Planning for Executives - 6 Regulatory rules and restrictions governing a corporate executive’s publicly held stock Flashcards
What is Section 16(a) of the 1934 Act?
This requires insiders of a public company to report their direct and indirect ownership of the company’s equity securities and any transactions in such securities, and to disgorge any “short-swing profits,”
What is Section 16(b) of the 1934 Act?
This prohibits insiders from making short-swing profits by forfeiting/returnin their profit back tot he company within a 6 month period of the registration or acquiring the shares
What are the requirements for Section 16?
- insider files SEC Form 3 at the time
he or she becomes an insider - insider sets forth the number of shares of company stock he
or she owns - Insider sets forth the number of shares he or she is then entitled
to acquire on the exercise of any option or other right.
When was it effective for Section 16(a) to require each public company’s Section 16 reporting persons report transactions in the company’s equity securities within two business days of the execution date?
August 29, 2002
What are the new rules relating to the Section 16(a) reporting requirements?
1) Transactions between officers or directors and the issue are now reportable on Form 4 within two business days.
2) All transactions that were previously reportable on Form 5, continue to be reportable on Form
5 on a deferred basis
3) For Form 4 transactions that occurred prior to August 29, the Form 4s continue to be due by September 10.
4) For Form 5 transactions that occurred prior to August 29, the Form 5s reporting these transactions will continue to be due 45 days after
the issuer’s fiscal-year end.
After August 29, 2002, Form 4 must be filed within two business days of the execution date to report?
(1) all changes in the beneficial
ownership of an issuer’s equity securities not exempt from Section 16(b) of the
Exchange Act
(2) all transactions exempt from Section 16(b) of the Exchange Act
under Rule 16b-3
(3) all exercises and conversions of derivative securities
regardless of whether they are exempt from Section 16(b)
Transactions under 10b5-1 trading plans and Discretionary Transactions, where the reporting person does not select the trade date, are reportable on Form 4
within _____ business days after the reporting person receives notice of the execution of the transaction
(two or four)
two
Transactions pursuant to non-qualified deferred compensation plans and other dividend reinvestment plans (such as an acquisition pursuant to voluntary
contributions of additional funds) will be reportable on Form 4 within ____ business days after the date of execution.
(two or four)
two
Transactions that were previously exempt for Section 16(a) reporting ____ remain exempt.
(will or will not)
will
What is a performance stock?
Performance shares are awarded to employees based on the company’s performance. In taxation, he the employee is taxed at vesting, unless the plan allows for the employee to defer receipt of the cash or shares.
What are the consequences whene there is a disqualifiying disposition of shares in the employer’s perspective?
