|VALERO ENERGY CORPORATION
|| Jay D. Browning
Vice President and
June 24, 2002
Mr. Jonathan G. Katz, Secretary
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Form 8-K Disclosure of Certain Management Transactions,
Commission File No. S7-09-02
Dear Mr. Katz:
I am Jay D. Browning, Vice President, Secretary and Managing Attorney, Corporate Law of Valero Energy Corporation ("Valero"). I am writing to you on behalf of Valero to provide comments on the Commission's proposed rules concerning the Form 8-K disclosure of directors' and executive officers' transactions in company equity securities and certain other transactions as set forth in Release No. 33-8090; 34-45742 (the "Proposed Rule"). We are pleased to have the opportunity to comment on the Proposed Rule.
As an issuer of securities subject to Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), Valero would be subject to the changes the Proposed Rule would make to Form 8-K. We support efforts to enhance meaningful disclosure to investors. However, as currently proposed, we do not believe that the rule meets this goal.
The objective in the reporting of management transactions should be to report transactions that would be meaningful to an investor when trying to determine whether to purchase, sell or hold a company's securities. We are concerned that the Proposed Rule would inundate the investment community with a vast amount of irrelevant information that would make it much more difficult for investors to cull the material transactions from the immaterial. The implementation of the Proposed Rule would result in a reporting environment in which companies file a multitude of Current Reports on Form 8-K rather than the somewhat limited number that are now filed, and investors would have difficulty determining which of these reports contain information that was meaningful to their individual investment decisions.
If a rule is adopted as proposed, we respectfully submit that:
- Substantially all transactions covered by the Proposed Rule are already required to be reported under Section 16. If there is a problem with the current Section 16 reporting requirements, (e.g., timeliness or lack of mandatory electronic filing) we recommend the proposal of amendments to those existing requirements instead of a new rule that will substantially duplicate existing reporting requirements. Alternatively, if a new rule is created that duplicates substantially the existing reporting requirements, then the existing and duplicative reporting requirements should be abolished.
- Virtually all transactions by directors and executive officers are already subject to extensive disclosure requirements. The only transactions that should be subject to accelerated or special reporting are those that would be "material" to the mix of company information available to an investor when making a decision whether to purchase, sell or hold that company's securities. Moreover, the determination of what is "material" should be based on a measure that differentiates small companies from large ones, such as the market capitalization of the reporting company, rather than an arbitrary "one size fits all" amount, such as $100,000. The sale or transfer of $100,000 of company stock by the CEO of a company with revenues of $50 billion and a market capitalization of $25 billion would clearly be less significant than a similar sale by a CEO whose company had revenues of $5 million and a market capitalization of $2.5 million.
- De minimis or non-material transactions, which are already reported pursuant to Section 16 or disclosed in a company's Proxy Statement or Form 10-K, should be deleted from the Proposed Rule. Separate reporting of these small management transactions would not appear to provide any meaningful new information to an investor trying to decide whether to purchase or sell a company's securities, even when aggregated as proposed under the Proposed Rule. The volume of immaterial transactions that would be reported on Form 8-K if the new rule is adopted would dilute the value of information that is reported on Form 8-K, and the duplicate reporting of these transactions would add unnecessary administrative burdens on reporting companies.
- Two business days is very little time to receive information, then prepare and file reports, especially in the current environment where there are concurrent demands that all reports filed with the SEC be complete and accurate, and subject to appropriate review prior to filing to ensure accuracy. Having a two-business day reporting rule may effectively require pre-clearance or pre-notification of transactions subject to the new rule. If pre-notification or pre-clearance is the actual goal of the Proposed Rule, we request that this be spelled out in the Proposed Rule, with additional time for consideration and comment on the proposal.
We appreciate the opportunity to comment on the Proposed Rule.
Very truly yours,
Jay D. Browning