Opções de estoque da seção 16

Seção 16.

O que é a "Seção 16"

A Seção 16 é uma seção da Securities Exchange Act de 1934 que é usada para descrever as várias responsabilidades de arquivamento regulatório que devem ser atendidas por diretores, diretores e acionistas principais. De acordo com a Seção 16, toda pessoa que seja, direta ou indiretamente, um beneficiário efetivo de mais de 10% da empresa, ou que seja um diretor ou um funcionário do emissor dessa garantia, deve arquivar as declarações exigidas por esta subseção com a Comissão de Valores Mobiliários (SEC).

BREAKING 'Seção 16'

Propriedade benéfica.

De acordo com a Seção 16, uma pessoa é considerada um dono efetivo, mesmo que ele não possua diretamente participação na empresa. Os membros da família imediata que compartilham o mesmo agregado familiar com outro membro que de fato possui interesse em uma empresa coberta também são considerados proprietários efetivos. O interesse financeiro em uma empresa também pode surgir indiretamente como resultado de várias pessoas agindo como um grupo para adquirir, possuir e vender títulos de capital de uma empresa coberta. Além disso, se uma pessoa possui derivativos de patrimônio líquido que, em seu exercício, proporcionem participação acionária, ele também é considerado um dono efetivo. Além disso, os diretores e diretores cai sob os requisitos da Seção 16, independentemente de quão pequena ou grande seja a sua propriedade beneficiária.

Requisitos de arquivamento.

A Seção 16 exige que os integrantes de uma empresa coberta arquivem arquivos eletrônicos os Formulários 3, 4 e 5. A SEC exige o Formulário 3, que é uma declaração inicial de propriedade beneficiária, se houver uma oferta pública inicial de títulos de dívida ou de dívida ou uma pessoa torna-se diretor, funcionário ou titular de 10% em uma empresa. Novos diretores e diretores, bem como novos acionistas significativos, devem preencher o Formulário 3 dentro de 10 dias. Se houver uma mudança importante nas explorações dos iniciados de uma empresa, eles devem arquivar o Formulário 4 com a SEC. Além disso, de acordo com a Seção 16, o Formulário 5 deve ser arquivado por um insider que tenha conduzido uma transação de capital durante o ano, se não foi relatado anteriormente no Formulário 4.

Construindo a confiança dos acionistas.

Blog # 1 para conformidade regulamentar.

Uma revisão das responsabilidades de arquivamento da Seção 16.

Com toda a atenção em High Frequency Trading e alguns pontos de vista de pontos de vista que são insider trading, aqui está uma revisão de informações privilegiadas a partir de uma perspectiva de emissor.

Existem três tipos de insiders corporativos para fins da Seção 16: diretores, diretores e mais de 10% de acionistas. Nós nos referimos a esses três tipos de iniciados corporativos coletivamente como insiders da Seção 16.

Os agentes da empresa sujeitos à Seção 16 são:

O presidente O principal funcionário financeiro O principal contabilista (ou, se não houver um tal contabilista, o controlador) Qualquer vice-presidente responsável por uma unidade de negócio principal, divisão ou função (como vendas, administração ou finanças) Qualquer outro funcionário que desempenha uma importante função de elaboração de políticas. Qualquer outra pessoa que desempenhe funções similares de formulação de políticas para a empresa.

Os integrantes da Seção 16 devem arquivar relatórios com a SEC divulgando sua propriedade efetiva e transações nos títulos de capital de uma empresa pública. As três formas em que os integrantes da Seção 16 devem fazer esses relatórios - Formulários 3, 4 e 5.

Formulário 3: Declaração inicial de propriedade benéfica de valores mobiliários.

Os integrantes da Secção 16 devem apresentar um relatório inicial no Formulário 3 com a SEC no prazo de 10 dias após se tornarem sujeitos à Seção 16. Para uma pessoa que seja eleita como diretora ou diretor de uma empresa que já tenha uma classe de títulos de capital registrados nos termos da Seção 12, O período de 10 dias começa quando a pessoa se torna um oficial ou diretor. A Seção 929R da Lei Dodd-Frank alterou a Seção 16 da Lei de Câmbio para autorizar a SEC a estabelecer por regra um período de tempo mais curto dentro do qual um novo insider da Secção 16 seria obrigado a apresentar um Formulário 3. Como este manual é publicado, a SEC não propôs nenhuma alteração de regra que encurtaria a atual janela de relatório de 10 dias.

As pessoas que são diretores, diretores ou maiores de 10% de acionistas de uma empresa que registra uma classe de títulos de capital (e que anteriormente não possuíam uma classe de títulos de capital social registrados) são obrigadas a apresentar um Formulário 3 na data efetiva do registro da empresa declaração. Em qualquer caso, o Formulário 3 deve divulgar todos os valores mobiliários da empresa que o membro da Secção 16 possuía de forma beneficiada na data em que a pessoa ficou sujeita à Seção 16. Mesmo que um diretor ou funcionário não possui valores mobiliários na data em que se tornar um Membro da Secção 16, ele ou ela ainda é obrigado a apresentar um Formulário 3.

Em determinadas circunstâncias, o insider da Seção 16 deve arquivar um Formulário 3 inicial anterior ao necessário. Conforme discutido abaixo, um insider da Seção 16 geralmente deve denunciar mudanças na propriedade efetiva dos valores mobiliários da empresa no Formulário 4 dentro de dois dias úteis. Se a propriedade efetiva do integrante da Seção 16 dos valores mobiliários da empresa muda durante o período de 10 dias antes de ele apresentar um Formulário 3 (por exemplo, quando um novo diretor recebe um estoque restrito em sua nomeação), a SEC recomenda que o Arquivo Iniciado da Seção 16, um Formulário 3 inicial em simultâneo com um Formulário 4 relatando a alteração, não obstante que as regras permitem que o Formulário 3 seja arquivado posteriormente.

Formulário 4: Declaração de Mudanças na Propriedade Beneficiária.

Após a apresentação de um Formulário 3, um membro da Secção 16 deve relatar qualquer alteração subsequente na propriedade beneficiária dos valores mobiliários da empresa, arquivando um Formulário 4 dentro de dois dias úteis, a menos que a transação esteja isenta de relatório ou seja elegível para relatórios diferidos.

As transações que devem ser relatadas no Formulário 4 incluem, mas não estão limitadas a:

Compras e vendas não isentas de títulos de capital detidas no nome do iniciado da Secção 16 Transações envolvendo títulos de capital detidos por terceiros, mas que o membro da Secção 16 é considerado como proprietário (isto é, títulos de capital em que o membro da Secção 16 possui "um interesse pecuniário , "Conforme discutido acima) Exercícios ou conversões de títulos derivativos Aquisições e concessões de qualquer dos prêmios patrimoniais da empresa (incluindo opções), mesmo que não exerçável atualmente Entrada em várias outras operações de derivativos, incluindo equity swaps e hedges similares Prêmios para não empregados Diretores feitos de acordo com planos de incentivo de capital Valores mobiliários recebidos de um reinvestimento de dividendos não isentos Disposições de títulos de capital para a empresa (por exemplo, a retenção de ações da empresa para pagar a obrigação de retenção de imposto de insider da Seção 16 no exercício de opções de compra de ações)

Clique na imagem para solicitar o nosso Manual de Governança Corporativa.

Após um IPO, os diretores e diretores da empresa antes de se tornarem públicos podem ser obrigados a denunciar certas transações pré-IPO nos títulos de capital da empresa. Essa obrigação de arquivamento pode surgir se o diretor ou funcionário se envolver em uma transação reportável menos de seis meses após a data em que a declaração de registro da empresa entrar em vigor. Nesse caso, o diretor ou funcionário é obrigado a "olhar para trás" por um período de seis meses a partir da data da transação reportável e informar sobre o primeiro formulário requerido 4 quaisquer transações nos títulos de participação da empresa que ocorreram durante esse período. As pessoas que são membros da Secção 16 em virtude de serem superiores a 10% de acionistas não estão sujeitas a períodos de retorno de seis meses. Da mesma forma, um oficial ou diretor coberto pode ser obrigado a relatar as transações que ocorrem depois que a empresa deixar de ser uma empresa pública (ou seja, devido ao rescisão das obrigações de registro e relatório da Seção 12). Uma transação de outra forma reportável que ocorra depois que a empresa não for mais pública será reportável no Formulário 4 se (e somente se) a transação não estiver isenta da Seção 16 (b) e ocorrer dentro de seis meses de uma transação "de maneira oposta" que também foi sujeito à Seção 16 (b) e ocorreu enquanto a empresa era pública. Para fins desta regra, uma aquisição e disposição subsequente (ou vice-versa) são consideradas transações de "maneira oposta".

Um funcionário ou diretor coberto também pode ser obrigado a relatar as transações que ocorrem após o término do status de oficial ou diretor da pessoa. Uma transação de outra forma reportável ocorrida após a cessação do status de agente ou diretor de uma pessoa será reportável no Formulário 4 na mesma circunstância que uma transação que ocorre depois que uma empresa deixa de ser pública (ou seja, se (e somente se) a transação não for isento da Seção 16 (b) e ocorre dentro de seis meses de uma transação "de maneira oposta" que também estava sujeita à Seção 16 (b) e ocorreu enquanto a pessoa ainda era diretor ou funcionário). Uma pessoa que é um membro da Secção 16 exclusivamente em virtude de ser um acionista superior a 10% deixa de estar sujeita aos requisitos de relatório da Seção 16, uma vez que a pessoa deixa de ser um acionista superior a 10%.

A SEC adotou uma variedade de isenções dos requisitos de relatórios da Seção 16 (a) com base na natureza da transação. Essas isenções aplicam-se aos seguintes tipos de transações:

Qualquer aumento ou diminuição no número de títulos de capital detidos como resultado de uma divisão de ações ou um dividendo em ações aplicando igualmente a todos os títulos de uma classe. A aquisição de direitos, como o acionista ou o direito de preferência, de acordo com uma prêmio proporcional a todos detentores da mesma classe de títulos patrimoniais registrados Transações que afetam apenas uma alteração na forma de propriedade beneficiária sem alterar o interesse pecuniário da pessoa nos títulos de capital em questão (note, no entanto, que esta isenção não cobre o exercício e a conversão de títulos derivativos ou depósitos e retiradas de fideicomisos de votação) Certas operações de acordo com planos de benefícios de empregados com impostos As aquisições efetuadas de acordo com um plano de reinvestimento de dividendos, desde que o plano atinja determinados requisitos especificados na Regra 16a-11 nos termos da Lei de Câmbio. Aquisições ou alienações de um segurança de capital de acordo com uma ordem de relações domésticas A disposição ou fechamento de uma longa derivação posição de segurança como resultado do cancelamento ou expiração, desde que o insider da Seção 16 não receba nenhum valor em troca do vencimento ou cancelamento.

Além das isenções acima, a SEC adotou uma série de isenções com base no status do insider da Seção 16. Dependendo das circunstâncias, certas dessas isenções podem estar disponíveis para executores e outros fiduciários, revendedores de estranhos, fabricantes de mercado, árbitros, subscritores e outras pessoas que participam de uma distribuição dos títulos de capital da empresa.

Formulário 5: Declaração Anual de Mudanças na Propriedade Beneficiária.

Um membro da Secção 16 deve comunicar determinadas transações no relatório de fim de ano no Formulário 5 dentro de 45 dias após o final do ano fiscal da empresa. Algumas transações, principalmente presentes, não são obrigadas a ser relatadas no Formulário 4, mas devem ser relatadas no Formulário 5. Um insider da Seção 16 é requerido para arquivar um Formulário 5 de fim de ano para denunciar qualquer transação que a pessoa deveria ter relatado durante o ano fiscal no Formulário 3 ou Formulário 4, mas não. As transações relatáveis ​​no Formulário 5 estão limitadas ao seguinte:

Certas transações ocorridas durante o ano fiscal mais recente, que estão isentas de uma obrigação de lucro de curto prazo, de acordo com a Seção 16 (b), como presentes fidedignos de valores mobiliários da empresa, exceto as operações isentas que envolvem a aquisição de minimis de qualificação da empresa. títulos de ações da empresa Transações de que o membro da Secção 16 deve ter informado no Formulário 3 ou Formulário 4 durante o ano fiscal mais recente, mas não.

Divulgação de inadimplências de relatórios; Programas de conformidade. O item 405 do Regulamento S-K exige que uma empresa divulgue em sua declaração anual de procuração e relatório anual no Formulário 10-K certas informações sobre o incumprimento por qualquer insider da Seção 16 de um relatório da Seção 16 durante o ano fiscal anterior ou exercícios anteriores. Para cada um dos insiders infractores da Secção 16, a empresa deve indicar o número de relatórios atrasados, o número de transações que não foram notificadas em tempo hábil e qualquer falha conhecida em apresentar um Formulário 3, 4 ou 5 exigido. não há nenhuma sanção oficial colocada sobre a empresa como resultado da inadimplência de seus insiders, tais divulgações são potencialmente embaraçosas.

Consequentemente, todas as empresas públicas devem desenvolver e implementar um forte programa de conformidade para garantir que seus diretores e diretores arquitem todos os relatórios necessários. Além de minimizar o potencial de divulgações embaraçosas do tipo descrito acima, um forte programa de conformidade ajudará os diretores e diretores da empresa a evitar a responsabilidade de curto prazo nos termos da Seção 16 (b) e as ações de execução da SEC para impor a Seção 16 (a) requisitos de relatórios da empresa.

Todos os relatórios da Seção 16 (a) devem ser arquivados eletronicamente usando o sistema de arquivo EDGAR da SEC e todos os relatórios tornam-se publicamente disponíveis imediatamente após a apresentação.

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Seção final 16 relatórios e regras de lucro curto: as Regras finais da Seção 16 são amigáveis ​​para usuários.

Este artigo analisa o impacto prático das novas regras da Seção 16 sobre o planejamento de remuneração de executivos para diretores e diretores. As novas regras eliminam muitos dos requisitos e incertezas que consumiram uma quantidade excessiva de tempo para o planejador de compensação executiva. Talvez o maior benefício das novas regras é que eles praticamente eliminam uma das principais considerações regulatórias envolvidas em qualquer decisão de compensação executiva, a Seção 16 e as regras de recuperação de lucros de curto prazo.

Exigências antigas eliminadas.

As novas regras eliminam muitos dos requisitos de relatórios e condições de isenção da atual Regra 16b-3.

As seguintes transações estão isentas de requisitos de relatórios:

transações de acordo com a isenção para planos com impostos condicionados, tais como planos 401 (k), planos de benefícios excessivos e planos de compra de ações dos empregados; transações de acordo com planos de reinvestimento de dividendos ou juros e ordens de relações domésticas; transações que alteram apenas a forma de propriedade efetiva, por exemplo, distribuições de estoque de um plano de fiança ou de benefício de empregado; cancelamentos ou expirações de opções de ações sem valor; e as transações isentas por uma pessoa que deixou de ser um insider.

De acordo com as novas regras, exercícios e conversões de valores mobiliários derivados, ou seja, opções de ações e direitos de valorização de ações ("SARs") devem ser reportados no Formulário 4. As transações não isentas também devem ser reportadas no Formulário 4. Presentes, subsídios de opção de compra de ações e as transações de troca de estoque de ações do empregador são relatáveis ​​no Formulário 5, com relatórios anteriores no Formulário 4 permitidos.

As novas regras de relatório são efetivas para as transações efetuadas em e após 15 de agosto de 1996. No entanto, a isenção de relatórios para os Planos Tarifados Fiscais só se aplica se a empresa optar por cumprir a nova Regra 16b-3, que tem um período de entrada em fase de conformidade terminando em 1 de novembro de 1996.

Unidades de ações ou unidades de ações fantasmas, isto é, "instrumentos de caixa somente", & quot; se tornam títulos derivativos sob as novas regras sujeitas a relatórios em 15 de agosto de 1996. No entanto, ações fantasmas e unidades de ações concedidas antes de 15 de agosto de 1996 estão geralmente isentas das novas regras de relatório.

Os seguintes requisitos da atual Regra 16b-3 foram eliminados:

Condição do Plano Escrita. A nova isenção concentra-se em transações entre diretores e diretores e o emissor e não há mais necessidade de um plano escrito. Embora o requisito do plano escrito da Regra 16b-3 tenha sido eliminado, um plano ainda é exigido pelo Código da Receita Federal ou ERISA nas seguintes circunstâncias: opções de ações de incentivo; seção 423 planos de compra de ações dos empregados; 401 (k) planos, ESOPs e planos de participação nos lucros; e planos de benefícios excessivos A Proibição de Transferência de Opções de Ações. Quase todos os planos de ações proíbem a transferência de opções de ações, exceto de acordo com uma ordem de relacionamento doméstico qualificada ("QDRO"). Essa proibição é exigida pelas regras de opção de estoque de incentivo e pela atual Regra 16b-3. De acordo com as novas regras, esta proibição pode ser liberada para permitir a concessão de opções de ações não estatutárias totalmente transferíveis e para permitir transferências de acordo com "ordens de relações domésticas", & quot; conforme definido no Internal Revenue Code ou ERISA, que não se qualificam como QDROs.

O presente das opções de compra de ações tornou-se uma ferramenta cada vez mais popular de planejamento fiscal de renda, propriedade e presente, e essa mudança facilitará tais presentes, por exemplo, os presentes para instituições de caridade podem aumentar. Para fins de imposto de renda, uma opção totalmente transferível e totalmente exercível na data da concessão deve ter um "valor facilmente determinável" mesmo que a opção não seja negociada ativamente em um mercado estabelecido. O valor tributável da concessão de uma opção transferível provavelmente será determinado sob um Black Scholes ou outro modelo de avaliação aceito. Se o IRS concorda que uma opção totalmente transferível tem um "valor facilmente verificável", & quot; esse valor é um lucro tributável para o executivo, a ser determinado na data da concessão, e o empregador-emissor terá uma dedução equivalente. Não deve haver mais tributação até que o donatário venda as ações e, em seguida, o excesso do preço de venda sobre a base do executivo nas ações, ou seja, o montante que o executivo incluiu no resultado no momento da concessão, deve ser qualificado como ganho de capital para o donatário. Os executivos vão querer transferir opções para fora de suas propriedades, avaliando seus presentes para tirar o máximo proveito da exclusão de US $ 10.000 por dono.

A concessão de uma opção transferível é uma operação isenta sob a isenção de aprovação, descrita abaixo, e é reportável no formulário 5. Atualmente, o formulário S-8 não está disponível para os donos. Portanto, um emissor deve considerar o registro do Formulário S-8 e as possíveis questões de divulgação de proxy (por exemplo, como os acionistas reagirão às opções que podem ser exercidas por pessoas que não sejam executivos ou seus membros) antes da concessão de opções de compra totalmente transferíveis.

Aprovação do Acionista. A aprovação dos acionistas de um plano ou uma emenda do plano que (i) aumenta as ações sujeitas ao plano, (ii) altera a classe de executivos elegíveis, ou (iii) aumenta substancialmente os benefícios, não será mais necessário como condição da nova Regra Isenção 16b-3. A exclusão deste requisito é um grande benefício para os planos qualificados de impostos e para emendas a planos de ações que aumentam os benefícios. No entanto, a aprovação dos acionistas da adoção de um plano e alterações do plano para aumentar as ações disponíveis ou alterar a classe de indivíduos cobertos ainda é geralmente necessária para planos de ações sujeitos a requisitos de bolsa de valores, opções de ações de incentivo e planos de compra de ações qualificados. Além disso, a Seção 162 (m) do Internal Revenue Code requer a aprovação dos acionistas da adoção ou alteração de limites de concessão individuais ou o estabelecimento ou alteração dos termos materiais de um objetivo de desempenho. Como resultado, a aprovação dos acionistas ainda será procurada, mas não com o objetivo de obter uma isenção da Regra 16b-3 que anteriormente era a principal motivação. Administração desinteressada. A Regra atual 16b-3 exige que um plano ou arranjo seja administrado por um comitê de pelo menos dois "diretores desinteressados". Um diretor é desinteressado se o diretor não tiver recebido uma concessão discricionária de uma garantia derivada ou patrimonial durante os 12 meses anteriores à data do serviço no comitê. As novas regras substituem o requisito de diretor desinteressado por um "Diretor não-empregado" requisito, discutido abaixo, que não proíbe o recebimento de prêmios discricionários. Isso faz com que o "plano de fórmula" para diretores externos, um dispositivo familiar de compensação executiva, obsoleto para fins da Seção16. No entanto, como uma questão de conveniência, se não a governança corporativa, é improvável que esses planos desapareçam em breve. Fórmula planos prontamente resolver a questão um tanto espinhosa de quanta equidade merece cada diretor externo. É provável, no entanto, que os planos de fórmula serão alterados para permitir que os membros do comitê (e, se necessário, todos os diretores externos) recebam subsídios discricionários. Requisitos de eleição prévia de seis meses e janela. De acordo com a atual Regra 16b-3, para que determinadas transações sejam isentas, elas devem ser feitas de acordo com uma eleição irrevogável feita com pelo menos seis meses de antecedência da transação ou antes da transação durante um período de 10 dias após a versão trimestral dos ganhos do emissor. Esses requisitos de eleição antecipada foram aplicados ao exercício de SARs em dinheiro, troca de fundos de investimento em planos qualificados de impostos e direitos de retenção de impostos ou o preço de exercício de um prêmio. Os requisitos de eleição antecipada eram muito difíceis de entender e administrar. De acordo com as novas regras, os direitos de retenção na fonte não constituem uma garantia derivada separada, e os SARs e a troca de fundos estão isentos de provisões muito menos complicadas. No entanto, para SARs, muitas políticas de insider trading ainda exigem que o exercício da SAR por dinheiro ocorra em um período de janela. O requisito do período de espera de seis meses. A Regra atual 16b-3 exige que a concessão de uma garantia patrimonial só seja isenta se o título for detido pelo diretor ou diretor por seis meses a partir da data da concessão, ou no caso de um título derivado, por exemplo, uma opção de compra de ações , seis meses devem passar antes da venda do título subjacente. Embora as novas regras preservem o período de retenção de seis meses como forma de isentar uma aquisição, elas também adicionam duas condições alternativas que não exigem o período de retenção. De acordo com as novas regras, a concessão de uma garantia de capital ou de derivativos também estará isenta se for simplesmente aprovada antecipadamente ou ratificada (veja "Isenção de Aprovação" abaixo).

A substituição da Isenção de Aprovação pelo requisito de prazo de retenção de seis meses é bem-vinda pelos planejadores de compensação de executivos, que já não precisarão gastar tempo se preocupando com coisas como:

Seção 83 do Código da Receita Interna (b) eleições quando as opções são exercidas no prazo de seis meses a partir da data da concessão; alterações aos prêmios que, de acordo com as regras atuais, resultariam no cancelamento e re-concessão do prêmio (e no início de um novo período de espera de seis meses); e quando os prêmios se tornam títulos derivativos para fins da regra de seis meses se eles tiverem um exercício ou recurso de conversão que não se baseie no preço do título subjacente. A questão de cancelamento / re-concessão foi especialmente problemática no caso de fusões onde o novo prêmio ou opção deve ser exercida no prazo de três meses após a rescisão do emprego.

As Novas Isenções.

De acordo com as novas regras, as transações serão isentas se satisfizerem uma das seguintes exceções simples e diretas:

Planos com impostos condicionados.

De acordo com as regras atuais, as disposições de notificação e responsabilidade das Seções 16 (a) e (b) foram um pesadelo para planos qualificados de impostos, como planos 401 (k), planos de bônus de ações e ESOPs e planos de compra de ações classificados da seção 423. As seções 16 (a) e (b) geralmente não se aplicavam a um plano de benefício excessivo "somente em dinheiro" que foi operado em conjunto com um plano qualificado para impostos.

As novas regras isentas de relatórios e de lucro de curto prazo, quase todas as transações sob "Planos com impostos condicionados". Um plano de imposto condicionado é definido como:

Plano Qualificado; Plano de Benefício Excesso; ou Plano de Compra de estoque.

Um "Plano Qualificado" é qualquer plano, seja qualificado ou não, que satisfaça as regras de cobertura no âmbito do Código da Receita Federal para planos qualificados. Um "Plano de Benefício Excesso" & quot; é um plano de benefícios para funcionários que é operado em conjunto com um Plano Qualificado e fornece benefícios superiores aos permitidos no Plano Qualificado, por exemplo, um plano suplementar 401 (k). & quot; Um plano de compra de estoque & quot; é um plano de compra de ações qualificado da section423 ou um plano de compra de ações não qualificado que satisfaça os requisitos de cobertura para planos qualificados. As transações típicas que serão completamente isentas, independentemente de quaisquer requisitos, incluem:

compras de ações ou títulos derivativos com contribuições do plano; disposições de acordo com ordens de relações domésticas; distribuições em caso de morte, invalidez, aposentadoria ou cessação de funções; diversificação ou distribuições de investimentos exigidas pelo Código da Receita Federal, por exemplo, contribuições excedentes em 401 (k) ou 401 (m); e compras de ações do plano de compras de ações do empregado.

As únicas transações em Planos Qualificados e Planos de Benefícios Excessivos que não estarão isentos de acordo com a isenção para Planos com Taxa de Aluguel são transferências de fundos de investimento dentro e fora dos fundos de ações do empregador, levantamentos em dinheiro no serviço e empréstimos direcionados aos participantes dos fundos de ações do empregador.

Muitos planos de benefícios para empregados, quer sejam planos qualificados ou planos de benefícios excessivos, permitam aos participantes transferir dentro e fora dos fundos de ações do empregador e optar por receber retiradas de dinheiro ou empréstimos de tais fundos. De acordo com as novas regras, qualquer transação desse tipo estará isenta da Seção 16 (b) se for efetuada de acordo com uma eleição feita pelo menos seis meses após a data do "caminho oposto" mais recente eleição sob qualquer plano da empresa. Por exemplo, uma retirada de dinheiro seria isenta de acordo com as novas regras, desde que um participante não tenha eleito uma transferência para um fundo de empregador nos seis meses anteriores. Os emissores irão querer rever suas políticas de insider trading de Seção16 para refletir esse novo requisito.

A isenção de aprovação: as regras do comitê.

A última isenção abrange todas as outras operações de remuneração de executivos entre diretores e diretores e emitentes que não são abrangidos pelas duas exceções anteriores. Esta isenção, que depende principalmente da aprovação ou ratificação antecipada, será a força de trabalho para planos de ações e transações de plano somente em dinheiro. Felizmente, o requisito de aprovação antecipada é facilmente implementado.

A isenção de aprovação. A Isenção de Aprovação isenta a aquisição de um acionista ou de um acionista de valores mobiliários ou derivativos do emissor, se:

a aquisição é aprovada antecipadamente pelo conselho de administração ou um comitê do conselho composto por dois ou mais "Diretores não empregados"; & quot; A aquisição é aprovada antecipadamente pelos acionistas ou ratificada na próxima assembléia de acionistas; ou a segurança do patrimônio líquido ou derivativo é mantida por seis meses antes da alienação da garantia patrimonial.

As disposições para o emissor estão isentas se os requisitos dos parágrafos (i) ou (ii) acima estiverem preenchidos.

A Isenção de Aprovação isentará o plano de ações mais típico ou as transações do plano somente em dinheiro, incluindo:

a concessão de opções (incluindo opções transferíveis), SARs e ações fantasmas; o exercício de opções, SARs e ações fantasmas e o exercício de direitos de retenção; o cancelamento, expiração ou entrega de opções, SARs e ações fantasmas; e adiar as eleições e as distribuições a partir de planos apenas em dinheiro.

Um "exercício sem dinheiro" envolvendo a venda de ações do corretor ao público ainda é uma venda inexistente.

As novas regras também afirmam que o alcance da aprovação antecipada pode ser bastante amplo. Por exemplo, se a concessão de um prêmio contemplar transações subseqüentes, incluindo transações direcionadas por participante, por exemplo, exercícios de prêmio, recarregar subsídios, entregas ou adiamentos, etc., as transações subsequentes não exigirão aprovação adicional. Esta regra deve resultar na elaboração mais cuidadosa e abrangente das resoluções de aprovação. A aprovação de transações específicas não é, no entanto, necessária se os termos e condições de tais transações forem estabelecidos em um plano de fórmula que tenha sido aprovado.

O Comitê Diretor não-Funcionário. Na prática, quase todas as transações acima serão aprovadas antecipadamente pelo novo "Diretor não-empregado" Comitê. O comitê de diretor não empregado de duas pessoas substituirá o comitê de pelo menos dois diretores desinteressados. & Quot; A definição de diretor não-empregado é muito semelhante à definição de "diretor externo" para fins de isenção de transações sob a limitação de dedução de $ 1 milhão da seção 162 (m) do Código da Receita Federal. Essa semelhança facilitará a nomeação do comitê.

Um diretor não-empregado é um diretor que:

não é um funcionário ou empregado de outra forma pelo emissor ou por uma empresa-mãe ou por uma subsidiária (da mesma forma que a seção 162 (m), exceto que ex-oficiais e certos ex-funcionários são proibidos nos termos da seção 162 (m)); não recebe uma remuneração, direta ou indiretamente, do emissor ou de uma empresa-mãe ou subsidiária por serviços como consultor ou em qualquer outra categoria que não seja diretor, exceto por um valor que não exceda o valor que requer a divulgação da procuração, ou seja, em excesso de US $ 60.000 (seção 162 (m) proíbe qualquer remuneração direta ou indireta); e não tem interesse em nenhuma transação ou não se envolveu em um relacionamento comercial para o qual a divulgação da procuração é necessária (estes não são os requisitos da seção 162 (m)).

O planejamento da remuneração dos executivos em planos de ações, e em ações fantasmas e outros planos somente para dinheiro, será muito mais fácil sob a Isenção de Aprovação. As transações com emissores serão isentas, desde que o comitê faça o que sempre fez, aprova a transação antecipadamente. Como o alcance da aprovação do comitê pode ser muito amplo, muitas transações podem simplesmente ser aprovadas no momento da concessão inicial do prêmio.

As novas regras são simplificadas e eliminará grande parte da incerteza que nublou o planejamento de compensação executiva. O Plano de imposto condicionado, as transações discricionárias, a aprovação prévia e as isenções de relatórios são bem-vindos, na medida em que não exigem muitas mudanças na forma como as operações de compensação de executivos seriam executadas mesmo na ausência das regras atuais da SEC.

Construindo a confiança dos acionistas.

Blog # 1 para conformidade regulamentar.

Uma revisão das responsabilidades de arquivamento da Seção 16.

Com toda a atenção em High Frequency Trading e alguns pontos de vista de pontos de vista que são insider trading, aqui está uma revisão de informações privilegiadas a partir de uma perspectiva de emissor.

Existem três tipos de insiders corporativos para fins da Seção 16: diretores, diretores e mais de 10% de acionistas. Nós nos referimos a esses três tipos de iniciados corporativos coletivamente como insiders da Seção 16.

The company officers subject to Section 16 are:

The president The principal financial officer The principal accounting officer (or, if there is no such accounting officer, the controller) Any vice president in charge of a principal business unit, division or function (such as sales, administration or finance) Any other officer who performs a significant policy-making function Any other person who performs similar policy-making functions for the company.

Section 16 insiders must file reports with the SEC disclosing their beneficial ownership of and transactions in a public company’s equity securities. The three forms on which Section 16 insiders must make these reports – Forms 3, 4 and 5.

Form 3: Initial Statement of Beneficial Ownership of Securities .

Section 16 insiders must file an initial report on Form 3 with the SEC within 10 days of becoming subject to Section 16. For a person who is elected an officer or director of a company that already has a class of equity securities registered under Section 12, the 10-day period begins when the person becomes an officer or director. Section 929R of the Dodd-Frank Act amended Section 16 of the Exchange Act to authorize the SEC to establish by rule a shorter time period within which a new Section 16 insider would be required to file a Form 3. As this handbook goes to publication, the SEC has not proposed any rule change that would shorten the current 10-day reporting window.

Persons who are officers, directors or greater than 10% shareholders of a company that registers a class of equity securities (and did not previously have a class of registered equity securities) are required to file a Form 3 on the effective date of the company’s registration statement. In any case, the Form 3 must disclose all equity securities of the company that the Section 16 insider beneficially owned on the date the person became subject to Section 16. Even if a director or officer owns no securities on the date he or she becomes a Section 16 insider, he or she is still required to file a Form 3.

In certain circumstances, the Section 16 insider should file an initial Form 3 earlier than is required. As discussed below, a Section 16 insider generally must report changes in his or her beneficial ownership of the company’s equity securities on Form 4 within two business days. If the Section 16 insider’s beneficial ownership of the company’s equity securities changes during the 10-day period before he or she must file a Form 3 ( e. g. , where a new director is granted restricted stock upon his or her appointment), the SEC recommends that the Section 16 insider file an initial Form 3 concurrently with a Form 4 reporting the change, notwithstanding that the rules permit the Form 3 to be filed at a later date.

Form 4: Statement of Changes in Beneficial Ownership .

After filing a Form 3, a Section 16 insider must report any subsequent change in beneficial ownership of the company’s equity securities by filing a Form 4 within two business days, unless the transaction is exempt from reporting or is eligible for deferred reporting.

Transactions that must be reported on Form 4 include, but are not limited to:

Non-exempt purchases and sales of equity securities held in the Section 16 insider’s name Transactions involving equity securities held by others but that the Section 16 insider is deemed to beneficially own ( i. e. , equity securities in which the Section 16 insider has a “pecuniary interest,” as discussed above) Exercises or conversions of derivative securities Acquisitions and grants of any of the company’s equity awards (including options), even if not presently exercisable Entry into various other derivative transactions, including equity swaps and similar hedges Awards to non-employee directors made pursuant to equity incentive plans Equity securities received from a non-exempt dividend reinvestment Dispositions of equity securities to the company ( e. g. , the company’s retention of shares to pay the Section 16 insider’s tax withholding obligation upon the exercise of stock options)

Click the image to request our free Corporate Governance Handbook.

Following an IPO, the directors and officers of the company before it became public may be required to report certain pre-IPO transactions in the company’s equity securities. Such a filing obligation may arise if the director or officer engages in a reportable transaction less than six months after the date that the company’s registration statement becomes effective. In such event, the director or officer is required to “look back” for a period of six months from the date of the reportable transaction and report on its first required Form 4 any transactions in the company’s equity securities that occurred during that period. Persons who are Section 16 insiders by virtue of being greater than 10% shareholders are not subject to six-month look-back periods. Likewise, a covered officer or director may be required to report transactions that occur after the company ceases to be a public company ( i. e. , because of termination of its Section 12 registration and reporting obligations). An otherwise reportable transaction occurring after the company is no longer public will be reportable on Form 4 if (and only if) the transaction is not exempt from Section 16(b) and occurs within six months of an “opposite way” transaction that was also subject to Section 16(b) and occurred while the company was public. For purposes of this rule, an acquisition and subsequent disposition (or vice versa) are considered “opposite way” transactions.

A covered officer or director may also be required to report transactions that occur after the termination of that person’s officer or director status. An otherwise reportable transaction occurring after the cessation of a person’s officer or director status will be reportable on Form 4 in the same circumstance as a transaction that occurs after a company ceases to be public ( i. e. , if (and only if) the transaction is not exempt from Section 16(b) and occurs within six months of an “opposite way” transaction that was also subject to Section 16(b) and occurred while the person was still a director or officer). A person who is a Section 16 insider solely by virtue of being a greater than 10% shareholder ceases to be subject to Section 16 reporting requirements once the person ceases to be a greater than 10% shareholder.

The SEC has adopted a variety of exemptions from the reporting requirements of Section 16(a) based upon the nature of the transaction. These exemptions apply to the following types of transactions:

Any increase or decrease in the number of equity securities held as a result of a stock split or a stock dividend applying equally to all securities of a class The acquisition of rights, such as shareholder or preemptive rights, pursuant to a pro rata grant to all holders of the same class of registered equity securities Transactions that effect only a change in the form of beneficial ownership without changing the person’s pecuniary interest in the subject equity securities (note, however, that this exemption does not cover the exercise and conversion of derivative securities or deposits to and withdrawals from voting trusts) Certain transactions pursuant to tax-conditioned employee benefit plans Acquisitions made pursuant to a dividend reinvestment plan, provided that the plan meets certain requirements specified in Rule 16a-11 under the Exchange Act Acquisitions or dispositions of an equity security pursuant to a domestic relations order The disposition or closing of a long derivative security position as a result of cancellation or expiration, provided that the Section 16 insider receives no value in exchange for the expiration or cancellation.

In addition to the above exemptions, the SEC has adopted a number of exemptions based upon the status of the Section 16 insider. Depending on the circumstances, certain of these exemptions may be available to executors and other fiduciaries, odd-lot dealers, market makers, arbitrageurs, underwriters and other persons who participate in a distribution of the company’s equity securities.

Form 5: Annual Statement of Changes in Beneficial Ownership.

A Section 16 insider must report certain transactions on a year-end report on Form 5 within 45 days after the end of the company’s fiscal year. Some transactions, most notably gifts, are not required to be reported on Form 4, but must be reported on Form 5. A Section 16 insider is required to file a year-end Form 5 to report any transaction that the person should have reported during the fiscal year on Form 3 or Form 4, but did not. Transactions reportable on Form 5 are limited to the following:

Certain transactions occurring during the most recent fiscal year that are exempt from short-swing profit liability under Section 16(b), such as bona fide gifts of the company’s equity securities, but excluding exempt transactions which involve the company Qualifying de minimis acquisitions of the company’s equity securities Transactions that the Section 16 insider should have reported on Form 3 or Form 4 during the most recent fiscal year, but did not.

Disclosure of Reporting Delinquencies; Compliance Programs. Item 405 of Regulation S-K requires a company to disclose in its annual proxy statement and annual report on Form 10-K certain information regarding the failure of any Section 16 insider to timely file a Section 16 report during the previous fiscal year or prior fiscal years. For each such delinquent Section 16 insider, the company is required to set forth the number of late reports, the number of transactions that were not reported on a timely basis, and any known failure to file a required Form 3, 4 or 5. Although there is no official sanction placed upon the company as a result of the filing delinquencies of its insiders, such disclosures are potentially embarrassing.

Accordingly, every public company should develop and implement a strong compliance program to ensure that its directors and officers timely file all required reports. In addition to minimizing the potential for embarrassing disclosures of the type described above, a strong compliance program will assist the company’s directors and officers in avoiding both short-swing liability under Section 16(b) and SEC enforcement actions to enforce Section 16(a)’s reporting requirements.

All Section 16(a) reports must be filed with the SEC electronically using the SEC’s EDGAR filing system, and all reports become publicly available immediately upon filing.

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Last Update: August 11, 2018.

These interpretations replace the Section 16 interpretations in the July 1997 Manual of Publicly Available Telephone Interpretations, the March 1999 Supplement to the Manual of Publicly Available Telephone Interpretations, the Section 16 Electronic Reporting Frequently Asked Questions and the November 2002 Sarbanes-Oxley Act Frequently Asked Questions. Some of the interpretations included herein were originally published in the sources noted above, and have been revised in some cases. The bracketed date following each interpretation is the latest date of publication or revision.

QUESTIONS AND ANSWERS OF GENERAL APPLICABILITY.

Section 101. Section 16 – General Guidance.

Question 101.01.

Question: A company reincorporated from Canada to Delaware, thus losing its "foreign private issuer" status ( see Exchange Act Rule 3b-4). Before the reincorporation, an officer of the company purchased shares of company common stock, which he sold after the reincorporation but within six months of his purchase. Would the officer's purchase be subject to Section 16?

Answer: Yes. The officer's purchase would be subject to Section 16, and the officer would be required to file a Form 3 within 10 days of the reincorporation and a Form 4 reporting both the purchase and sale of the common shares following the sale of those shares. While the staff is of the view, generally, that transactions effected by officers and directors of a foreign company before the loss of "foreign private issuer" status are not subject to Section 16 ( see Question 110.03), this position has not been applicable if the event that culminated in the loss of "foreign private issuer" status also involved the company's initial registration of equity securities under Exchange Act Section 12 (cf. Question 110.04). In such event, Rule 16a-2(a) would be applicable, which subjects to Section 16 transactions effected by a director or officer in the six months before the initial Section 12 registration. In the staff's view, for purposes of Section 16, a reincorporation by a foreign company that causes it to lose its "foreign private issuer" status is analogous to a company's initial registration of equity securities under Section 12 because, in each event, the change in the company's "foreign private issuer" status was within the control of the company and insiders should have been aware of the change sufficiently in advance to take potential Section 16 responsibilities into account when buying and selling the company's equity securities. [Aug. 11, 2018]

Question 101.02.

Question: Exchange Act Rule 3b-4(c) provides that a foreign issuer determines whether it is a foreign private issuer as of the last business day of its most recently completed second fiscal quarter (the "determination date"). Under Rule 3b-4(e), if a foreign issuer with securities registered under Exchange Act Section 12 does not qualify as a foreign private issuer as of the determination date, it must begin using the forms prescribed for domestic companies and complying with Section 16, starting on the first day of the fiscal year following the determination date. In this situation, when must a Form 3 be filed?

Answer: A Form 3 must be filed on or before the first day of the fiscal year following the determination date. [Aug. 11, 2018]

Section 102. Section 16(a)

Question 102.01.

Question: If an insider purchases units consisting of common stock and debentures of the insider's company, must the insider file a Section 16(a) report covering the acquisition of the stock?

Answer: Yes. An insider who purchases units consisting of common stock and debentures of the insider's company must file a Section 16(a) report covering the acquisition of the stock. The debentures need not be reported unless they are also deemed to be equity securities, as would occur, for example, if they were convertible into common stock. [May 23, 2007]

Question 102.02.

Question: Section 16(a)(3)(B) of the Exchange Act, as amended by the Sarbanes-Oxley Act of 2002, states, in part, that Forms 4 and 5 "shall indicate ownership by the filing person at the date of filing." Does this mean that an insider must report ownership of all classes of equity securities of the issuer each time the insider files a Form 4 or 5?

Answer: When an insider files a Form 4 or 5, the insider need only report ownership after the transaction or at the end of the fiscal year, respectively, of the class(es) of equity securities of the issuer as to which the insider reports a transaction. Because Section 16 contained the same language before the statutory amendment, the amendment did not expand an insider's obligation to report post-transaction ownership. [May 23, 2007]

Question 102.03.

Question: Can an issuer satisfy its Web site posting obligation if it posts forms directly in PDF only?

Answer: Assuming an issuer otherwise satisfies the Web site posting requirements, it is permissible to post forms directly in PDF only if the Web site explains clearly the need to use Adobe Acrobat to access the forms and provides clear directions on how to download it easily and without cost using a readily accessible link provided on the issuer's Web site. [May 23, 2007]

Section 103. Section 16(b)

Question 103.01.

Question: Will the Division staff express a view as to whether a particular transaction involves a "purchase" or "sale" for purposes of Section 16(b)?

Answer: No. Since the enforcement of Section 16(b) is left to private parties and the courts, the Division staff ordinarily will not express a view as to whether a particular transaction involves a "purchase" or "sale" for purposes of this section. [May 23, 2007]

Section 104. Section 16(c)

Section 105. Section 16(d)

Section 106. Section 16(e)

Question 106.01.

Question: Section 16(e) exempts foreign and domestic arbitrage transactions from the other provisions of Section 16. Rule 16e-1 provides that the Section 16(e) exemption does not apply to such arbitrage transactions by officers and directors. Will the Division staff express a view as to whether any particular transaction qualifies for the Section 16(e) exemption?

Answer: No. In Release No. 34-26333 (Dec. 2, 1988), the Commission noted that Section 16(e) "gives the Commission rulemaking authority to define 'bona fide arbitrage,' but the Commission has not exercised this authority, opting instead to leave such interpretation to the courts." In Release No. 34-26333, the Commission solicited comment on "whether further guidance in this area is needed" without proposing any additional Section 16(e) rules. Because the Commission did not subsequently adopt any rules defining "bona fide arbitrage" or otherwise address the subject, the Release No. 34-26333 statement about leaving such interpretation to the courts remains the Commission's statement regarding its intentions. Accordingly, the staff will not express a view as to whether any particular transaction qualifies for the Section 16(e) exemption, but instead will direct counsel to relevant case law, e. g ., Falco v. Donner, 208 F.2d 600 (2d Cir. 1953). [May 23, 2007]

Section 107. Section 16(f)

Section 108. Section 16(g)

Section 109. Rule 16a-1 – Definition of Terms.

Question 109.01.

Question: Would an Assistant Secretary ordinarily be considered an officer of a company under Section 16(a)?

Answer: No. An Assistant Secretary would not ordinarily be considered an officer of a company under Section 16(a), unless such person performs any of the functions that would make such person an officer as defined in Rule 16a-1(f). [May 23, 2007]

Section 110. Rule 16a-2 – Persons Subject to Section 16.

Question 110.01.

Question: Where Rule 16a-2(a) makes Section 16 applicable to a transaction that occurs before the issuer's Section 12 registration, are the exemptions provided by the other rules under Section 16 available to the same extent as for any other transaction subject to Section 16?

Answer: Yes. The exemptions provided by the other rules under Section 16 should be available to the same extent as for any other transaction subject to Section 16. [May 23, 2007]

Question 110.02.

Question: Rule 16a-2(c) provides that “a ten percent beneficial owner not otherwise subject to Section 16 of the Act must report only those transactions conducted while the beneficial owner of more than ten percent of a class of equity securities of the issuer registered pursuant to Section 12 of the Act.” A person is subject to Section 16 solely by being a member of a group, as described in Section 13(d)(3) and Rule 13d-5(b) thereunder, that beneficially owns more than 10 percent of such a class of equity security. The person no longer agrees to act together with the other group members for the purpose of acquiring, holding, voting or disposing of equity securities of the issuer. Does Rule 16a-2(c) require the person to report his or her transactions in issuer equity securities that occur after the person ceases to act as a member of the group?

Answer: No. Group membership is construed the same way for purposes of Section 16(a) and Rule 16a-2(c) as for purposes of Section 13(d). Group membership terminates when the person no longer agrees to act together with the other group members for the purpose of acquiring, holding, voting or disposing of equity securities of the issuer. If after ceasing to act as a member of the group, the person’s beneficial ownership does not exceed 10 percent of a class of issuer equity securities registered under Section 12, and the person is not otherwise subject to Section 16 with respect to the issuer, Rule 16a-2(c) does not require the person to report his or her transactions in issuer equity securities that occur after the person ceases to act as a member of the group. [Apr. 24, 2009]

Question 110.03.

Question: If a foreign issuer with securities registered under Exchange Act Section 12 loses foreign private issuer status as described in Question 101.02, would Rule 16a-2(a) apply to make transactions effected by its officers and directors before a Form 3 is due subject to Section 16 and reportable on Form 4?

Answer: No. [Aug. 11, 2018]

Question 110.04.

Question: A foreign issuer that is not a foreign private issuer files its initial registration statement to register equity securities under Exchange Act Section 12. Would Rule 16a-2(a) apply to make transactions by its officers and directors within six months before the effectiveness of the registration statement subject to Section 16 and reportable on Form 4?

Answer: Yes. [Aug. 11, 2018]

Section 111. Rule 16a-3 – Reporting Transactions and Holdings.

Question 111.01.

Question: If a company otherwise maintains a dividend reinvestment plan that satisfies the exemptive conditions of Rule 16a-11, are automatic dividend reinvestments under a non-qualified deferred compensation plan also eligible for the Rule 16a-11 exemption, so that those reinvestment transactions would not be required to be reported, thus reducing the number of Forms 4 due?

Answer: Non-qualified deferred compensation plans are not Excess Benefit Plans, as defined by Rule 16b-3(b)(2) under the Exchange Act, in which transactions are exempted by Rule 16b-3(c). See interpretive letter to American Bar Association (Feb. 10, 1999, Q. 2(c)). Under Rule 16a-3(g)(1), as amended in Release No. 34-46421 (Aug. 27, 2002), each transaction in a non-qualified deferred compensation plan must be reported on a Form 4 not later than the end of the second business day following the day on which the transaction was executed. However, if a company maintains a dividend reinvestment plan that satisfies the exemptive conditions of Rule 16a-11, automatic dividend reinvestments under a non-qualified deferred compensation plan are also eligible for the Rule 16a-11 exemption. See interpretive letter to American Home Products (Dec. 15, 1992). [May 23, 2007]

Question 111.02.

Question: For purposes of satisfying the affirmative defense conditions of Rule 10b5-1(c), an insider adopts a written plan for the purchase or sale of issuer equity securities. In the plan, which was drafted by a broker-dealer, the broker-dealer specified the dates on which plan transactions will be executed. Can the insider rely on Rule 16a-3(g)(2) to compute the Form 4 due date for plan transactions based on a deemed execution date?

Answer: No. By adopting a written plan that specifies the dates on which plan transactions will be executed, the insider will have selected the date of execution for plan transactions. Consequently, the insider will not be able to rely on Rule 16a-3(g)(2) to compute the Form 4 due date for plan transactions based on a deemed execution date. [May 23, 2007]

Question 111.03.

Question: Where a new beneficial owner joins an existing set of beneficial owners who file as a group, does the new beneficial owner have to file a new Form 3, even if the new owner is not adding any new securities to the group holdings?

Answer: Yes. Under Rule 16a-3(j), the new beneficial owner must file a new Form 3 even if the new owner is not adding any new securities to the group holdings. [May 23, 2007]

Question 111.04.

Question: In order to reduce the number of Forms 4 due annually, an insider makes the following choices: In connection with the annual year-end election to defer some of the following year's salary into a non-qualified deferred compensation plan, the insider elects to have payroll deductions invested in the plan's interest-only account. The insider also elects for the deferred salary so invested to be "swept" on a quarterly basis into the plan's stock fund account. How should these "sweep" transactions be reported?

Answer: Each "sweep" transaction would be reportable separately on Form 4. If the "sweep" election satisfies the Rule 16b-3(f ) exemptive conditions for Discretionary Transactions (as defined in Rule 16b-3(b)(1)), the "sweep" transactions would be reported using Code I. Further, if the reporting person does not select the date of execution for a "sweep" that is a Discretionary Transaction, Rules 16a-3(g)(3) and (4) would apply to determine the deemed execution date. [May 23, 2007]

Section 112. Rule 16a-4 – Derivative Securities.

Section 113. Rule 16a-5 – Odd-Lot Dealers.

Section 114. Rule 16a-6 – Small Acquisitions.

Section 115. Rule 16a-7 – Transactions Effected in Connection with a Distribution.

Section 116. Rule 16a-8 – Trusts.

Section 117. Rule 16a-9 – Splits, Stock Dividends, and Pro Rata Rights.

Question 117.01.

Question: Does Rule 16a-9(a) exempt a stock dividend payable where there is only one shareholder of the class on which the dividend is paid?

Answer: No. This position reflects the staff's concern that such a transaction would represent a manipulative use of the rule for the purpose of benefiting one shareholder. For purposes of this interpretation, a single group required to file a Schedule 13D is treated the same way as a single shareholder. [May 23, 2007]

Question 117.02.

Question: Does Rule 16a-9(b) exempt from Section 16 the pro rata acquisition of rights by a shareholder who is a stand-by purchaser?

Answer: Rule 16a-9(b) exempts from Section 16 the acquisition of rights, such as shareholder or preemptive rights, pursuant to a pro rata grant to all holders of the same class of equity securities registered under Section 12. Where the distribution of rights is pro rata, the acquisition of rights so distributed is exempt, including a pro rata acquisition by a shareholder who is a stand-by purchaser. However, such stand-by purchaser's acquisition of underlying shares pursuant to the exercise of rights not exercised by other shareholders is not exempted by Rule 16a-9(b) because such acquisition is the result of an independently negotiated contract with the issuer that is not available to all shareholders on a pro rata basis. [May 23, 2007]

Question 117.03.

Question: A company will effect a 1-for-4 reverse stock split for all of its outstanding common stock. Rather than issue fractional shares, the company will pay cash for the value of the fractional shares. Is this transaction exempt from Section 16?

Answer: Yes. Rule 16a-9(a) exempts from Section 16 "the increase or decrease in the number of securities held as a result of a stock split or stock dividend applying equally to all securities of a class, including a stock dividend in which equity securities of a different issuer are distributed." This rule is available to exempt the disposition of fractional shares incidental to the reverse stock split where the cash-out of fractional shares, like the reverse split itself, applies equally to all securities of the class, and there is no choice to receive fractional shares instead of cash. [Aug. 14, 2009]

Section 118. Rule 16a-10 – Exemptions under Section 16(a)

Section 119. Rule 16a-11 – Dividend or Interest Reinvestment Plans.

Question 119.01.

Question: Rule 16a-11 exempts from Sections 16(a) and 16(b) of the Exchange Act the acquisition of securities by insiders through the reinvestment of dividends pursuant to dividend reinvestment plans that satisfy the conditions of the rule. Is the disposition of such securities also exempted by Rule 16a-11?

Answer: No. Dispositions of securities acquired by insiders through the reinvestment of dividends pursuant to dividend reinvestment plans that satisfy the conditions of the rule is not exempted by Rule 16a-11. Further, Rule 16a-11 does not exempt from the liability provisions of Section 16(b) the acquisition of additional securities through voluntary additional investments permitted by such plans. [May 23, 2007]

Question 119.02.

Question: When a dividend reinvestment plan meeting the requirements of Rule 16a-11 is terminated and the stock held by the plan is distributed to participants, does the distribution of the shares of stock to persons covered by Section 16 need to be reported?

Answer: No. In this situation there is no effective change in beneficial ownership, and therefore, pursuant to Rule 16a-13, the distribution of shares to persons covered by Section 16 need not be reported as an acquisition of securities, assuming that those shares previously had been reported as indirectly beneficially owned. [May 23, 2007]

Section 120. Rule 16a-12 – Domestic Relations Orders.

Section 121. Rule 16a-13 – Change in Form of Beneficial Ownership.

Section 122. Rule 16b-1 – Transaction Approved by a Regulatory Authority.

Section 123. Rule 16b-3 – Transactions Between an Issuer and Its Officers or Directors.

Question 123.01.

Question: Does Rule 16b-3 exempt issuer equity securities transactions between the issuer and persons who are subject to Section 16 solely because they are more than 10 percent beneficial owners?

Answer: No. Rule 16b-3 exempts issuer equity securities transactions between the issuer (including an employee benefit plan sponsored by the issuer) and an officer or director of the issuer. The rule, however, does not exempt similar transactions by persons who are subject to Section 16 solely because they are more than 10 percent beneficial owners. Rule 16b-3 is available to a more than 10 percent beneficial owner who is also subject to Section 16 by virtue of being an officer or director of the issuer ( see Release No 34-37260 (May 31, 1996) at n. 42 (Part 1 and Part 2)), including a "deputized" director (see Brief of the Securities and Exchange Commission, Amicus Curiae in Roth v. Perseus, L. L.C.) [May 23, 2007]

Question 123.02.

Question: Does Rule 16b-3 exempt a transaction between the issuer and (1) an officer's charitable remainder trust, or (2) an investment advisor of which a director is a principal?

Answer: No. Rule 16b-3 exempts issuer equity securities transactions between the issuer (including an employee benefit plan sponsored by the issuer) and an officer or director of the issuer. Rule 16b-3 will not exempt a transaction between the issuer and (1) an officer's charitable remainder trust, or (2) an investment advisor of which a director is a principal. However, in its interpretive letter to American Bar Association (Feb. 10, 1999), Q. 4, the Division staff has stated that Rule 16b-3 is available to exempt an officer's or director's indirect pecuniary interest in certain specific transactions. [May 23, 2007]

Question 123.03.

Question: For purposes of determining whether a plan is a "Stock Purchase Plan," as defined by Rule 16b-3(b)(5), how are satisfaction of the coverage and participation requirements of Internal Revenue Code Section 410 measured?

Answer: Satisfaction of the coverage and participation requirements of Internal Revenue Code Section 410 are measured by reference to employees eligible to participate, rather than employees actually participating. [May 23, 2007]

Question 123.04.

Question: Does the definition of a "Stock Purchase Plan" in Rule 16b-3(b)(5), which includes employee benefit plans that satisfy the coverage and participation requirements of Sections 423(b)(3) and (b)(5) of the Internal Revenue Code, contemplate that such plans are broad-based?

Answer: Yes. While Rule 16b-3(b)(5) does not specifically indicate that such plans must also meet the broad-based plan requirements in Section 423(b)(4) of the Internal Revenue Code (because these requirements may be more restrictive than was intended for purposes of Rule 16b-3(b)(5)), Rule 16b-3(b)(5) contemplates that Stock Purchase Plans are broad-based. See footnote 50 to Release No. 34-37260 (May 31, 1996) (Part 1 and Part 2). Accordingly, a director-only or senior-executive only plan would not be a Stock Purchase Plan within the meaning of Rule 16b-3(b)(5) or Rule 16b-3(c). [May 23, 2007]

Question 123.05.

Question: A Stock Purchase Plan, as defined in Rule 16b-3(b)(5), includes a dividend reinvestment feature. Would dividend acquisitions pursuant to this plan be exempted by Rule 16b-3(c)?

Answer: Yes. Dividend acquisitions pursuant to the Stock Purchase Plan are exempted by Rule 16b-3(c), because any acquisition pursuant to a Stock Purchase Plan is exempted by Rule 16b-3(c). [May 23, 2007]

Question 123.06.

Question: Would a stand-alone top hat plan that qualifies for an exemption under Section 201(2) of ERISA be an Excess Benefit Plan eligible for exemption under Rule 16b-3(c)?

Answer: No. A stand-alone top hat plan that qualifies for an exemption under Section 201(2) of ERISA would not be an Excess Benefit Plan eligible for exemption under Rule 16b-3(c), because such plan would not be operated in conjunction with a Qualified Plan, as defined in Rule 16b-3(b)(4). [May 23, 2007]

Question 123.07.

Question: Are the Non-Employee Director standards of Rule 16b-3(b)(3) independent of the "outside director" standards of Internal Revenue Code Section 162(m)?

Answer: Yes. Accordingly, satisfaction of the Non-Employee Director standards cannot be presumed based on satisfaction of the Section 162(m) "outside director" standards. [May 23, 2007]

Question 123.08.

Question: What is the relevant date for determining Non-Employee Director status under Rule 16b-3?

Answer: The relevant date for determining Non-Employee Director status is the date such director proposes to act as a Non-Employee Director. This would be the date on which approval is obtained, even where an award is not deemed to occur until a later date, for example, upon the satisfaction of conditions (other than the passage of time and continued employment) that are not tied to the market price of an equity security of the issuer. Cf. Bioject Medical Technologies Inc. (Nov. 24, 1993). [May 23, 2007]

Question 123.09.

Question: Rule 16b-3(b)(3)(i)(A) disqualifies for service as a Non-Employee Director any director who currently is an officer of or otherwise currently employed by the issuer, its parent or subsidiary. How is the term "subsidiary" defined for the purposes of this rule?

Answer: For the purposes of Rule 16b-3(b)(3)(i)(A), "subsidiary" would be defined pursuant to the broad standards of Rule 12b-2, i. e. , as an affiliate controlled directly or indirectly through one or more intermediaries. [May 23, 2007]

Question 123.10.

Question: Will a sale into the open market from a Stock Purchase Plan or other Tax-Conditioned Plan be exempt pursuant to Rule 16b-3(c)? Will such a sale be a Discretionary Transaction (as defined in Rule 16b-3(b)(1)) eligible for exemption pursuant to Rule 16b-3(f)?

Answer: No to both questions. Such transactions will not be eligible for exemption from Section 16(b) pursuant to Rule 16b-3. [May 23, 2007]

Question 123.11.

Question: Would stock acquisitions through an open market purchase plan that is not a Rule 16b-3(b) Stock Purchase Plan (and hence ineligible for Rule 16b-3(c) exemption) but is "sponsored by the issuer" as interpreted in the interpretive letter to American Bar Association (Oct. 15, 1999) be considered "acquisitions from the issuer" eligible for the Rule 16b-3(d) exemption?

Answer: No. [May 23, 2007]

Question 123.12.

Question: Is a diversification transaction permitted by Section 401(a)(35) of the Internal Revenue Code a "Discretionary Transaction," as defined in Rule 16b-3(b)(1), subject to the exemptive conditions of Rule 16b-3(f)?

Answer: Yes. Section 401(a)(35) of the Internal Revenue Code provides diversification rights to qualifying participants in defined contribution plans that hold publicly-traded employer securities. Specifically, Section 401(a)(35) makes intra-plan transfers out of and back into the plan's issuer securities fund available no less frequently than quarterly. As explained in Release No. 34-37260 (May 31, 1996) (Part 1 and Part 2), periodic fund-switching transactions involving an issuer equity securities fund may present opportunities for abuse, because the investment decision is similar to that involved in a market transaction. Moreover, the plan may buy and sell issuer equity securities in the market in order to effect these transactions, so that the actual counterparty to the transaction is not the issuer, but instead is a market participant.

Rule 16b-3(b)(1)(iii) excludes from the definition of "Discretionary Transaction" a transaction "required to be made available to a plan participant pursuant to a provision of the Internal Revenue Code." This provision was adopted in 1996 to exclude:

the diversification elections and distributions that Section 401(a)(28) of the Internal Revenue Code makes available t 10-year plan participants wh have reached age 55, and.

The basis for the Rule 16b-3(b)(1)(iii) exclusion was that the insider's opportunity to speculate in the context of the specified events was well circumscribed. In contrast, Section 401(a)(35) of the Internal Revenue Code, which was added by Section 901 of the Pension Protection Act of 2006, makes available the periodic fund-switching transactions for which the exemptive conditions of Rule 16b-3(f) were designed to apply. Because the Commission did not consider the later-enacted Section 401(a)(35) of the Internal Revenue Code when it adopted Rule 16b-3(b)(1)(iii), this rule should not be construed to exclude Section 401(a)(35) transactions from the exemptive conditions of Rule 16b-3(f). [May 23, 2007]

Question 123.13.

Question: May a plan be bifurcated so that it is eligible in part for exemption under Rule 16b-3(c)?

Answer: A plan may be bifurcated so that it is eligible in part for exemption under Rule 16b-3(c) only if it works entirely as a Tax-Conditioned Plan with respect to a segregable class of participants and entirely as a non-Tax-Conditioned Plan as to a different class of participants. [May 23, 2007]

Question 123.14.

Question: Would an amendment to a material term of a security acquired pursuant to the full board, Non-Employee Director or shareholder approval conditions of Rule 16b-3(d) require further approval pursuant to any one of those approval conditions?

Answer: Yes, an amendment to a material term of a security acquired pursuant to the full board, Non-Employee Director or shareholder approval conditions of Rule 16b-3(d) would require further approval pursuant to any one of those approval conditions in order for the specific approval conditions of Note 3 to the rule to be satisfied. This is required because allowing a material term to be changed without subsequent approval would vitiate the specific approval requirement of the rule. Such further approval is required whether or not the amendment would result in the cancellation and regrant of the security. For example, an amendment to accelerate vesting (which, pursuant to the interpretive letter to Foster Pepper & Shefelman (Dec. 20, 1991), does not effect a cancellation and regrant) would require further approval. [May 23, 2007]

Question 123.15.

Question: Will initial approval of a plan satisfy the specificity requirement where the specific terms and conditions of each acquisition are fixed in advance, such as a formula plan?

Answer: Yes. [May 23, 2007]

Question 123.16.

Question: Would approval of a grant that by its terms provides for automatic reloads satisfy the specificity of approval requirements under Rule 16b-3(d) for the reload grants?

Answer: Yes. Approval of a grant that by its terms provides for automatic reloads would satisfy the specificity of approval requirements under Rule 16b-3(d) for the reload grants, unless the automatic reload feature permitted the reload grants to be withheld by the issuer on a discretionary basis. The same result applies under Rule 16b-3(e) where the automatic feature is a tax - or exercise-withholding right. [May 23, 2007]

Question 123.17.

Question: Could the six-month holding period of Rule 16b-3(d)(3) be used to exempt an officer's or director's purchase of the issuer's stock in an underwritten public offering?

Answer: No. Rule 16b-3 would not exempt this transaction, because the rule was not intended to cover a situation where someone other than the issuer controls to whom the sales are made and on what terms. For the same reasons, Rule 16b-3 would not exempt an officer's or director's purchase of the issuer's stock in a public offering pursuant to a "friends and family" allocation. [May 23, 2007]

Question 123.18.

Question: Are the dispositions of issuer securities that take place in cashless exercises through a broker eligible for exemption pursuant to Rule 16b-3(e)?

Answer: No. The dispositions that take place pursuant to these transactions are not eligible for exemption pursuant to Rule 16b-3(e) because cashless exercises through a broker do not involve a transaction with the issuer or the issuer's employee benefit plan. [May 23, 2007]

Question 123.19.

Question: Is the disclosure regarding loans by a bank, savings and loan association, or broker-dealer contemplated by Instruction 4.c to Item 404(a) (loan made in ordinary course of business, on substantially same terms as for unrelated persons, no more than normal risk of collectibility, etc.) Item 404(a) disclosure that would disqualify a director from being a Non-Employee Director, as defined in Rule 16b-3(b)(3)?

Answer: No. Statements disclosed pursuant to Instruction 4.c to Item 404(a) will not be considered Item 404(a) disclosure that would disqualify a director from being a Non-Employee Director. Release No. 33-8732A, in the Item 404 discussion at Section V. A.3, characterizes this instruction as addressing a situation that "do[es] not raise the potential issues underlying our principle for disclosure."

Section 124. Rule 16b-5 – Bona Fide Gifts and Inheritance.

Section 125. Rule 16b-6 – Derivative Securities.

Question 125.01.

Question: Would Rule 16b-6(b) be available to exempt the cash settlement of phantom stock?

Answer: No. Rule 16b-6(b) would not be available to exempt the cash settlement of phantom stock, because the deemed sale of the underlying stock following exercise of the phantom stock is outside the exemptive scope of Rule 16b-6(b). In contrast, Rule 16b-6(b) would be available to exempt the stock settlement of phantom stock because such transaction involves only the exercise of a derivative security. [May 23, 2007]

Section 126. Rule 16b-7 – Mergers, Reclassifications and Consolidations.

Section 127. Rule 16b-8 – Voting Trusts.

Section 128. Rule 16c-1 – Brokers.

Section 129. Rule 16c-2 – Transactions Effected in Connection with a Distribution.

Section 130. Rule 16c-3 – Exemption of Sales of Securities to be Acquired.

Section 131. Rule 16c-4 – Derivative Securities.

Section 132. Rule 16e-1 – Arbitrage.

Section 133. Forms 3, 4 and 5 – General.

Question 133.01.

Question: What information does an insider report for the issuer's ticker or trading symbol (Item 3 of Form 3, and Item 2 of Forms 4 and 5) if there is none?

Answer : The insider should enter "NONE." [May 23, 2007]

Question 133.02.

Question: Does an insider need to file a power of attorney with the filing?

Answer: If the Form is signed on behalf of an individual by another person, the power of attorney establishing the authority of such person to sign the Form must be filed in an exhibit to the Form or as soon as practicable in an amendment to the Form, unless a previously filed paper or electronic power of attorney is still in effect. The power of attorney need only indicate that the reporting person authorizes and designates the named person or persons to sign and file the Form on the reporting person's behalf and state its duration. [May 23, 2007]

Question 133.03.

Question: How should an insider sign the document when it uses a power of attorney?

Answer: The staff recommends that the document signature be the typed signature of the person holding the power of attorney. The remainder of the signature line would then indicate that the person is signing on behalf of the named officer, director or more than 10 percent shareholder under a power of attorney. For example, "John Jones, by power of attorney," where John Jones holds power of attorney for insider Susan Smith. [May 23, 2007]

Question 133.04.

Question: How can a filer indicate the title of the person filing the Form?

Answer: The title of the person may be included on the same line as the signature. [May 23, 2007]

Question 133.05.

Question: Do all officers and directors need filing codes?

Answer: Yes. Each officer, director and more than 10 percent shareholder will need his/her own CIK, CCC and Password codes. The codes are needed whether the insider is filing as an individual or as part of a group. It is very important to use the insider's CIK rather than, for example, the issuer's CIK, so that users can readily identify the insider filing the form (if the wrong CIK has been used, file a new form with the correct CIK). Only one set of codes is permitted even if the filer is an officer, director, or more than 10 percent shareholder of more than one company. We strongly recommend that companies applying for codes on behalf of their insiders verify that the persons do not already have codes assigned to them. [May 23, 2007]

Question 133.06.

Question: When reporting derivative securities on Table II of Form 4 or Form 5, are options that have different economic characteristics (such as exercise price and expiration date) considered different classes of securities?

Answer: Yes. General Instruction 4(a)(i) to Form 4 requires an insider to "report total beneficial ownership following the reported transaction(s) for each class of securities in which a transaction was reported." In reporting derivative securities on Table II, options that have different economic characteristics (such as exercise price and expiration date) are considered different classes of options. For example, in reporting the grant of options with an exercise price of $10 per share and an expiration date of March 1, 2018, the holdings column should show the total number of options with the same terms, and should not include the insider's holdings of options with an exercise price of $8 per share and an expiration date of November 1, 2018. On a voluntary basis, the insider may report on a separate line(s) holdings of options that are of a different class(es) than the options transaction reported. General Instruction 4(a)(iii) to Form 5, which requires an insider to "report total beneficial ownership as of the end of the issuer's fiscal year for all classes of securities in which a transaction was reported," is construed the same way. [May 23, 2007]

Question 133.07.

Question: Column 8 of Table II in Form 4 and Form 5 requires disclosure of the "Price of Derivative Security." Does this column require the exercise price of the derivative security, the fair market value of the underlying security on the date of the reported transaction, or some other price?

Answer: The "Price of Derivative Security" required in Column 8 of Table II is the price, if any , that the insider paid to acquire the derivative security (where an acquisition is reported) or received when disposing of the derivative security (where a disposition is reported). It is not the exercise price of the derivative security (which is reportable in Column 2) or the fair market value of the underlying security on the date of the reported transaction. [May 23, 2007]

Question 133.08.

Section 134. Form 3.

Question 134.01.

Question: Must an estate that holds more than 10 percent of a class of an issuer's equity securities file a Form 3 to report its holdings?

Answer: Yes. An estate that holds more than 10 percent of a class of an issuer's equity securities must file a Form 3 to report its holdings. Rule 16a-2(d), which permits an executor not to report transactions in securities held by an estate for the first 12 months following appointment as an executor, does not apply to the reporting of holdings on a Form 3. However, if the executor is already an insider (e. g., by virtue of being an officer of the issuer), in accordance with Rule 16a-3(b)(2) the executor need not file an additional Form 3 in the capacity of executor. Rather, when the executor next files a Form 4 (e. g., in the executor's individual capacity or for the estate after the 12 month period has elapsed), the executor would indicate the additional capacity in Box 5. [May 23, 2007]

Section 135. Form 4.

Question 135.01.

Question: May an officer of a company whose securities are registered under Section 12(g) of the Exchange Act file a Form 4 report solely to indicate the officer's resignation?

Answer: Yes. An officer of a company whose securities are registered under Section 12(g) of the Exchange Act may, but is not legally required to, file a Form 4 report, checking the exit box, solely to indicate the officer's resignation. [May 23, 2007]

Question 135.02.

Question: On Form 4, what date should be entered for Item 3 (Date of Earliest Transaction Required to be Reported)?

Answer: The date in Item 3 should be the transaction date of the earliest transaction reported that you are required to report on Form 4. This is the same date you enter in Column 2 of Table I (or Column 3 of Table II), not the Deemed Execution Date you would enter in Column 2A of Table I (or Column 3A of Table II). Where the transactions reported on the Form 4 include a transaction that the insider previously failed to report timely on Form 4, the transaction date for that transaction should be entered in Item 3. [May 23, 2007]

Question 135.03.

Question: What date should be entered for Item 3 on a Form 4 filed solely to report voluntarily a transaction that is eligible for deferred reporting on Form 5, such as a Rule 16b-5 gift or a Rule 16a-6(a) small acquisition?

Answer: Enter the transaction date reported in Column 2 of Table I (or Column 3 of Table II). In reporting the transaction, make sure that "V" is designated in Column 3 of Table I (or Column 4 of Table II). [May 23, 2007]

Section 136. Form 5.

Question 136.01.

Question: Are Discretionary Transactions required to be reported on Form 5 individually, rather than on an aggregate basis, even when they are "same way" rather than "opposite way" transactions?

Answer: Yes. Discretionary Transactions are required to be reported individually, rather than on an aggregate basis, even when they are "same way" rather than "opposite way" transactions. [May 23, 2007]

INTERPRETIVE RESPONSES REGARDING PARTICULAR SITUATIONS.

Section 201. Section 16 – General Guidance.

Section 202. Section 16(a)

202.01 In connection with a bank holding company formation, in which jurisdiction over a Section 12(g) entity passes from a banking agency to the Commission, officers, directors and more than 10 percent shareholders are not required to file either a Form 3 or Form 4 with the Commission to reflect the transaction establishing the holding company. However, in the interest of ownership reporting continuity, the next filing on Form 4 or Form 5 by an insider reporting a change in his or her ownership of equity securities should reflect that the holding company is the issuer for purposes of filing under Section 16(a). [May 23, 2007]

Section 203. Section 16(b)

Section 204. Section 16(c)

Section 205. Section 16(d)

205.01 A broker-dealer that had ceased making a market in a public company's securities cannot rely upon the Section 16(d) exemption with respect to sales of securities remaining in its inventory. Furthermore, even if the cessation was only temporary, the broker-dealer would not regain eligibility for the exemption unless it resumed market-making activities on a bona fide basis, i. e. , the broker-dealer cannot re-register as a market maker simply to liquidate its inventory. [May 23, 2007]

Section 206. Section 16(e)

Section 207. Section 16(f)

Section 208. Section 16(g)

Section 209. Rule 16a-1 – Definition of Terms.

209.01 For purposes of the various ownership tests of Rule 16a-1, a limited liability company should be treated consistently as a general partnership, limited partnership or a corporation, depending on which form of organization it more closely resembles. [May 23, 2007]

209.02 Following a company's buy-back of its stock, a person who previously owned less than 10 percent of the company's stock may own more than 10 percent of the stock without having purchased additional shares. If, before the buy-back, the person is aware that the buy-back will occur and will have this result on his or her holdings, the person should file a Form 3 within 10 days after the buy-back. If the person does not have advance awareness of the buy-back and/or its consequences, he or she would need to determine whether he or she is a more than 10 percent beneficial owner and satisfy any obligation to file a Form 3 within ten days after information in the company's most recent quarterly, annual or current report indicates the amount of securities outstanding following the buy-back. [May 23, 2007]

209.03 In connection with termination of employment, an officer was awarded options that would become exercisable (in installments) when the issuer's stock reached and maintained specified price levels for a period of 30 days, conditioned on the terminated officer's continued provision of services as a consultant. These options would be derivative securities under Rule 16a-1(c) and thereby subject to Section 16 upon grant because their exercisability would not be subject to conditions (other than the passage of time and continued employment) that are not tied to the market price of an equity security of the issuer. Cf. Certilman Balin Adler & Hyman (April 20, 1992). [May 23, 2007]

209.04 Rule 16a-1(c)(3) excludes from "derivative security" rights or obligations to surrender a security, or have a security withheld, upon the receipt or exercise of a derivative security or the receipt or vesting of equity securities, in order to satisfy the exercise price or tax withholding consequences of receipt, exercise or vesting. The federal state, local and foreign taxes that may be paid through the withholding, tendering back or delivery of previously owned shares may exceed minimum withholding requirements as along as the amount withheld does not exceed the participant's estimated federal state, local and foreign tax obligations attributable to the underlying transaction. Such amount may include capital gains tax on the shares that were surrendered or withheld in settlement of the tax-withholding right or exercising the derivative security. [May 23, 2007]

209.05 A caller contemplated writing a short put option, whereby the counterparty would have the right to put the security to the writer at any point after execution of the contract. Provided that the counterparty who is "long" the put option retains its discretion as to whether and when to exercise the put option, then the writer of the put option is not deemed to beneficially own the securities underlying the put option because the right to receive the underlying securities is dependent upon factors that are not within the control of the writer of the put option. Thus, in calculating its beneficial ownership for purposes of Section 16, the party that is short the put option should not count the underlying securities. [May 23, 2007]

Section 210. Rule 16a-2 – Persons Subject to Section 16.

Section 211. Rule 16a-3 – Reporting Transactions and Holdings.

211.01 A Discretionary Transaction in a phantom stock account that is exempt pursuant to Rule 16b-3(f) is reportable under Rule 16a-3(f)(1) on Table II of Form 4 on a single line using Code "I." [May 23, 2007]

211.02 Any issuer that maintains a corporate Web site must post on that Web site by the end of the business day after filing any Form 3, 4 or 5 under Section 16(a) as to the equity securities of that issuer, and must keep each such form accessible on that website for at least a 12-month period in accordance with Section 16(a)(4)(C) and Rule 16a-3(k). In a bank holding company, the bank subsidiary maintains a corporate Web site, but the bank holding company does not. The staff advised that the subsidiary Web site should be considered a corporate Web site for purposes of these posting requirements. [May 23, 2007]

211.03 One public company will acquire another public company. After the merger, the acquiring company will shut down the Web site of the acquired company. Under Rule 16a-3(k), any issuer that maintains a Web site is required to post Section 16 forms on its Web site. Because the acquired company will no longer exist, and its Web site will be shut down, the staff would not object if the acquiring company stopped posting the pre-acquisition Section 16 reports of the acquired company. [May 23, 2007]

Section 212. Rule 16a-4 – Derivative Securities.

Section 213. Rule 16a-5 – Odd-Lot Dealers.

Section 214. Rule 16a-6 – Small Acquisitions.

Section 215. Rule 16a-7 – Transactions Effected in Connection with a Distribution.

Section 216. Rule 16a-8 – Trusts.

Section 217. Rule 16a-9 – Splits, Stock Dividends, and Pro Rata Rights.

217.01 Rule 16a-9(a) exempts from Section 16 "the increase or decrease in the number of securities held as a result of a stock split or stock dividend applying equally to all securities of a class, including a stock dividend in which equity securities of a different issuer are distributed." This rule is available to exempt payment of a "pay-in-kind" dividend where there is no choice to receive the dividend in cash rather than stock. [May 23, 2007]

217.02 A limited partnership will make a pro rata distribution to its limited partners of portfolio securities that it holds. The limited partnership is subject to Section 16 with respect to the securities that will be distributed. The Division staff was asked whether Rule 16a-9(a) would exempt this distribution for the limited partnership as the distributing party. The Division staff expressed the view that Rule 16a-9(a), which exempts from Sections 16(a) and (b) "the increase or decrease in the number of securities held as a result of a stock split or stock dividend applying equally to all securities of a class, including a stock dividend in which equity securities of a different issuer are distributed," would not provide the limited partnership an exemption. Instead, the scope of Rule 16a-9(a) is limited to persons subject to Section 16 who experience an increase or decrease in the number of securities held as a result of a stock distribution or reverse stock split effected by the distributing party, and is not available to the distributing party. [May 23, 2007]

Section 218. Rule 16a-10 – Exemptions under Section 16(a)

Section 219. Rule 16a-11 – Dividend or Interest Reinvestment Plans.

219.01 A dividend reinvestment plan that is sponsored by a broker-dealer and available only to customers of that broker-dealer does not provide for "broad-based participation" within the meaning of Rule 16a-11. Accordingly, Rule 16a-11 is not available to exempt dividend or interest reinvestment transactions pursuant to such a plan. However, if a dividend reinvestment plan sponsored by a broker-dealer essentially mirrors a dividend reinvestment plan sponsored by the issuer that satisfies the conditions of Rule 16a-11, acquisitions pursuant to dividend reinvestment under the broker-dealer sponsored plan would be exempted by Rule 16a-11. See interpretive letter to Merrill, Lynch, Pierce, Fenner & Smith (Mar. 16, 1994). [May 23, 2007]

Section 220. Rule 16a-12 – Domestic Relations Orders.

Section 221. Rule 16a-13 – Change in Form of Beneficial Ownership.

221.01 A limited liability company ("LLC") makes a distribution of portfolio securities to its members. If the members have been relying upon Rule 16a-1(a)(2)(iii) to exclude the portfolio securities from their individual pecuniary interest (where the members do not control the LLC and do not exercise voting or investment control over the portfolio securities), Rule 16a-13 cannot be relied on to exempt (from reporting and profit liability) the distribution of the portfolio securities. [May 23, 2007]

221.02 For estate planning purposes, a director of an issuer transfers shares of that issuer to a newly created foreign domiciled mutual fund in exchange for shares of the mutual fund. The mutual fund's equity investments would be limited to the issuer's shares. While significant restrictions would likely make the mutual fund an unattractive investment to the general public, the fund would have one shareholder other than the director and would be open to investment by the general public. Rule 16a-13 would not be available for the director's transfer of the issuer's shares to the mutual fund. [May 23, 2007]

221.03 An insider is a partner in a partnership that owns securities of the issuer. The insider's Section 16 reports reported all of the issuer shares owned by the partnership, which exceeded the insider's individual pecuniary interest, and did not disclaim an interest in the excess. The insider planned to "recapitalize" the partnership by contributing cash and withdrawing more issuer shares than his individual pecuniary interest. The insider cannot rely on Rule 16a-13 with respect to the amount that he withdraws in excess of his individual pecuniary interest. [May 23, 2007]

Section 222. Rule 16b-1 – Transaction Approved by a Regulatory Authority.

Section 223. Rule 16b-3 – Transactions Between an Issuer and its Officers or Directors.

223.01 If, pursuant to the terms of a plan, a transaction to re-balance holdings among accounts other than the issuer equity securities account results in a transfer of assets into or out of an issuer equity securities account, the transaction will be a Discretionary Transaction, subject to Rule 16b-3(f). [May 23, 2007]

223.02 A rollover of funds into the issuer equity securities fund from a plan maintained by the insider's former employer will not be a Discretionary Transaction subject to Rule 16b-3(f) because it does not involve a reallocation of funds already invested in a plan of the issuer. An automatic rollover of a phantom stock account upon the issuer's abolition of the plan in which it is maintained into a restricted stock account in another plan of the issuer would not be a Discretionary Transaction. However, other rollovers or transfers between different plans sponsored by the same issuer may be Discretionary Transactions, and need to be analyzed on a case-by-case basis as to the character of the funds involved and whether the transaction is volitional to the insider. [May 23, 2007]

223.03 Where there are two issuer equity securities funds (one containing 100 percent issuer equity securities and the other 50 percent issuer equity securities), a transfer from the 100 percent fund to the 50 percent fund would be a transfer out of an issuer equity securities fund for purposes of measuring the six-month period before the next Discretionary Transaction. Conversely, a transfer from the 50 percent fund to the 100 percent fund would be a transfer into an issuer equity securities fund for the same purpose. But a transfer out of either fund into a non-issuer equity securities fund would be a transfer out, and a transfer into either fund from a non-issuer equity securities fund would be a transfer into an issuer equity securities fund.

223.04 Under Rule 16b-3(b)(3)(i)(B), a director will not be disqualified for service as a Non-Employee Director by virtue of receiving compensation from the issuer for services rendered "in any capacity other than as a director" where the director receives a higher director's fee in consideration for service as chairman of the board or on a committee of the board. [May 23, 2007]

223.05 Rule 16b-3(b)(3)(i)(B) provides that a Non-Employee Director may not receive compensation from the issuer, its parent or subsidiary, for services in any capacity other than as a director, except for an amount that does not exceed the dollar amount for which disclosure is required under Item 404(a) of Regulation S-K. The "services" in question refer to current services or services recently provided. Accordingly, a director's receipt from the issuer of a pension that is paid as a result of the director's prior service as an employee of the issuer would not trigger disqualification under paragraph (B), without regard to amount. In contrast, a director's receipt of a severance payment, in excess of the referenced amount, would trigger disqualification to the extent it relates to recent service. [May 23, 2007]

223.06 An Internal Revenue Code Section 423 plan permits a lump sum purchase at the end of the purchase period as an alternative to payroll deductions. However, a participant must enroll at the beginning of a purchase period and elect at that time whether to use payroll deductions or the lump sum payment. Such a plan would be a Stock Purchase Plan, as defined by Rule 16b-3(b)(5) and purchases under either form of payment would be exempt under Rule 16b-3(c). [May 23, 2007]

223.07 A routine disposition of shares to fund an administrative fee assessment under a Tax-Conditioned Plan would be exempt without further condition. However, the staff is of the view that dispositions that are not similarly incidental to plan administration are outside the purview of the plan and thus not exempted by Rule 16b-3(c). See the staff interpretive letter to American Bar Association (Oct. 15, 1999). [May 23, 2007]

223.08 Under a plan that is otherwise a formula plan, following a change in control (as objectively defined in the plan) participants will receive benefits in the form of cash or stock. The decision as to whether payment is made in cash or stock is made by the issuer's compensation committee. Although issuer discretion is limited to the form of payment (rather than the amount) this issuer discretion must be exercised by the full board, the committee of Non-Employee Directors, or shareholders. Alternatively, any securities received by insiders must be held for six months for the Rule 16b-3(d)(3) exemption to apply. [May 23, 2007]

223.09 The six-month holding period Rule 16b-3(d)(3) will remain satisfied if, during the six months, the insider transfers the securities to a family trust, provided that the insider retains a pecuniary interest in the securities so transferred. In contrast, an outright transfer to a family member during the six months (either by gift or for consideration) will result in failure to satisfy the six-month holding period. [May 23, 2007]

223.10 A company grants options in reliance on the six-month holding period of Rule 16b-3(d)(3). Shortly thereafter, the company authorizes tax-withholding rights with respect to the same options pursuant to Non-Employee Director approval under Rule 16b-3(e). This bifurcated procedure should not alter the availability of Rule 16b-3(d)(3), provided that the withholding rights are not exercised before the conclusion of the six-month holding period for the related option grant. [May 23, 2007]

223.11 Board approval of a buy-back plan providing for the issuer to buy back option shares at any time at fair market value would not satisfy the approval requirement of Rule 16b-3(e), because the resultant open-ended buy-back transactions would not have been approved with sufficient specificity. [May 23, 2007]

223.12 Consistent with the staff interpretive letter to American Bar Association (Dec. 20, 1996), an insider elects to defer salary into a phantom stock account in a single fund plan, and at the same time makes an election to receive the ultimate cash payout at a fixed date more than six months following the election. The payout election will not be subject to the conditions applicable to Discretionary Transactions under Rule 16b-3(f). [May 23, 2007]

223.13 A deferred compensation plan allows deferrals to either a phantom stock account or a cash account. Transfers between the phantom stock account and cash account are permitted. At the time a participant elects to defer compensation, the participant determines that the balance of both accounts will be paid in cash at a fixed date more than six months following the election. Because of the transfer feature, the plan is treated as a multi-fund deferral plan under Q. 4(c) of the staff interpretive letter to American Bar Association (Dec. 20, 1996), rather than a single-fund deferral plan under Q. 4(b) of that interpretive letter. A cash-out from the phantom stock account pursuant to the election described above would be a Discretionary Transaction, eligible for exemption under Rule 16b-3(f). Because the transfer feature permits assets to be transferred between the accounts, the balance of assets that will be in the phantom stock account at the fixed date payout cannot be determined until the fixed date occurs. Therefore, for purposes of Rule 16b-3(f) the fixed date payout election will be deemed to occur on the fixed date. The fixed date payout is not eligible for exemption under Rule 16b-3(e). [May 23, 2007]

223.14 A deferred compensation plan allows deferrals to either a phantom stock account or a cash account (which is credited with interest at the market rate). No transfers between the phantom stock account and the cash account are permitted, except that if a participant elects a payout in installments, the participant may make a one-time election (effective simultaneously with commencement of payouts) to transfer all or part of the phantom stock account balance to the cash account. Because of this transfer feature, pursuant to the staff interpretive letter to American Bar Association (Dec. 20, 1996) Q. 4(c), the plan is treated as a multi-fund deferral plan, rather than as a single-fund deferral plan. Generally, a transfer pursuant to this feature would be a Discretionary Transaction, eligible for exemption under Rule 16b-3(f). However, where such a transaction is not a Discretionary Transaction (for example, where it is in connection with the participant's death, disability or retirement, as provided by Rule 16b-3(b)(1)), it is eligible for exemption under Rule 16b-3(e). In that case, if the participant irrevocably elects to make such a transfer at the time he or she elects to defer funds, the approval requirement of Rule 16b-3(e) and Note 3 may be satisfied by approval of the plan. Cf. staff interpretive letter to American Bar Association (Dec. 20, 1996) Q. 4(b). However, if the election is made at a later point, approval of the individual transaction is necessary. [May 23, 2007]

223.15 If an election to effect a Discretionary Transaction is revocable until a specified date, such specified date should be used as the date of the election for purposes of measuring the six-month period before election of the next "opposite way" Discretionary Transaction eligible for exemption under Rule 16b-3(f). [May 23, 2007]

Section 224. Rule 16b-5 – Bona Fide Gifts and Inheritance.

Section 225. Rule 16b-6 – Derivative Securities.

Section 226. Rule 16b-7 – Mergers, Reclassifications and Consolidations.

Section 227. Rule 16b-8 – Voting Trusts.

Section 228. Rule 16c-1 – Brokers.

Section 229. Rule 16c-2 – Transactions Effected in Connection with a Distribution.

Section 230. Rule 16c-3 – Exemption of Sales of Securities to be Acquired.

Section 231. Rule 16c-4 – Derivative Securities.

231.01 Rule 16c-4 provides that establishing or increasing a put equivalent position will be exempt from the Section 16(c) prohibition against short sales so long as the amount of securities underlying the put equivalent position does not exceed the amount of underlying securities otherwise owned. The insider had issued DECS (put equivalents) backed by issuer common stock. The insider proposed to sell all its issuer common stock in excess of the minimum amount deliverable in settlement of the DECS at maturity, and asked the Division staff to concur that the insider would continue to satisfy Rule 16c-4 following such sale. The Division staff did not agree because if a price decline occurred prior to maturity the insider would need to deliver a greater number of shares, at which point the insider would be short (in violation of Section 16(c)) and would be benefited by a stock decline so that it could go into the market and cover. Rule 16c-4 is construed to apply during the entire lifetime of the put equivalent so that at any such time the insider would have no net benefit resulting from a price decline in the issuer's shares. [May 23, 2007]

Section 232. Rule 16e-1 – Arbitrage.

Section 233. Forms 3, 4 and 5 – General.

233.01 Phantom stock is a derivative security reportable on Table II of Forms 4 and 5. Accordingly, in reporting an open market purchase of common stock, an insider would not need to update phantom stock holdings. The exception to this position is where phantom stock units that settle automatically on a one-for-one basis in common stock have been reported on Table I as common stock, in reliance on the staff interpretive letters to Lincoln National Corporation (Mar. 20, 1992), Q. 3 and American Bar Association (Dec. 20, 1996), Q. 4(d)(3). [May 23, 2007]

233.02 An insider may rely in good faith on the last plan statement in reporting holdings pursuant to 401(k) plans and other plans eligible for the Rule 16b-3(c) exemption on Forms 4 and 5, unless the insider is aware of subsequent plan transactions. [May 23, 2007]

233.03 When reporting a transaction on Form 4 or Form 5, care should be taken that the characterization of securities as "Acquired (A)" or "Disposed (D)" in Table I Column 4 or Table II Column 5 is consistent with the transaction code reported in Table I Column 3 or Table II Column 4. For example, a transaction coded "P" should not report "D" in Table I Column 4 or Table II Column 5, because a purchase is not a disposition. [May 23, 2007]

Section 234. Form 3.

Section 235. Form 4.

235.01 An insider planned to file a Form 4 to report the sale of securities of a closed-end investment company. Each shareholder in the investment company owns one share of stock, but a shareholder's voting interest is tied to its economic interest, rather than the number of shares of stock held. The staff advised that the insider must include information that would convey the amount of equity sold or purchased in the transaction. Specifically, while the insider may report on the Form 4 that one share was involved in the transaction, the insider should also include a footnote to explain the amount of equity involved in the transaction, stating: (1) the percentage held before transaction; (2) the percentage sold/purchased in the transaction; and (3) the percentage held after the transaction. [May 23, 2007]