Securities Lawyer's Deskbook                          published by The University of Cincinnati College of Law

Rule 101 -- Prohibition of Insider Trading During Pension Fund Blackout Periods

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1. Except to the extent otherwise provided in paragraph (c) of this section, it is unlawful under section 306(a)(1) of the Sarbanes-Oxley Act of 2002 for any director or executive officer of an issuer of any equity security (other than an exempt security), directly or indirectly, to purchase, sell or otherwise acquire or transfer any equity security of the issuer (other than an exempt security) during any blackout period with respect to such equity security, if such director or executive officer acquires or previously acquired such equity security in connection with his or her service or employment as a director or executive officer.
   
   
2. For purposes of section 306(a)(1) of the Sarbanes-Oxley Act of 2002, any sale or other transfer of an equity security of the issuer during a blackout period will be treated as a transaction involving an equity security "acquired in connection with service or employment as a director or executive officer" (as defined in Rule 100(a) of Regulation BTR) to the extent that the director or executive officer has a pecuniary interest (as defined in Rule 100(l)) in such equity security, unless the director or executive officer establishes by specific identification of securities that the transaction did not involve an equity security "acquired in connection with service or employment as a director or executive officer." To establish that the equity security was not so acquired, a director or executive officer must identify the source of the equity securities and demonstrate that he or she has utilized the same specific identification for any purpose related to the transaction (such as tax reporting and any applicable disclosure and reporting requirements).
   
   
3. The following transactions are exempt from section 306(a)(1) of the Sarbanes-Oxley Act of 2002:
   
   
   1. Any acquisition of equity securities resulting from the reinvestment of dividends in, or interest on, equity securities of the same issuer if the acquisition is made pursuant to a plan providing for the regular reinvestment of dividends or interest and the plan provides for broad-based participation, does not discriminate in favor of employees of the issuer and operates on substantially the same terms for all plan participants;
      
      
   2. Any purchase or sale of equity securities of the issuer pursuant to a contract, instruction or written plan entered into by the director or executive officer that satisfies the affirmative defense conditions of Rule 10b5-1(c); provided that the director or executive officer did not enter into or modify the contract, instruction or written plan during the blackout period (as defined in Rule 100(b)) in question, or while aware of the actual or approximate beginning or ending dates of that blackout period (whether or not the director or executive officer received notice of the blackout period as required by Section 306(a)(6) of the Sarbanes-Oxley Act of 2002;
      
      
   3. Any purchase or sale of equity securities, other than a Discretionary Transaction (as defined in Rule 16b-3(b)(1)), pursuant to a Qualified Plan (as defined in Rule 16b-3(b)(4)), an Excess Benefit Plan (as defined in Rule 16b-3(b)(2)) or a Stock Purchase Plan (as defined in Rule 16b-3(b)(5)) (or, in the case of a foreign private issuer, pursuant to an employee benefit plan that either (i) has been approved by the taxing authority of a foreign jurisdiction, or (ii) is eligible for preferential treatment under the tax laws of a foreign jurisdiction because the plan provides for broad-based employee participation); provided that a Discretionary Transaction that meets the conditions of paragraph (c)(2) of this section also shall be exempt;
      
      
   4. Any grant or award of an option, stock appreciation right or other equity compensation pursuant to a plan that, by its terms:
      
      
      1. Permits directors or executive officers to receive grants or awards; and
         
         
      2. Either:
         
         
         1. States the amount and price of securities to be awarded to designated directors and executive officers or categories of directors and executive officers (though not necessarily to others who may participate in the plan) and specifies the timing of awards to directors and executive officers; or
            
            
         2. Sets forth a formula that determines the amount, price and timing, using objective criteria (such as earnings of the issuer, value of the securities, years of service, job classification, and compensation levels);
            
            
   5. Any exercise, conversion or termination of a derivative security that the director or executive officer did not write or acquire during the blackout period (as defined in Rule 100(b)) in question, or while aware of the actual or approximate beginning or ending dates of that blackout period (whether or not the director or executive officer received notice of the blackout period as required by Section 306(a)(6) of the Sarbanes-Oxley Act of 2002); and either:
      
      
      1. The derivative security, by its terms, may be exercised, converted or terminated only on a fixed date, with no discretionary provision for earlier exercise, conversion or termination; or
         
         
      2. The derivative security is exercised, converted or terminated by a counterparty and the director or executive officer does not exercise any influence on the counterparty with respect to whether or when to exercise, convert or terminate the derivative security;
         
         
   6. Any acquisition or disposition of equity securities involving a bona fide gift or a transfer by will or the laws of descent and distribution;
      
      
   7. Any acquisition or disposition of equity securities pursuant to a domestic relations order, as defined in the Internal Revenue Code or Title I of the Employment Retirement Income Security Act of 1974, or the rules thereunder;
      
      
   8. Any sale or other disposition of equity securities compelled by the laws or other requirements of an applicable jurisdiction;
      
      
   9. Any acquisition or disposition of equity securities in connection with a merger, acquisition, divestiture or similar transaction occurring by operation of law;
      
      
   10. The increase or decrease in the number of equity securities held as a result of a stock split or stock dividend applying equally to all securities of that class, including a stock dividend in which equity securities of a different issuer are distributed; and the acquisition of rights, such as shareholder or pre-emptive rights, pursuant to a pro rata grant to all holders of the same class of equity securities;
       
       
   11. Any acquisition or disposition of an asset-backed security, as defined in Rule 229.1101 of this chapter.
       
       

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