August 15, 2002

Securities and Exchange Commission
450 Fifth Street
Washington, D.C. 20549
Attention: Jonathan G. Katz, Secretary

Re: Proposing Release No. 34-46313 (the "Proposing Release"); File No. S7-31-02

Dear Commissioners,

On behalf of Compass Bancshares, Inc. ("Compass"), we respectfully submit these comments relating to the Commission's supplemental information regarding the filing of ownership reports by officers, directors and principal security holders under Section 16 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). We understand that the enactment of the Sarbanes-Oxley Act of 2002 (the "Act") has presented the Commission with a phenomenal undertaking and placed the Commission under tremendous pressure. Not only must the Commission adopt rules implementing the bulk of the provisions of the Act, but it must also do so on a vigorous timetable. None of the provisions of the Act is uncomplicated or insignificant in its potential impact on public companies; therefore, we urge the Commission to exercise prudence and vigilance in its rulemaking process.

Compass is a financial services company that was organized in 1970 and operates approximately 340 full-service banking offices in Alabama, Arizona, Colorado, Florida, Nebraska, New Mexico and Texas. Compass has $23.5 billion in assets and is among the top forty (40) bank holding companies in the United States in terms of assets. Shares of Compass' common stock are traded on the Nasdaq stock market under the symbol "CBSS". Compass is a financial holding company and its officers, directors and principal security holders would be subject to the proposed filing requirements for purposes of the Proposing Release.


On April 12, 2002, the Commission issued a release (Release Nos. 33-8090 and 34-45742) (the "Earlier Release") in which it proposed to require public companies to file current reports describing certain transactions and arrangements of directors and executive officers involving company equity securities and loans obtained from or guaranteed by such public companies. In the Proposing Release, the Commission has indicated that, due to the enactment of the Act, it will no longer consider the proposals contained in the Earlier Release to require public companies to report the transactions and arrangements of directors and executive officers on current reports. The Commission, however, will continue to consider requiring companies to disclose, on a current report, information regarding (i) arrangements of directors and executive officers aimed at satisfying the affirmative defense of Rule 10b5-1(c) of the Exchange Act and (ii) loans from and loan guarantees by public companies to their directors and executive officers.

We applaud the Commission's decision to abandon its consideration of requiring public companies to report transactions and arrangements of their officers and directors on current reports. We believe, among other things, that those reports would have unnecessarily duplicated the reports required under Section 16 of the Exchange Act and potentially would have been confusing to the investing public.

In its continuing rulemaking process pursuant to the Earlier Release, we urge the Commission to consider whether certain financial institutions should be required to report loans and loan guarantees to their directors and executive officers. We believe that banks, savings and loan associations and broker-dealers extending credit under Federal Reserve Regulation T, such as Compass' state banking corporation subsidiary, should not be required to disclose, under any circumstances, the terms of any loans made or guaranteed by them or any of their affiliates to any director or executive officer if such loans (i) are made in compliance with Section 402 of the Act1, (ii) are made in the ordinary course of business, (iii) are made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and (iv) did not involve more than the normal risk of collectability or present other unfavorable terms. 2 The terms of such loans from an insured financial institution would not be of interest to investors in making their investment decisions and, therefore, need not be disclosed.

The disclosure of the terms of such loans would serve only to encourage directors and executive officers to obtain loans from competing financial institutions in order merely to protect the confidentiality of this information. We do not believe this was the intent of the Commission in proposing the amendment to the current report on Form 8-K and request that the Commission continue to require only the disclosures set forth in Item 404 of Regulation S-K relating to loans made or guaranteed by a financial institution to its directors or executive officers.


On July 30, 2002, the Act was signed into law by President Bush. Section 403 of the Act amends Section 16(a) of the Exchange Act by

Section 403(b) of the Act provides that the amendments to Section 16 of the Exchange Act become effective thirty (30) days after the enactment of the Act, which is August 29, 2002. We agree with the Commission that only those transactions executed on or after August 29, 2002 are subject to the amended provisions of Section 16 of the Exchange Act and, therefore, reportable under the amended filing deadlines.


Section 16 of the Exchange Act requires insiders to file certain reports relating to their beneficial ownership of all equity securities of an issuer. Such reports include a report of the initial ownership of an insider and a report of changes in such ownership. Prior to the enactment of the Act, Section 16 of the Exchange Act required insiders to report changes in ownership within ten (10) days after the end of each calendar month in which such change in ownership occurred. Section 403 of the Act amended Section 16 of the Exchange Act by requiring such changes in ownership to be reported "before the end of the second business day following the day on which the subject transaction has been executed, or at such other time as the Commission shall establish, by rule, in any case in which the Commission determines that such 2-day period is not feasible".

The Commission indicates in the Proposing Release that it intends to issue final rules that will become effective no later than August 29, 2002 and that the final rules will

In the Proposing Release, the Commission indicates that it does not intend to consider providing, by rule, exemptions based upon "type of issuer, type of insider, or size of transaction". The Commission further indicates that it is considering exempting from the two-business day deadline

We generally agree with the Commission's stated intentions and encourage the Commission to carefully bear in mind each of these intentions in promulgating rules implementing Section 403 of the Act. Many companies, whose insiders are subject to Section 16 of the Exchange Act, maintain plans in which purchases of those companies' equity securities are completed for the account of plan participants upon a schedule that is not entirely known to plan participants, including insiders, until some time after the transactions are completed.4 As the Commission noted in the Earlier Release, the primary benefits to the investing public of accelerated reporting of transactions in a company's equity securities by its insiders are that it enables the investing public to make better-informed investing decisions and that it may provide "information regarding management's view of company performance or prospects" on a timelier basis. It is difficult to imagine how accelerated reporting of purchases in the above-mentioned plans will provide either of these benefits to the investing public, particular the latter. Purchases made on behalf of an insider in a plan without the specific knowledge of the insider can hardly offer an investor any insight into the insider's view of a company's prospects or its performance.

Compass currently maintains several of the above-mentioned plans, including the following: (i) Employee Stock Ownership Plan ("ESOP") / 401(k) Plan, (ii) ESOP Benefit Restoration Plan, (iii) Deferred Compensation Plan, (iv) Compass ShareBuilder Plan, (v) Director & Executive Stock Purchase Plan, (vi) Dividend Reinvestment Plan and (vii) Directors' Compensation and Business Development Plan. Purchases in these plans are made by independent agents of Compass. These agents purchase all shares for the plans and allocate the purchased shares to each participant's account in accordance with the participant's proportional interest. Such purchases are made without the specific knowledge of the insiders or any other participant. Further, most insiders are participants in several of these plans, and the dates on which purchase transactions are completed pursuant to these plans vary from plan to plan.

It is virtually impossible to report these transactions on a basis consistent with the amended two-business day deadline. If these transactions are subject to the two-business day deadline, insiders will be denied the right and opportunity to participate in such plans. We urge the Commission to provide more realistic deadlines, perhaps quarterly deadlines, for the reporting of changes in ownership due to purchases made under such plans.


Section 403 of the Act provides that, not later than one year following the enactment of the Act, (i) change in ownership reports must be filed electronically, (ii) the Commission must post such reports on its website before the end of the business day following the filing of the reports and (iii) issuers whose insiders make such filings must post such reports on their websites before the end of the business day following the filing of the reports. We support the provisions of the Act requiring the electronic filing of the change in ownership forms and recognize the Commission's earlier efforts in this regard. We believe that such filings will enable investors to make better-informed investment and voting decisions.

We, however, do have a concern regarding the effect that this flood of new information may have on investors' ability to locate other important information, such as annual reports, quarterly reports, current reports, proxy materials and registration statements.5 We suggest that, in order to avoid this potential problem, the Commission post the insider transaction reports filed with the Commission in a location on its website separate from the other information filed with the Commission pursuant to the Securities Act of 1933, as amended, and the Exchange Act or potentially on a separate website maintained by the Commission.


In the Proposing Release, the Commission has indicated that it will adopt amendments to Form 4 to conform it to the requirements of Section 403 of the Act. We encourage the Commission to take this opportunity to simplify Form 4 and the other forms required by Section 16 of the Exchange Act.

Currently, these "Section 16" forms are astonishingly complex, and insiders regularly require the assistance of an attorney or other professional adviser in completing them. We do not believe that such complicated filings were, or are, intended under Section 16 of the Exchange Act. Section 16(a)(3), as amended by the Act, merely requires that statements filed with the Commission "contain a statement of the amount of all equity securities of such issuer of which the filing person is the beneficial owner" (in the case of initial registration with national securities exchanges and initial insider ownership) or "indicate ownership by the filing person at the date of filing, any such changes in such ownership ... since the most recent such filing" (in the case of changes in ownership). Given the drastically accelerated filing deadlines, we encourage the Commission to take this opportunity to simplify Form 4 and the other "Section 16" forms.


While we support the Commission's efforts in implementing the provisions of the Act and in attempting to restore investor confidence in our capital markets, we urge the Commission to weigh the burden that each of its rules may place on public companies and their officers and directors against the potential benefit to the investing public and to proceed accordingly. We do not believe that the Commission's rules should drive the undesirable result of discouraging investment in public companies by their insiders, in particular through "allocated" plans.

We respectfully submit these comments with the hope that they are helpful to the Commission's consideration of the proposed rule changes. We would be happy to meet with representatives of the Commission to discuss our comments.

Respectfully submitted,

/s/ Jerry W. Powell

Jerry W. Powell
General Counsel / Secretary
Compass Bancshares, Inc.

1 Section 402 of the Act prohibits public companies from, directly or indirectly, extending, arranging, renewing or maintaining credit in the form of a personal loan to or for their directors or executive officers. Certain types of loans are exempt from this prohibition, including home improvement and manufactured home loans, consumer credit loans, charge cards and extensions of credit by a broker or dealer (other than for the purchase of stock in that public company). Loans made or maintained by a depository institution insured under the Federal Deposit Insurance Act and subject to the insider lending restrictions of Section 22(h) of the Federal Reserve Act are not prohibited under Section 402 of the Act.
2 See Instruction 3 to Paragraph (c) of Item 404 of Regulation S-K of the Exchange Act relating to items (ii), (iii) and (iv).
3 Section 16 of the Exchange Act applies to "[e]very person who is directly or indirectly the beneficial owner of more than 10 per centum of any class of any equity security (other than an exempted security) which is registered pursuant to Section 12 of this title, or who is a director or an officer of the issuer of such security".
4 For example, some plans allow participants, including executive officers and directors, to purchase a company's equity securities through accumulated payroll deductions. In a typical plan, participants make contributions to the plan through payroll deductions, and those accumulated payroll deductions are later used by a designated broker to purchase shares of the company's equity securities within some previously established time period. While the participants are aware that purchases are being made on their behalf during the previously established window, they are unaware of the dates on which the shares are allocated to their accounts until they receive a statement from the plan administrator.
5 In an earlier release (Release Nos. 33-8106 and 34-46084), the Commission proposed significantly increasing the events reportable on Form 8-K that may further increase the information presented to investors.