment adviser, closed-end funds may incur
cost from distorted director incentives. Out of all listed closed-end
funds, we estimate only 4 are internally managed, so their portfolio
managers are covered by proposed 407(i). These four closed-end funds
may incur cost resulting from distortion to both portfolio managers'
and directors' incentives by the required disclosure under Item 407(i).
    A revision in hedging policy also could impose costs on employees
and directors. For example, if the company currently allows hedging for
named executive officers but decides to prohibit all hedging
transactions as a result of the new proposed disclosure requirements,
named executive officers may incur costs stemming from the loss of
their ability to hedge their current and future equity compensation
awards or holdings.\111\
---------------------------------------------------------------------------

    \111\ Such loss does not necessarily need to be compensated
through other forms of compensation. Consider the following three
alternative scenarios. First, under efficient contracting where
hedging by officers promotes efficient investment decisions,
officers are paid their opportunity wage to the extent that their
labor market is competitive. If hedging is later prohibited as a
result of public disclosure under the proposed amendments, these
companies would resort to other, possibly more costly, compensation
mechanisms to promote efficient investment decisions. While this
change represents a cost to the company, officers still would
receive their opportunity wage, so they are not better or worse off
than before. Note that the dollar amount of the compensation may
vary due to a potential change in riskiness of compensation.
Prohibiting hedging may affect the riskiness of officers'
compensation, but the riskiness also depends on the use of new types
of compensation mechanism to promote efficient investments
decisions, so the direction of the net change is not clear. The
change in the dollar amount of compensation, if any, reflects the
change in the riskiness of the compensation, and is not a
compensation for a loss in hedging opportunity. Second, if the labor
market is not competitive, officers may be paid above their
opportunity wage. If hedging is used to promote efficient investment
decisions, prohibiting it as a result of public disclosure under the
proposed amendments may shift the balance of power between the board
and officers. While the loss of hedging opportunity is a cost to the
officers, they may not be compensated for it as long as their
compensation is still above their opportunity wage. Third, if
hedging by officers is not in shareholders' interests, a change from
permitting to prohibiting hedging better aligns incentives. Officers
may incur a cost from the loss of ability to hedge, but such cost
merely represents the loss in the rents extracted by officers, and
the officers should not be compensated for it.
---------------------------------------------------------------------------

    These costs incurred to implement a hedging policy or to revise a
hedging policy are difficult to quantify. For example, in the absence
of data on a company's investment opportunities, the magnitude of the
inefficiency in choosing investment projects as a result of a change in
hedging policy is difficult to estimate.
    The proposed amendments would also require Item 407(i) disclosure
in Schedule 14C, in addition to Schedule 14A. This would extend the
disclosure requirements and potential benefits described above to the
Section 12(g) companies that do not file proxy statements with respect
to the election of directors, thereby facilitating better understanding
of companies' corporate governance policies and practices, without
regard to whether proxies or consents are solicited or otherwise
obtained for such an action. At the same time, requiring the disclosure
specified in proposed Item 407(i) to be included in information
statements on Schedule 14C would impose costs on companies that file
Schedule 14C. However, consistency of the disclosure requirements
applicable to both Schedules 14A and 14C in the context of an action
with respect to the election of directors would facilitate better
understanding of how companies address hedging, without regard to
whether proxies or consents are solicited or otherwise obtained in
connection with such action.
    The proposed amendment to Item 402(b) would add an instruction
providing that a company may satisfy its CD&A obligation to disclose
any material policies on hedging by named executive officers under that
requirement by cross referencing to the information disclosed pursuant
to proposed Item 407(i) to the extent that the information disclosed
there would satisfy this CD&A disclosure requirement. This approach
would reduce potentially duplicative disclosure in complying with the
existing CD&A requirements under Item 402(b) and the proposed
requirements of Item 407(i), thereby reducing issuers' cost of
compliance. Locating all the responsive disclosure in one place also
would make it easier for investors to find it.
4. Anticipated Effects on Efficiency, Competition, and Capital
Formation
    As discussed above, the proposed amendments may improve capital

allocation efficiency by enabling investors to make more informed
voting decisions. The disclosure costs incurred by Section 12
registrants to comply with the proposed amendments would be minimal,
and hence unlikely to put any company at a competitive disadvantage.
However, as discussed above, additional costs could arise if companies
revise their hedging policies from permitting hedging to prohibiting
hedging by officers and directors. Such a change could aggravate the
underinvestment concern and result in shareholder wealth reduction.
However, such costs would be limited by the availability and cost-
effectiveness of other means to promote investments in high risk but
value-enhancing projects.\112\ The proposed amendments are unlikely to
have a notable impact on the competition either among U.S. companies or
between U.S. companies and FPIs. We also do not expect the proposed
amendments to affect the attractiveness of employment opportunities at
the company to employees and directors, and hence impact the
competitiveness of the labor market of employees and directors. The
proposed amendments would impose new costs on companies seeking to
become public, but such costs, taken alone, are unlikely to be a
significant hurdle to companies seeking to become public.
---------------------------------------------------------------------------

    \112\ See footnote 91.
---------------------------------------------------------------------------

D. Alternatives

1. Changing the Scope of Disclosure Obligations
    The proposed amendments would extend reporting requirements to
information statements on Schedule 14C. This extension primarily
affects those Section 12(g) registrants that do not file proxy
statements given that Section 12(b) registrants are generally required
to solicit proxies. We have considered alternatives to this extension.
One alternative would be to require proposed Item 407(i) disclosure in
proxy statements only, i.e., not in information statements. This would
reduce the disclosure burden on companies that do not solicit proxies
from any or all security holders but are otherwise authorized by
security holders to take an action with respect to the election of
directors. However, providing Item 407(i) disclosure in information
statements provides consistency in disclosures in proxy statements and
information statements, so that the disclosure could be made to all
shareholders when a company does not solicit proxies from any or all
security holders but are otherwise authorized by security holders to
take a corporate action with respect to the election of directors.
Excluding the Item 407(i) disclosure from information statements, as
under this alternative, would reduce such benefits.
    We also considered extending the proposed disclosure requirement to
Form 10-K filings of Section 12 companies in order to impose consistent
disclosure obligations upon all registrants with a class of securities
registered under Section 12. This extension would have increased the
proposed disclosure obligations especially for Section 12(g) companies
that did not solicit proxies as they then would be required to provide
the required disclosure in annual Form 10-K filings. Moreover,
extending the disclosure requirement to all Section 12(g) companies may
provide limited benefits to shareholders, as non-exchange listed
companies can have infrequently traded stock, making it more costly and
thus less likely that employees and directors would pursue hedging
opportunities.
2. Issuers Subject to the Proposed Amendments
    The proposed amendments apply to all Section 12 registrants,
including EGCs, SRCs, and listed closed-end funds. We have considered
the following alternatives about the scope of the proposed amendments.
    The first alternative would be to either exempt or delay the
application of the proposed amendments to EGCs and SRCs. Doing so would
reduce costs for these entities, but the potential benefits would be
eliminated or delayed as well. As discussed above, we expect the
potential benefits from the required disclosures under proposed Item
407(i) to be higher for shareholders of EGCs and SRCs (i.e., category 3
in Table 2) than for shareholders of other operating companies (i.e.,
categories 1 and 2). While EGCs and SRCs likely also incur a higher
cost from distorted incentives than companies in category 1, it is not
clear whether such cost is higher than that for companies in category
2.
    Not exempting EGCs and SRCs from the proposed amendment is also
consistent with officers and directors at these companies not being
exempt from the obligation under Exchange Act Section 16(a) to disclose
hedging transactions involving derivative securities.
    The second alternative is to include all funds, including mutual
funds and ETFs, or a broader group of funds than listed closed-end
funds, as proposed. Requiring all funds to provide the proposed
disclosure would impose costs on the funds. The disclosure also could
provide benefits, however, although the benefits to investors in funds
other than listed closed-end funds may not be as significant where fund
shares do not trade on an exchange. As discussed above, exchange-listed
fund shares likely are more liquid than non-exchange-listed fund
shares. Due to increased cost to hedge less liquid shares, directors
and employees of non-exchange-listed funds may be less likely to engage
in hedging transactions than those at exchange-listed funds.\113\
---------------------------------------------------------------------------

    \113\ The scope for hedging may be even more limited for mutual
funds, as investors purchase mutual fund shares from or sell them to
the fund daily at NAV.
---------------------------------------------------------------------------

    Further, the benefits that would result from applying the proposed
amendments to ETFs are likely lower than the benefits from applying the
proposed amendments to listed closed-end funds as proposed. Employees
(if any) and directors of ETFs may not have as strong an incentive to
hedge their personal fund shareholdings as those at listed closed-end
funds. First, listed closed-end funds likely are more volatile than
ETFs. While the shares of many ETFs often trade on the secondary market
at prices close to NAV of the shares, one study finds that closed-end
funds' monthly return on average is 64% more volatile than that of the
underlying NAV.\114\ The difference in volatility between ETF and
closed-end fund returns is not driven by the difference in NAV between
the two types of funds, and the listed closed-end funds' ``excess''
volatility is largely idiosyncratic, and cannot be explained by market
risk or risks that affect other closed-end funds.\115\ Employees and
directors of listed closed-end funds may therefore have more incentive
to hedge their fund shareholdings due to the ``excess'' volatility.
Second, the non-redeemability of listed closed-end fund shares allows
the funds to take more illiquid positions, or positions that may not be
possible to sell quickly and at short notice without incurring a
substantial loss in value. Due to the potentially heightened liquidity
risk in the funds' portfolios, fund directors and employees may prefer
not to expose their personal portfolios to the volatility resulting
from liquidity risk and thus may hedge their personal fund share
holdings. To the extent that listed

closed-end funds have greater ability than ETFs to invest in illiquid
assets, it is possible that employees and directors of listed closed-
end funds would have more incentives to hedge their personal holdings.
---------------------------------------------------------------------------

    \114\ See Pontiff, J., 1997, ``Excess Volatility and Closed-End
Funds'' American Economic Review 87 (1): 155-169. Day et al. (2011)
find similar evidence in a much more recent sample. See Day T., G.
Li, and Y. Xu, 2011, ``Dividend Distributions and Closed-end Fund
Discounts'' Journal of Financial Economics 100: 579-593.
    \115\ Id.
---------------------------------------------------------------------------

    Another alternative is not to require any funds to provide the
proposed disclosure. Doing so would not impose costs related to the
proposed rule on the funds. However, fund investors, including
investors in listed closed-end funds, also would not derive any
benefits, including a better understanding of policies that may affect
incentives provided by fund shareholdings of employees and directors.

E. Request for Comments

    1. We request information including data that would help quantify
the costs and the value of the benefits of the proposed amendments
described above. We seek estimates of these costs and benefits, as well
as any costs and benefits not already defined, that may result from the
adoption of the proposed amendment. We also request qualitative
feedback on the nature of the benefits and costs described above and
any benefits and costs we may have overlooked.
    2. We are interested in any studies or analysis on the number and
characteristics of companies that have made disclosures of their
``policies regarding hedging'' under the existing requirement of Item
402(b)(2)(xiii) or otherwise. In particular, among the companies
subject to the reporting requirement of Item 402(b)(2)(xiii), how many
have hedging policies that they do not disclose because they do not
deem them material? Among companies that disclose hedging policies,
what are the types of the ``policies'' disclosed?
    3. Among companies currently subject to Item 402(b), some make no
disclosure of a hedging policy for named executive officers. We believe
that it may be reasonable to construe the absence of a disclosure of
hedging policy to mean that the company does not prevent named
executive officers from hedging. Is there evidence to the contrary? Are
we correct in thinking that investors may draw the same inference?
    4. To our knowledge, hedging transactions typically involve
derivative contracts, and fixed price derivative contracts are subject
to reporting under Section 16(a). Are there any types of hedging
transactions that are not currently subject to reporting by officers
and directors under Section 16(a)? If yes, please provide details.
    5. Would the proposed disclosure increase the transparency to
investors about the incentives provided by employees' and directors'
equity holdings? Are there alternative ways to make the disclosures
that would be more useful to investors in evaluating employees' and
directors' incentive alignment with shareholders while still satisfying
the mandate of Section 14(j)?
    6. What impact would the proposed amendments have on the incentives
of employees and directors? Would the proposed amendments likely change
the behavior of issuers, investors, or other market participants?
    7. Would the proposed disclosure requirements be likely to cause
companies to change their policies on whether hedging is permitted for
employees and directors? Why and how? If so, what costs would be
incurred? What effect, if any, may the proxy voting policies of
institutional investors and proxy advisory firms have on a company's
decision to change its policy? Have institutional investors and proxy
advisory firms already established hedging policy positions that have
been guiding voting decisions and vote recommendations? Have
institutional investors and proxy advisory firm recommendations
regarding such policies encouraged companies to provide transparency
into hedging transactions that are permitted at the companies? How
would the transparency into hedging transactions as a result of this
disclosure impact investor communication with companies about such
policies? What effect will this proposed disclosure requirement have on
voting decisions? Would the proposed disclosure requirements be likely
to cause companies to change their compensation policies for employees
(including officers) or directors? Why or why not, and if so, how?
    8. If a company revises its hedging policy, would this revision
influence other corporate decisions, for example, by encouraging or
discouraging more risky but value-enhancing corporate investments?
Please explain and provide data.
    9. Relative to other operating companies, would the proposed
amendments have differential economic effects on EGCs and SRCs that we
do not currently discuss in the release? If so, what are these
differential economic effects? Would the impact of the proxy voting
policies of institutional investors and proxy advisory firms, if any,
be different for EGCs and SRCs than for other operating companies? In
the absence of disclosure of hedging policies by EGCs and SRCs, to what
extent have hedging policy positions of institutional investors and
proxy advisory firms already been guiding voting decisions and vote
recommendations for EGCs and SRCs?
    10. Are the costs and benefits of disclosing information about
whether non-officer employees are permitted or prohibited to hedge
different from the costs and benefits of disclosing information about
officers and directors? If so, should the rule be modified to take
those differences into account?
    11. What impact would the proposed amendments have on competition?
Would the proposed amendments put registrants subject to the new
disclosure requirements, or particular types of registrants subject to
the new disclosure requirements, at a competitive advantage or
disadvantage?
    12. What impact would the proposed amendments have on efficiency?
Have we overlooked any positive or negative effects on efficiency?
    13. What impact would the proposed amendments have on capital
formation? Would there be any positive or negative effects on capital
formation that we may have overlooked?
    14. Are listed closed-end funds subject to an incentive alignment
concern due to shareholders' inability to redeem their shares from the
fund (or often to sell them in secondary transactions at or close to
the funds' NAV per share) that would relate to hedging considerations?
What are the characteristics of listed closed-end funds' incentive
structure with respect to employees and directors that would inform
this consideration?
    15. We note above that shares of listed closed-end funds are not
redeemable, and they may trade at a discount to NAV. Will this create
heightened incentives for these funds' employees and directors to hedge
personal holdings in listed closed-end funds as compared to employees
and directors of other types of funds? Are there features of ETFs that
would make the disclosures under the proposed amendments particularly
useful for their investors even though ETF shares often trade on the
secondary market at prices close to NAV of the shares? Are there
features of mutual funds or other types of funds that would make the
disclosures under the proposed amendments particularly useful for their
investors?
    16. The potential cost to companies from distorting investment
incentives as a result of required disclosures under proposed Item
407(i) is lower for companies with fewer investment choices. How, if at
all, does the range of available investment choices for listed closed-
end funds differ from that for operating companies?

V. Paperwork Reduction Act

A. Background

    The proposed amendments contain ``collection of information''
requirements within the meaning of the Paperwork Reduction Act of 1995
(``PRA''). We are submitting the proposed amendments to the Office of
Management and Budget (``OMB'') for review in accordance with the
PRA.\116\ The titles for the collection of information are:
---------------------------------------------------------------------------

    \116\ 44 U.S.C. 3507(d) and 5 CFR 1320.11.
---------------------------------------------------------------------------

    (1) ``Regulation 14A and Schedule 14A'' (OMB Control No. 3235-
0059);
    (2) ``Regulation 14C and Schedule 14C'' (OMB Control No. 3235-
0057);
    (3) ``Regulation S-K'' (OMB Control No. 3235-0071); \117\ and
---------------------------------------------------------------------------

    \117\ The paperwork burden from Regulation S-K is imposed
through the forms that are subject to the disclosure requirements in
Regulation S-K and is reflected in the analysis of these forms. To
avoid a Paperwork Reduction Act inventory reflecting duplicative
burdens, for administrative convenience we estimate the burden
imposed by Regulation S-K to be a total of one hour.
---------------------------------------------------------------------------

    (4) ``Rule 20a-1 under the Investment Company Act of 1940,
Solicitation of Proxies, Consents, and Authorizations'' (OMB Control
No. 3235-0158).
    Regulation S-K was adopted under the Securities Act and Exchange
Act; Regulations 14A and 14C and the related schedules were adopted
under the Exchange Act; and Rule 20a-1 was adopted under the Investment
Company Act. The regulations and schedule set forth the disclosure
requirements for proxy and information statements filed by companies to
help investors make informed investment and voting decisions. The hours
and costs associated with preparing, filing and sending the schedule
constitute reporting and cost burdens imposed by each collection of
information. An agency may not conduct or sponsor, and a person is not
required to respond to, a collection of information unless it displays
a currently valid OMB control number. Compliance with the proposed
amendment would be mandatory. Responses to the information collection
would not be kept confidential, and there would be no mandatory
retention period for the information disclosed.

B. Summary of the Proposed Amendments

    We are proposing to add new paragraph (i) to Item 407 of Regulation
S-K that would implement Section 14(j) of the Exchange Act, as added by
Section 955 of the Act. As discussed in more detail above, proposed
Item 407(i) would require disclosure of whether employees and directors
of the company, or their designees, are permitted to hedge or offset
any decrease in the market value of equity securities that are granted
to them by the company as part of their compensation, or that are held,
directly or indirectly, by them. Pursuant to the proposed amendment to
Item 7 of Schedule 14A, and for listed closed-end funds, the proposed
amendment to Item 22 of Schedule 14A, this new disclosure would be
required in proxy or consent solicitation materials with respect to the
election of directors, or an information statement in the case of such
corporate action authorized by the written consent of security holders.
    In addition, to reduce potentially duplicative disclosure between
proposed Item 407(i) and the existing requirement for CD&A under Item
402(b) of Regulation S-K, we propose to amend Item 402(b) to add an
instruction providing that a company may satisfy its obligation to
disclose material policies on hedging by named executive officers in
the CD&A by cross referencing the information disclosed pursuant to
proposed Item 407(i) to the extent that the information disclosed there
satisfies this CD&A disclosure requirement.\118\ This instruction, like
the Item 407(i) disclosure requirement, would apply to the company's
proxy or information statement with respect to the election of
directors.
---------------------------------------------------------------------------

    \118\ Proposed Instruction 6 to Item 402(b).
---------------------------------------------------------------------------

C. Burden and Cost Estimates Related to the Proposed Amendments

    If adopted, proposed Item 407(i) would require additional
disclosure in proxy statements filed on Schedule 14A with respect to
the election of directors and information statements filed on Schedule
14C where such corporate action is taken by the written consents or
authorizations of security holders, and would thus increase the burden
hour and cost estimates for each of those forms. For purposes of the
PRA, we estimate the total annual increase in the paperwork burden for
all affected issuers to comply with our proposed collection of
information requirements, averaged over the first three years, to be
approximately 19,238 hours of in-house personnel time and approximately
$2,565,200 for the services of outside professionals (see Table
3).\119\ These estimates include the time and cost of collecting and
analyzing the information, preparing and reviewing disclosure, and
filing the documents.
---------------------------------------------------------------------------

    \119\ Our estimates represent the average burden for all
companies, both large and small.
---------------------------------------------------------------------------

    In deriving our estimates, we assumed that the information that
proposed Item 407(i) would require to be disclosed would be readily
available to the management of a company because it only requires
disclosure of policies they already have but does not direct them to
have a policy or dictate the content of the policy. Nevertheless, we
used burden estimates similar to those used in the 2006 Executive
Compensation Disclosure Release for updating Schedules 14A and 14C,
which we believe were more extensive.\120\ Since the first year of
compliance with the proposed amendment is likely to be the most
burdensome because companies are not likely to have compiled this
information in this manner previously, we assumed it would take five
total hours per form the first year and two total hours per form in all
subsequent years.
---------------------------------------------------------------------------

    \120\ See the 2006 Executive Compensation Disclosure Release.
---------------------------------------------------------------------------

    Based on our assumptions, we estimated that the proposed amendments
would increase the burden hour and cost estimates per company by an
average of three total hours per year over the first three years the
amendments are in effect for each Schedule 14A or Schedule 14C with
respect to the election of directors.
    We recognize that the burdens may vary among individual companies
based on a number of factors, including the size and complexity of
their organizations, and whether or not they prohibit or restrict
hedging transactions by employees, directors and their designees and if
they do, the specificity and complexity of such restrictions.
    The table below shows the three-year average annual compliance
burden, in hours and in costs, of the collection of information
pursuant to proposed Item 407(i) of Regulation S-K.\121\ The burden
estimates were calculated by multiplying the estimated number of
responses by the estimated average amount of time it would take a
company to prepare and review the proposed disclosure requirements. The
portion of the burden carried by outside professionals is reflected as
a cost, while the portion of the burden carried by the company
internally is reflected in hours. For purposes of the PRA, we estimate
that 75% of the burden of preparation of Schedules 14A and 14C is
carried by the company internally and that 25% of the burden of
preparation is carried by outside professionals retained by the company
at an average cost of $400 per hour. There is no change to the
estimated burden of the

collections of information under Regulation S-K because the burdens
that this regulation imposes are reflected in our burden estimates for
Schedule 14A and 14C.
---------------------------------------------------------------------------

    \121\ For convenience, the estimated hour and cost burdens in
the table have been rounded to the nearest whole number.

              Table 3--Incremental Paperwork Burden Under the Proposed Amendments Affecting Schedules 14A and 14C--Three-Year Average Costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                            Incremental        Total                         External        External
                                                             Number of     burden hours/    incremental      Internal      professional    professional
                                                             responses         form        burden  hours   company  time       time            costs
                                                               (A) \122\             (B)     (C)=(A)*(B)    (D)=(C)*0.75    (E)=(C)*0.25    (F)=(E)*$400
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sch. 14A................................................           7,300               3          21,900          16,425           5,475      $2,190,000
Sch. 14C................................................             680               3           2,040           1,530             510         204,000
Rule 20a-1..............................................             590               3           1,770           1,328             443         177,200
                                                         -----------------------------------------------------------------------------------------------
    Total...............................................           8,570  ..............          25,710          19,283           6,428       2,571,200
--------------------------------------------------------------------------------------------------------------------------------------------------------

The proposed amendment to the CD&A requirement under Item 402(b) would
not be applicable to smaller reporting companies or emerging growth
companies because under current CD&A reporting requirements these
companies are not required to provide CD&A in their Commission filings.
For all other issuers, we do not expect this amendment would materially
affect the disclosure burden associated with their Commission filings.
---------------------------------------------------------------------------

    \122\ For Schedules 14A and 14C, the number of responses
reflected in the table equals the three-year average of the number
of schedules filed with the Commission and currently reported by the
Commission to OMB. For Rule 20a-1, the number of responses reflected
in the table is based on an average of three years of data from
2012-2014 in the 2014 ICI Fact book.
---------------------------------------------------------------------------

D. Request for Comment

    Pursuant to 44 U.S.C. 3506(c)(2)(B), we request comment in order
to:
     Evaluate whether the proposed collection of information is
necessary for the proper performance of the functions of the
Commission, including whether the information will have practical
utility;
     Evaluate the accuracy of our assumptions and estimates of
the burden of the proposed collection of information;
     Determine whether there are ways to enhance the quality,
utility and clarity of the information to be collected;
     Evaluate whether there are ways to minimize the burden of
the collection of information on those who respond, including through
the use of automated collection techniques or other forms of
information technology; and
     Evaluate whether the proposed amendments will have any
effects on any other collection of information not previously
identified in this section.
    Any member of the public may direct to us any comments concerning
the accuracy of these burden estimates and any suggestions for reducing
these burdens. Persons submitting comments on the collection of
information requirements should direct their comments to the Office of
Management and Budget, Attention: Desk Officer for the U.S. Securities
and Exchange Commission, Office of Information and Regulatory Affairs,
Washington, DC 20503, and send a copy to, Brent J. Fields, Secretary,
U.S. Securities and Exchange Commission, 100 F Street NE., Washington,
DC 20549-1090, with reference to File No. S7-01-15. Requests for
materials submitted to OMB by the Commission with regard to the
collection of information should be in writing, refer to File No. S7-
01-15 and be submitted to the U.S. Securities and Exchange Commission,
Office of FOIA Services, 100 F Street NE., Washington DC 20549-2736.
OMB is required to make a decision concerning the collection of
information between 30 and 60 days after publication of this release.
Consequently, a comment to OMB is best assured of having its full
effect if the OMB receives it within 30 days of publication.

VI. Small Business Regulatory Enforcement Fairness Act

    For purposes of the Small Business Regulatory Enforcement Fairness
Act of 1996, or ``SBREFA,'' \123\ we solicit data to determine whether
the rule proposals constitute a ``major'' rule. Under SBREFA, a rule is
considered ``major'' where, if adopted, it results or is likely to
result in:
---------------------------------------------------------------------------

    \123\ Public Law 104-121, Title II, 110 Stat. 857 (1996).
---------------------------------------------------------------------------

     An annual effect on the economy of $100 million or more
(either in the form of an increase or a decrease);
     A major increase in costs or prices for consumers or
individual industries; or
     Significant adverse effects on competition, investment or
innovation.
    Commentators should provide empirical data on: (1) The potential
annual effect on the economy; (2) any increase in costs or prices for
consumers or individual industries; and (3) any potential effect on
competition, investment or innovation.

VII. Initial Regulatory Flexibility Act Analysis

    This Initial Regulatory Flexibility Analysis has been prepared in
accordance with the Regulatory Flexibility Act.\124\ This analysis
involves a proposal to require, in proxy or consent solicitation
materials, or in an information statement, with respect to the election
of directors disclosure of whether employees (including officers),
directors or their designees are permitted to engage in transactions to
hedge or offset any decrease in the market value of equity securities
granted to them as compensation, or directly or indirectly held by
them.
---------------------------------------------------------------------------

    \124\ 5 U.S.C. 603.
---------------------------------------------------------------------------

A. Reasons for, and Objectives of, the Proposed Action

    The proposed amendments are designed to implement Section 14(j),
which was added to the Exchange Act by Section 955 of the Act.
Specifically, the proposed amendments would require disclosure, in any
proxy or information statement with respect to the election of
directors, of whether any employee or director of the company or any
designee of such employee or director, is permitted to purchase any
financial instruments (including but not limited to prepaid variable
forward contracts, equity swaps, collars, and

exchange funds) or otherwise engage in transactions that are designed
to or have the effect of hedging or offsetting any decrease in the
market value of equity securities, that are granted to the employee or
director by the company as compensation, or held, directly or
indirectly, by the employee or director. The covered equity securities
would be equity securities issued by the company, any parent of the
company, any subsidiary of the company or any subsidiary of any parent
of the company that are registered under Exchange Act Section 12.

B. Legal Basis

    We are proposing the amendments pursuant to Section 955 of the Act,
Sections 14, 23(a) and 36(a) of the Exchange Act, as amended, and
Sections 6, 20(a) and 38 of the Investment Company Act, as amended.

C. Small Entities Subject to the Proposed Amendments

    The proposed amendments would affect some companies that are small
entities. The Regulatory Flexibility Act defines ``small entity'' to
mean ``small business,'' ``small organization,'' or ``small
governmental jurisdiction.'' \125\ The Commission's rules define
``small business'' and ``small organization'' for purposes of the
Regulatory Flexibility Act for each of the types of entities regulated
by the Commission. Exchange Act Rule 0-10(a) \126\ defines a company,
other than an investment company, to be a ``small business'' or ``small
organization'' if it had total assets of $5 million or less on the last
day of its most recent fiscal year. We estimate that there are
approximately 428 issuers that may be considered small entities. The
proposed amendments would affect small entities that have a class of
securities that are registered under Section 12 of the Exchange Act. An
investment company, including a business development company, is
considered to be a ``small business'' if it, together with other
investment companies in the same group of related investment companies,
has net assets of $50 million or less as of the end of its most recent
fiscal year.\127\ We believe that the proposal would affect some small
entities that are investment companies. We estimate that there are
approximately 29 investment companies that would be subject to the
proposed rule that may be considered small entities.
---------------------------------------------------------------------------

    \125\ 5 U.S.C. 601(6).
    \126\ 17 CFR 240.0-10(a).
    \127\ 17 CFR 270.0-10(a).
---------------------------------------------------------------------------

D. Reporting, Recordkeeping and Other Compliance Requirements

    The proposed amendments would add to the proxy disclosure
requirements of companies, including small entities, that file proxy or
information statements with respect to the election of directors, by
requiring them to provide the disclosure called for by the proposed
amendment. Specifically, proposed Item 407(i) would require disclosure
of whether any employee or director of the company or any designee of
such employee or director, is permitted to purchase any financial
instruments (including but not limited to prepaid variable forward
contracts, equity swaps, collars, and exchange funds) or otherwise
engage in transactions that are designed to or have the effect of
hedging or offsetting any decrease in the market value of equity
securities, that are granted to the employee or director by the company
as compensation, or held, directly or indirectly, by the employee or
director.

E. Duplicative, Overlapping or Conflicting Federal Rules

    We believe that the proposed amendments would not duplicate,
overlap or conflict with other federal rules. The proposal would reduce
potentially duplicative disclosure by adding an instruction permitting
a company to satisfy any obligation under Item 402(b) of Regulation S-K
to disclose in the CD&A material policies on hedging by named executive
officers by cross referencing to the new disclosure required by
proposed Item 407(i) to the extent that the information disclosed there
satisfies this CD&A disclosure requirement.\128\ However, as described
above, the CD&A disclosure obligation does not apply to small entities
that are emerging growth companies, smaller reporting companies or
registered investment companies.
---------------------------------------------------------------------------

    \128\ Proposed Instruction 6 to Item 402(b).
---------------------------------------------------------------------------

F. Significant Alternatives

    The Regulatory Flexibility Act directs us to consider alternatives
that would accomplish our stated objectives, while minimizing any
significant adverse impact on small entities. In connection with the
proposed amendments, we considered the following alternatives:
     Establishing different compliance or reporting
requirements or timetables that take into account the resources
available to small entities;
     clarifying, consolidating, or simplifying compliance and
reporting requirements under the rules for small entities;
     use of performance rather than design standards; and
     exempting small entities from all or part of the proposed
requirements.
    We believe that the proposed amendments would require clear and
straightforward disclosure of whether employees or directors are
permitted to engage in transactions to hedge or offset any decrease in
the market value of equity securities granted to them as compensation,
or directly or indirectly held by them. Given the straightforward
nature of the proposed disclosure, we do not believe that it is
necessary to simplify or consolidate the disclosure requirement for
small entities. We have used performance standards in connection with
the proposed amendments by proposing to use a principles-based approach
to identify transactions that would hedge or offset any decrease in the
market value of equity securities. Additionally, the amendments do not
specify any specific procedures or arrangements a company must develop
to comply with the standards, or require a company to have or develop a
policy regarding employee and director hedging activities.
    We considered, but have not proposed, different compliance
requirements or an exemption for small entities. We believe that
mandating uniform and comparable disclosures across all issuers subject
to our proxy rules will promote informed shareholder voting. The
proposed rule amendments are intended to provide transparency regarding
whether employees, directors, or their designees are allowed to engage
in hedging transactions that will permit them to receive compensation
without regard to company performance, or will permit them to mitigate
or avoid the risks associated with long-term equity security
ownership.\129\ We believe this transparency would be just as
beneficial to shareholders of small companies as to shareholders of
larger companies. By increasing transparency regarding these matters,
the proposed amendments are designed to improve the quality of
information available to all shareholders, thereby promoting informed
voting decisions. Different compliance requirements or an exemption for
small entities may interfere with the goal of enhancing the information
provided by all issuers. We also note that the disclosure is expected
to result in minimal additional compliance costs for issuers although
there could be indirect costs for some small entities, depending on
their current hedging policies. Thus, we

believe that our proposed amendments will promote consistent disclosure
among all issuers, without creating a significant new burden for small
entities.
---------------------------------------------------------------------------

    \129\ See Senate Report 111-176.
---------------------------------------------------------------------------

    Although we preliminarily believe that an exemption for small
entities from coverage of the proposed amendments would not be
appropriate, we solicit comment on whether we should exempt small
entities. At this time, we do not believe that different compliance
methods or timetables for small entities would be necessary given the
relatively straightforward nature of the disclosure involved.
Nevertheless, we solicit comment on whether different compliance
requirements or timetables for small entities would be appropriate and
consistent with the purposes of Section 14(j).

G. Solicitation of Comments

    We encourage the submission of comments with respect to any aspect
of this Initial Regulatory Flexibility Analysis. In particular, we
request comments regarding:
     How the proposed amendments can achieve their objective
while lowering the burden on small entities;
     The number of small entities that may be affected by the
proposed amendments;
     Whether small entities should be exempt from the proposed
amendments;
     The existence or nature of the potential impact of the
proposed amendments on small entities discussed in the analysis; and
     How to quantify the impact of the proposed amendments.
    Respondents are asked to describe the nature of any impact of the
proposed amendments on small entities and provide empirical data
supporting the extent of the impact. Such comments will be considered
in the preparation of the Final Regulatory Flexibility Analysis, if the
proposed amendments are adopted, and will be placed in the same public
file as comments on the proposed amendments themselves.

VIII. Statutory Authority and Text of the Proposed Amendments

    The amendments contained in this release are being proposed under
the authority set forth in Section 955 of the Dodd-Frank Wall Street
Reform and Consumer Protection Act, Sections 14, 23(a) and 36(a) of the
Securities Exchange Act of 1934, as amended, and Sections 6, 20(a) and
38 of the Investment Company Act, as amended.

List of Subjects in 17 CFR Parts 229 and 240

    Reporting and recordkeeping requirements, Securities.

Text of the Proposed Amendments

    For the reasons set out in the preamble, the Commission proposes to
amend title 17, chapter II, of the Code of Federal Regulations as
follows:

PART 229--STANDARD INSTRUCTIONS FOR FILING FORMS UNDER SECURITIES
ACT OF 1933, SECURITIES EXCHANGE ACT OF 1934 AND ENERGY POLICY AND
CONSERVATION ACT OF 1975--REGULATION S-K

0
1. The authority citation for part 229 continues to read as follows:

    Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s, 77z-2,
77z-3, 77aa(25), 77aa(26), 77ddd, 77eee, 77ggg, 77hhh, 77iii, 77jjj,
77nnn, 77sss, 78c, 78i, 78j, 78j-3, 78l, 78m, 78n, 78n-1, 78o, 78u-
5, 78w, 78ll, 78mm, 80a-8, 80a-9, 80a-20, 80a-29, 80a-30, 80a-31(c),
80a-37, 80a-38(a), 80a-39, 80b-11, and 7201 et seq; and 18 U.S.C.
1350, unless otherwise noted.

0
2. Amend Sec.  229.402 by adding Instruction 6 to Item 402(b), to read
as follows:

Sec.  229.402  (Item 402) Executive compensation.

* * * * *
    (b) * * *
    Instructions to Item 402(b). * * *
    6. If the information disclosed pursuant to Item 407(i) would
satisfy the registrant hedging policy disclosure requirements of
paragraph (b)(2)(xiii) of this Item, a registrant may satisfy this Item
in its proxy or information statement by referring to the information
disclosed pursuant to Item 407(i).
* * * * *
0
3. Amend Sec.  229.407 by adding paragraph (i) before the Instructions
to Item 407, to read as follows:

Sec.  229.407  (Item 407) Corporate governance.

* * * * *
    (i) Employee, officer and director hedging. In proxy or information
statements with respect to the election of directors, disclose whether
the registrant permits any employees (including officers) or directors
of the registrant, or any of their designees, to purchase financial
instruments (including prepaid variable forward contracts, equity
swaps, collars, and exchange funds) or otherwise engage in transactions
that are designed to or have the effect of hedging or offsetting any
decrease in the market value of equity securities--
    (1) Granted to the employee or director by the registrant as part
of the compensation of the employee or director; or
    (2) Held, directly or indirectly, by the employee or director.
    Instructions to Item 407(i).
    1. For purposes of this Item 407(i), ``equity securities'' (as
defined in section 3(a)(11) of the Exchange Act (15 U.S.C. 78c(a)(11))
and Sec.  240.3a11-1 of this chapter) shall mean only those equity
securities issued by the registrant or any parent of the registrant,
any subsidiary of the registrant or any subsidiary of any parent of the
registrant that are registered under Section 12 of the Exchange Act (15
U.S.C. 78l).
    2. A registrant that permits hedging transactions by some, but not
all, of the categories of persons covered by this Item 407(i) shall
disclose the categories of persons who are permitted to engage in
hedging transactions and those who are not.
    3. A registrant shall disclose the categories of hedging
transactions it permits and those it prohibits. In disclosing these
categories, a registrant may, if true, disclose that it prohibits or
permits particular categories and permits or prohibits, respectively,
all other hedging transactions. If a registrant does not permit any
hedging transactions, or permits all hedging transactions, it shall so
state and need not describe them by category.
    4. A registrant that permits hedging transactions shall disclose
sufficient detail to explain the scope of such permitted transactions.
    5. The information required by this Item 407(i) will not be deemed
to be incorporated by reference into any filing under the Securities
Act, the Exchange Act or the Investment Company Act, except to the
extent that the registrant specifically incorporates it by reference.
* * * * *

PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF
1934

0
4. The authority citation for Part 240 continues to read, in part, as
follows:

    Authority:  15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77z-3,
77eee, 77ggg, 77nnn, 77sss, 77ttt, 78c, 78c-3, 78c-5, 78d, 78e, 78f,
78g, 78i, 78j, 78j-1, 78k, 78k-1, 78l, 78m 78n, 78n-1, 78o, 78o-4,
78o-10, 78p, 78q, 78q-1, 78s, 78u-5, 78w, 78x, 78ll, 78mm, 80a-20,
80a-23, 80a-29, 80a-37, 80b-3, 80b-4, 80b-11, 7210 et seq.; and
8302; 7 U.S.C. 2(c)(2)(E); 12 U.S.C. 5521(e)(3); 18 U.S.C. 1350; and
Pub. L. 111-203, 939A, 124 Stat. 1376, (2010), unless otherwise
noted.

* * * * *
0
5. Amend Sec.  240.14a-101 by:

0
a. Revising Item 7 paragraph (b);
0
b. Removing Item 7 paragraphs (c) and (d);
0
c. Redesignating Item 7 paragraph (e) as paragraph (c);
0
d. Removing the Instruction to Item 7 paragraph (e);
0
e. Redesignating Item 7 paragraph (f) as paragraph (d);
0
f. Redesignating Instruction to Item 7 paragraph (f) as Instruction to
Item 7 and revising the newly redesignated Instruction to Item 7;
0
g. Redesignating Item 7 paragraph (g) as paragraph (e); and
0
h. Adding to Item 22(b) paragraph (20).
    The revisions and addition read as follows:

Sec.  240.14a-101  Schedule 14A. Information required in proxy
statement.

SCHEDULE 14A INFORMATION
* * * * *
    Item 7. Directors and Executive Officers. * * *
    (b) The information required by Items 401, 404(a) and (b), 405 and
407 of Regulation S-K (Sec. Sec.  229.401, 229.404(a) and (b), 229.405
and 229.407 of this chapter), other than the information required by:
    (i) Paragraph (c)(3) of Item 407 of Regulation S-K (Sec.
229.407(c)(3) of this chapter); and
    (ii) Paragraphs (e)(4) and (e)(5) of Item 407 of Regulation S-K
(Sec. Sec.  229.407(e)(4) and 229.407(e)(5) of this chapter) (which are
required by Item 8 of this Schedule 14A).
    * * *
    Instruction to Item 7. The information disclosed pursuant to
paragraphs (c) and (d) of this Item 7 will not be deemed incorporated
by reference into any filing under the Securities Act of 1933 (15
U.S.C. 77a et seq.), the Securities Exchange Act of 1934 (15 U.S.C. 78a
et seq.), or the Investment Company Act of 1940 (15 U.S.C. 80a-1 et
seq.), except to the extent that the registrant specifically
incorporates that information by reference.
    * * *
    Item 22. Information required in investment company proxy
statement.
* * * * *
    (b) * * *
    (20) In the case of a Fund that is a closed-end investment company
that is listed and registered on a national securities exchange,
provide the information required by Item 407(i) of Regulation S-K
(Sec.  229.407(i) of this chapter).
* * * * *

     Dated: February 9, 2015.

    By the Commission.

Brent J. Fields,
Secretary.
[FR Doc. 2015-02948 Filed 2-13-15; 8:45 am]
BILLING CODE 8011-01-P


AGENDA State/ Tribal/ Federal Agency Meeting Re. Regulation of CCW's October 229 and 30, 2002 Williamsburg, VA I. Update on EPA's State Minesite Visits  Truett Degeare, EPA II. Update on EPA's State Regulatory Program Analysis Reports  Greg Conrad ° Regulation and Policy Concerning Mine Placement of CCW in Selected States ° Mine Placement of CCW  State Program Elements Analysis III. Update on MRAM Project  Andy Wittner, EPA IV. Presentation on Beneficial Use of Dredged Material with CCW  Andrew Voros, NJ/ NY Clean Oceans and Shore Trust V. Presentation by OSM re EPA's Mine Regulatory Concerns Document  Kim Vories and Randall Mills, OSM VI. Review and Discussion of State Response to EPA Minefill Regulatory Concerns Document  Greg Conrad ° Matrix of State Regulatory Components ( SMCRA and RCRA)  Dan Wheeler ( IL) and Craig Kennedy ( SC) ° Beneficial Use v. Disposal  Definitions and Regulatory Determinations  Susi Ferguson ( TX) ° Jurisdictional Authorities related to Mine Placement of CCW  Mike Menghini ( PA) ° Mine Placement of CCW at Abandoned Mines  Bruce Stevens ( IN)

VII. Update and Discussion of EPA's CCW Regulatory Development Plans VIII. Next Steps


[Federal Register: September 26, 2007 (Volume 72, Number 186)]
[Notices]
[Page 54712]
[DOCID:fr26se07-133]

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DEPARTMENT OF TRANSPORTATION

Federal Motor Carrier Safety Administration

[Docket No. FMCSA-2007-28618]

Agency Information Collection Activities; New Information
Collection: Household Goods Consumer Information Program Assessment
Study

AGENCY: Federal Motor Carrier Safety Administration (FMCSA), DOT.

ACTION: Notice and request for comments.

-----------------------------------------------------------------------

SUMMARY: In accordance with the Paperwork Reduction Act of 1995, FMCSA
announces its plan to submit the Information Collection Request (ICR)
described below to the Office of Management and Budget (OMB) for its
review and approval and invites public comment. This proposed ICR will
be used to collect information on recent interstate household goods
shippers' (consumers) awareness of the Household Goods (HHG) Consumer
Information Program messages and activities. This information
collection will establish a baseline assessment of the Program's
activities and aid FMCSA in developing future Household Goods education
and outreach initiatives by surveying and examining consumer awareness
of the ``Protect Your Move'' campaign and other HHG messages.

DATES: We must receive your comments on or before November 26, 2007.

ADDRESSES: You may submit comments identified by any of the following
methods. Please identify your comments by the FMCSA Docket Number
FMCSA-2007-28618.
     Web site: http://dms.dot.gov. Follow instructions for

submitting comments to the Docket.
     Fax:<PHONE_NUMBER>.
     Mail: U.S. Department of Transportation, Docket
Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New
Jersey Avenue, SE., Washington, DC 20590.
     Hand Delivery: U.S. Department of Transportation, Docket
Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New
Jersey Avenue, SE., Washington, DC 20590 between 9 a.m. and 5 p.m.,
e.t., Monday through Friday, except Federal holidays.
    Docket: For access to the Docket Management System (DMS) to read
background documents or comments received, go to http://dms.dot.gov at

any time or to the U.S. Department of Transportation, Docket
Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New
Jersey Avenue, SE., Washington, DC 20590 between 9 a.m. and 5 p.m.,
e.t., Monday through Friday, except Federal holidays. The DMS is
available electronically 24 hours each day, 365 days each year. If you
want notification of receipt of your comments, please include a self-
addressed stamped envelope or postcard or print the acknowledgement
page that appears after submitting comments on-line.
    Privacy Act: Anyone is able to search the electronic form of all
comments received into any of our dockets by the name of the individual
submitting the comment (or signing the comment, if submitted on behalf
of an association, business, labor union, etc.). You may review DOT's
complete Privacy Act Statement in the Federal Register on April 11,
2000 (65 FR 19477), or you may visit http://dms.dot.gov.

FOR FURTHER INFORMATION CONTACT: Mr. Brian Ronk, Office of Outreach and
Development, Department of Transportation, Federal Motor Carrier Safety
Administration, 1200 New Jersey Avenue, SE., Washington, DC 20590.
Telephone:<PHONE_NUMBER>, or e-mail<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:
    Background: The purpose of this study is to quantify and assess
consumer awareness of the Household Goods (HHG) Consumer Information
Program. The study will determine the interstate moving public's
recognition or knowledge of the Program's activities or messages, such
as the ``Protect Your Move'' campaign. The data will be collected
through a telephone survey. Results of the study will not be published,
but used for internal research purposes by FMCSA in developing future
HHG campaign materials, identifying target audiences, and determining
distribution strategies to provide better consumer information to the
public. It will also serve as a baseline for future program evaluations
or assessments. A follow-up telephone survey will be conducted two
years after the initial data collection and compared against the
results from the baseline assessment.
    Title: Household Goods Consumer Information Program Assessment
Study.
    OMB Control Number: 2126-xxxx.
    Type of Request: New collection.
    Respondents: Public/consumers who have moved household goods from
one State to a different State throughout the U.S. (Interstate
Household Goods Shippers).
    Estimated Number of Respondents: 1,500.
    Estimated Time per Response: The estimated average burden per
response is 15 minutes.
    Expiration Date: N/A.
    Frequency of Response: This information collection will occur twice
within the effective period of the OMB clearance; once in the current
year and once again two years following the initial data collection.
    Estimated Total Annual Burden: 375 [1,500 respondents x 15 minutes/
60 minutes per response = 375].
    Public Comments Invited: Interested parties are invited to send
comments regarding any aspect of this information collection, including
but not limited to: (1) Whether the proposed collection is necessary
for the performance of FMCSA's functions; (2) the accuracy of the
estimated burden; (3) ways for FMCSA to enhance the quality,
usefulness, and clarity of the collected information; and (4) ways that
the burden could be minimized without reducing the quality of the
collected information. Comments submitted in response to this notice
will be summarized and/or included in the request for OMB's clearance
for this information collection.

    Issued on: September 21, 2007.
Terry Shelton,
Associate Administrator for Research and Information Technology.
 [FR Doc. E7-19017 Filed 9-25-07; 8:45 am]

BILLING CODE 4910-EX-P


[Federal Register: June 23, 2008 (Volume 73, Number 121)]
[Notices]
[Page 35425]
[DOCID:fr23jn08-82]

=======================================================================
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SECURITIES AND EXCHANGE COMMISSION

Proposed Collection; Comment Request

Upon Written Request, Copies Available From: Securities and Exchange
Commission, Office of Investor Education and Advocacy, Washington, DC
20549-0213.

Extension:
    Form 8-A; OMB Control No. 3235-0056; SEC File No. 270-54.

    Notice is hereby given that pursuant to the Paperwork Reduction Act
of 1995 (44 U.S.C. 3501 et seq.) the Securities and Exchange Commission
(``Commission'') is soliciting comments on the collection of
information summarized below. The Commission plans to submit this
existing collection of information to the Office of Management and
Budget for extension and approval.
    Form 8-A (17 CFR 249.208a) is a registration statement for certain
classes of securities pursuant to sections 12(b) and 12(g) of the
Securities Exchange Act of 1934 (15 U.S.C. 78l(b) and 78l(g)). Section
12(a) (15 U.S.C. 78l(a)) requires securities traded on national
exchanges to be registered under the Exchange Act (15 U.S.C. 78a et
seq.). Section 12(b) establishes the registration procedures. Section
12(g), and Rule 12g-1 (17 CFR 240.12g-1) promulgated thereunder,
extended the Exchange Act registration requirements to issuers engaged
in interstate commerce, or in a business affecting interstate commerce,
and having total assets of $10,000,000 or more and a class of equity
security held or record by 500 or more persons. Form 8-A takes
approximately 3 hours to prepare and is filed by approximately 1,170
respondents for a total of 3,510 annual burden hours.
    Written comments are invited on: (a) Whether this collection of
information is necessary for the proper performance of the functions of
the agency, including whether the information will have practical
utility; (b) the accuracy of the agency's estimate of the burden
imposed by the collection of information; (c) ways to enhance the
quality, utility, and clarity of the information collected; and (d)
ways to minimize the burden of the collection of information on
respondents, including through the use of automated collection
techniques or other forms of information technology. Consideration will
be given to comments and suggestions submitted in writing within 60
days of this publication.
    Please direct your written comments to R. Corey Booth, Director/
Chief Information Officer, Securities and Exchange Commission, C/O
Shirley Martinson, 6432 General Green Way, Alexandria, Virginia 22312;
or send an e-mail to<EMAIL_ADDRESS>
    June 16, 2008.
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-14079 Filed 6-20-08; 8:45 am]

BILLING CODE 8010-01-P