SEC Question and Answer of General Applicability 123.18

SEC Question 123.18

Question: Are the dispositions of issuer securities that take place in cashless exercises through a broker eligible for exemption pursuant to Rule 16b-3(e)?


SEC Answer
 

Answer: No. The dispositions that take place pursuant to these transactions are not eligible for exemption pursuant to Rule 16b-3(e) because cashless exercises through a broker do not involve a transaction with the issuer or the issuer's employee benefit plan. [May 23, 2007]

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So here is the SEC Staff stating that dispositions of issuer securities through a broker for cashless exercises are not exempt from Section 16 (b) because the transaction is not a transaction with the issuer (i.e. not a transaction between the officer or director and the issuer).

The transaction is between the officer or director and the broker. Therefore the transaction is not exempt from Section 16 (b).

 

Edited Sun, Apr 28, 2019 3:50 AM

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