Securities Exchange Act of 1934 — Section 16
February 10, 1999
Response of the Office of Chief Counsel
American Bar Association
You have asked the Division's views about the application of Rule 16b-3 under Section 16 of the Securities Exchange Act of 1934 ("Exchange Act"). Our views are as follows:
1. Transactions With Subsidiaries. A transaction in issuer securities by an officer or director of the issuer will be considered a transaction with the issuer for purposes of Rule 16b-3(a) if the transaction is with:
However, the approval requirements of Rules 16b-3(d)(1), 16b-3(d)(2) and 16b-3(e) may be satisfied with respect to these transactions only if the approval is obtained from:
2. Excess Benefit Plans. Your letter describes certain supplemental non-qualified benefit plans ("supplemental plans"), operated in conjunction with related Qualified Plans, which permit employer contributions with respect to certain dollar amounts that are not income for federal income tax purposes. You ask whether these plans may be viewed as Excess Benefit Plans, as defined by Rule 16b-3(b)(2), in which transactions are exempted by Rule 16b-3(c). The following interpretations supersede American Express Company (Feb. 26, 1997).
For purposes of applying the Rule 16b-3(c) exemption, a plan may not be bifurcated on a transaction-by-transaction basis. Accordingly, the Rule 16b-3(c) exemption will not be available to exempt any transaction made under these plans. However, acquisitions and dispositions of issuer equity securities under these plans may be eligible for exemption under Rules 16b-3(d) and 16b-3(e), respectively.
3. Aggregate Reporting. Acquisitions of phantom stock (including dividend reinvestments) that are exempted by Rule 16b-3(d) may be reported on an aggregate basis on Form 5, so long as they are periodic transactions under a non-qualified deferred compensation plan or a supplemental plan that is not an Excess Benefit Plan. This position supersedes the interpretive advice provided in American Express Company (Feb. 26, 1997). This position also supersedes the interpretive advice provided in American Bar Association (Dec. 10, 1996) Q. 4(d)(2), but only with respect to phantom stock units acquired on a periodic basis under these types of plans.
4. Transactions in Which an Officer or Director Has an Indirect Pecuniary Interest. Rule 16b-3 is available to exempt an officer's or director's indirect interest in transactions between the issuer and:
In order to satisfy the specificity requirements of Note 3 to Rule 16b-3 for purposes of applying the approval conditions of Rules 16b-3(d) and 16b-3(e) to these transactions, the approving entity must know and the document evidencing the approval must specify:
Because these positions are based on the representations made to the Division in your letter, it should be noted that any different facts or conditions may require different conclusions.
Anne M. Krauskopf
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