Computer Sciences Corporation
December 16, 2002
Jonathan G. Katz, Secretary
RE: File No. S7-44-02
Dear Mr. Katz:
Thank you for the opportunity to comment on the Commission's "Proposed Rule: Insider Trades During Pension Blackout Periods," Subject File No. S7-44-02 (the "Proposed Rule"). Computer Sciences Corporation has reviewed the Proposed Rule, and, overall, we have a positive view of the proposal and appreciate the opportunity to provide our input.
We think the Proposed Rule is consistent with the statutory language. Overall, additional provisions and clarifications set out in the Proposed Rule appear appropriate and consistent with Congressional purposes, as expressed in the language of the statute.
We would like to comment on several areas, and hope that our suggestions will be beneficial to your consideration of final rules. For ease in review, our comments below are preceded by the specific headings from the Proposed Rule, with the question set out in italics.
4. Transactions Subject to Trading Prohibition
(d) Transitional Matters
Request for Comment
Should we exclude equity securities acquired by an individual before he or she became a director or executive officer of an issuer from Section 306(a) of the Act and proposed Regulation BTR?
Yes. Congress limited the statute to acquisitions in connection with service or employment. The rule should not impose added burdens on securities acquired outside the scope of the statute.
5. Blackout Period
Request for Comment
Should we define the term "blackout period" to be shorter than the three consecutive business days specified in the statute?
No. We do not think that the rules should diverge from the clear standard articulated by the Congress.
(c) Application of 50% Test
We suggest that the number be generally determined as of the end of a month not longer than 3 months prior to the commencement of the blackout date. We do not foresee plan enrollments dramatically fluctuating in normal course, and this would provide plan sponsors administrative flexibility to utilize reasonably available data, without significant risk of creating loopholes for abuses.
(d) Exceptions to Definition of Blackout Period
Request for Comment
Is it necessary or appropriate to clarify in proposed Exchange Act Rule 102(a) that disclosure of a regularly scheduled blackout period to an employee would be timely in the event of a subsequent amendment to an individual account plan if the employee was provided notice of the blackout period within 30 calendar days after the adoption of the amendment? If not, explain why.
This approach would compel notice of the plan amendment to be given within 30 days of its adoption, without relation to the actual blackout date. We believe that keying the rule to the blackout event, and not to the ministerial act of plan amendment, is a more appropriate focus, particularly in the case of a plan amendment that establishes a regularly scheduled blackout period. We suggest that regularly scheduled blackouts can be established by plan amendment, with notice in normal course and not subject to a 30 day cut-off.
Should the exception in proposed Exchange Act Rule 102(a) contain a de minimis threshold that would not cause the loss of the exception in the event that some plan participants or beneficiaries failed to receive timely notice of the regularly scheduled blackout period? If so, should the de minimis threshold be a number (such as fewer than 5 or 10) or a percentage (such as fewer than 1% or 2%) of participants or beneficiaries that have individual account plans? What should the threshold be?
This is a difficult area. ERISA rules requiring disclosure of plan terms generally do not allow for de minimis numerically-stated exceptions. In addition, the language of Section 306(a)(4) of the Act itself mandates timely disclosure in order for this exception to apply.
On the other hand, it would seem that one or several participants' inadvertent failure to receive a plan document describing a routine blackout should not be cause for this exemption to be lost. Rather than set a fixed number of participants or fixed percentage who can be affected, it may be more workable to consider setting a standard in which failure to disclose will not cause the exemption to be lost if the Issuer otherwise has diligent prudent processes for routinely delivering plan information to participants. Because such failures would be inadvertent and not deliberate, and because the number of "failed disclosures" could never be known with certainty if a numerical test were applied, this approach is favored over a numerical test.
Thank you for the opportunity to comment on this proposal and for your consideration of our suggestions and comments.