EMERSON

W. Wayne Withers
Senior Vice President
Secretary and General Counsel
8000 West Florissant Ave.
P.O. Box 4100
St. Louis, MO 63136-8506
T (314) 553-3798

August 13, 2002

Jonathan G. Katz
Secretary
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549-0609

RE: Comments on the Notice of Supplemental Information on Section 16(a)
and Related Rules; Release Nos. 34-46313 and 34-45742, File No. S7-31-02

Dear Mr. Katz:

I am Senior Vice President, Secretary and General Counsel of Emerson Electric Co. ("Emerson"). Emerson's common stock is registered under Section 12 of the Securities Exchange Act of 1934 (the "Exchange Act") and is traded on the New York Stock Exchange. The purpose of this letter is to provide the Commission with Emerson's comments in response to the Notice of Supplemental Information on Section 16(a) and Related Rules, File No. S7-31-02, (the "Notice").

Emerson supports the goals stated by Congress underlying the Sarbanes-Oxley Act of 2002 (the "Act") to increase corporate responsibility, to provide for enhanced penalties for accounting and auditing improprieties at publicly traded companies and to protect investors by improving the accuracy and reliability of corporate disclosures pursuant to the securities laws.

Because the Act gives the Commission a significant role in implementing rules relating to many of the Act's new requirements, Emerson urges the Commission to ensure that, to the extent the Commission has been left with rule-making discretion under the Act and otherwise under the securities laws, including, in particular with respect to the Commission's general exemptive authority pursuant to Section 36 of the Exchange Act and its rule-making authority pursuant to Section 23 of the Exchange Act, it carefully weighs the benefits to the investing public against the burdens to be placed on issuers by any new rules. Emerson submits the following comments before the Commission adopts final rules in light of the Notice and the Act's amendments to Section 16(a) of the Exchange Act. Capitalized terms used but not otherwise defined herein are used as defined in the Exchange Act or the Exchange Act Rules, as applicable.

As a preliminary matter, we note that concerns of the investing public, regulators and legislators about the adequacy of disclosure of insider transactions of the type described under Exchange Act Rules 16b-3(d)(1) and 16b-3(e) were the primary concerns that gave rise to the Act's amendments to Section 16(a) of the Exchange Act in the first place (i.e., in some cases, substantial transactions that had been approved by an issuer's board of directors and/or involved a disposition to the issuer were reported long after they took place) ("Long-Delay Transactions"). Therefore, Emerson believes that the Commission should consider generally retaining the present Section 16(a) reporting deadlines EXCEPT in respect of Long-Delay Transactions. We believe that limiting any reporting deadline changes in such a manner would be a reasonable and appropriate exercise of the Commission's authority and discretion, would fairly balance the informational needs of investors with the administrative burdens placed on insiders and issuers, and would appropriately give effect to the Act's stated purpose.

Should the Commission elect, however, to adopt final rules that make broader changes to the current reporting deadlines, Emerson suggests that the Commission's final rules should, at a minimum: (i) retain certain of the exemptive provisions set forth in Rule 16a-3(f), which exempts from reporting or permits delayed reporting of, as applicable, certain transactions that are exempt from Section 16(a) (or Section 16(b)) of the Exchange Act, including transactions of the type described in Rule 16b-3(c) (Tax-Conditioned Plans), Rule 16b-3(d)(2) and Rule 16b-3(d)(3), respectively, without changing the current reporting requirements for transactions covered by those rules; (ii) allow for a Form 4 reporting deadline of not less than ten business days after an insider's receipt of a confirmation or notice of a particular transaction in the case of transactions involving a pre-existing arrangement the timing of which is outside the knowledge of the insider before a confirmation or other notice of the transaction is sent to the insider; and (iii) allow for delayed Form 5 reporting (or, at least delayed Form 4 reporting, where the delay would again be tied to the insider's receipt of notice of the transaction) of a transaction (including a Discretionary Transaction) involving an employee benefit plan, whether or not exempted by Rule 16b-3. Emerson submits that incorporating these suggestions into any final rules adopted by the Commission would strike a fair and reasonable balance between the benefits to investors of such final rules and the burdens placed on insiders and issuers and would appropriately give effect to the Act's purpose.

I. Tax-Conditioned Plans

Currently, Rule 16a-3(f)(1)(i)(B) exempts from Section 16(a) those transactions that are exempt from Section 16(b) pursuant to Rule 16b-3(c). Rule 16b-3(c) exempts unconditionally all transactions (other than Discretionary Transactions) occurring under Tax-Conditioned Plans (which are defined to include Qualified Stock Purchase and Excess Benefit Plans). According to SEC Release No. 34-37260, § II.B. (1996), the Commission adopted this unconditional exemption for transactions under Tax-Conditioned Plans because, among other things, these plans generally provide adequate safeguards against speculative abuse. Additionally, the Rule 16b-3(c) exemption relies on the restrictive requirements imposed by certain provisions of the Internal Revenue Code and ERISA to protect against abuse. The most typical Tax-Conditioned Plan is the 401(k) savings plan.

Requiring Form 4 disclosure, within two business days, of routine 401(k) transactions of the type currently exempt under Rule 16b-3(c) would not afford investors any protections in addition to those already in existence, would provide investors with no additional meaningful information, and indeed may add to the problem of "disclosure clutter" in that every executive officer would be filing 24 or 26 extra reports each year (usually employee contributions are deducted from paychecks, and employer matching contributions are made and converted by the plan administrator into shares or share-equivalents once, perhaps more, for each pay period).

Additionally, because these plans are generally not subject to speculative abuse, requiring immediate disclosure of transactions currently exempt under Rule 16b-3(c) is unnecessary and would only serve to place undue burdens on insiders and issuers with no proportionate additional benefits to investors since 401(k) balances typically involve small amounts of issuer shares and plan balances are typically reported on the next Form 4 filed after the participant receives his or her quarterly plan statement. Requiring the disclosure of each plan transaction within two business days would, we submit, do nothing to further the purpose of the Act. Accordingly, the present exemption for routine plan transactions of the type described under Rule 16b-3(c) should be maintained.

II. Additional Exemptions

Currently, Rule 16a-3(f)(1)(i) allows for delayed Form 5 reporting of all transactions during the issuer's fiscal year that were exempt from Section 16(b) of the Exchange Act (with certain exceptions). Rule 16b-3(d) exempts from Section 16(b) certain transactions involving a grant, award or other acquisition from the issuer if the transaction satisfies certain alternative conditions. We submit that Commission should retain the current Rule 16b-3(d)(2) exemption for transactions that have been approved in advance by an issuer's security holders and the current Rule 16b-3(d)(3) exemption that applies when the insider holds the acquired securities for at least six months. We note that the advance security holder approval and six month holding period requirements, respectively, in and of themselves provide substantial safeguards against the type of abuses in connection with Long-Delay Transactions that gave rise to the Act's amendments to Section 16(a). Accordingly, allowing delayed reporting for transactions of this type would be an appropriate exercise of the Commission's discretion and exemptive authority.

Additionally, we submit that the Commission should exempt from the accelerated reporting requirements any transaction pursuant to a pre-existing arrangement, the timing of which transaction is outside the knowledge of the insider, until a confirmation or other notice of the transaction is received by the insider. It is objectively unfair and unreasonable to require accelerated reporting before an insider has knowledge of a transaction under an arrangement of this type. We suggest that the Commission should allow for a Form 4 reporting deadline of not less than ten business days after the insider's receipt of confirmation or notice of such a transaction.

Finally, we submit that the Commission's final rules should exempt from the accelerated reporting requirements any regular periodic acquisitions under an employee benefit plan, whether or not exempted by Rule 16b-3, including plans that supplement a Qualified Plan but do not necessarily meet all of the requirements for an Excess Benefit Plan. As with the previously discussed exemptions under Rule 16b-3, we suggest that the Commission should exercise its discretion to permit delayed reporting of transactions of this type on Form 5 (or, at a minimum, if Form 5 is abandoned, permit a Form 4 reporting deadline of not less than ten business days after the insider's receipt of confirmation or notice of the transaction).

Given their built-in procedural and substantive safeguards, the transactions discussed above are not the type of Long-Delay Transactions that gave rise to the Act's amendment to Section 16(a) of the Exchange Act. Therefore, requiring immediate disclosure of these transactions is unnecessary, would only serve to place undue compliance burdens on insiders and issuers with no proportionate additional benefits to investors and, we submit, would do nothing to further the purpose of the Act.

We thank you for the opportunity to comment on this important matter. Should the Commission have any questions regarding our comments, please do not hesitate to contact the undersigned.

Respectively submitted,

W. Wayne Withers
Senior Vice President,
Secretary and General Counsel