New SEC Disclosure Requirements Prompt Companies to Reevaluate Equity Grant Practices

New SEC disclosure requirements will soon take effect, prompting companies to review their equity grant practices to avoid criticism for “spring-loading” or “bullet-dodging” in senior management awards. According to an article by BCLP Law, companies must now provide detailed tables for grants of options, SARs, and similar instruments to Named Executive Officers (NEOs) made within four days before or one day after the release of material non-public information. 

Companies must also disclose their grant policies and how they account for the timing related to such information releases. These requirements apply to proxy statements filed later this year for companies with a September 30 fiscal year-end, or in 2025 for calendar year companies, with a six-month compliance delay for smaller reporting companies.

To comply with the new SEC disclosure requirements, the article says companies should consider adopting or revising policies on the timing of grants related to material announcements, limiting grant dates to quarterly windows post-10-K or 10-Q filings, and adjusting the timing of Committee actions or exercise price determinations. 

Off-cycle awards, such as for new hires, should require pre-clearance to avoid anticipated material disclosures. Companies should also evaluate controls and procedures related to equity award practices, coordinate with accounting staff on documentation per SAB No. 120, and seek auditor guidance for grants outside window periods.

The SEC requires tabular and narrative disclosures detailing grant practices for options and similar instruments. Companies must disclose grants to NEOs made within four days before or one day after releasing material non-public information. They must also explain grant policies and how material non-public information impacts the timing and terms of awards. 

Additionally, the SEC’s SAB No. 120 provides guidance on fair value accounting for spring-loaded awards, emphasizing scrutiny of non-routine grants made before significant information releases, which may require adjustments to market prices to reflect expected stock price changes.