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4000 - Advisory Opinions


FDIC Will Not Require Compliance With New SEC Rule 16b--3 Until SEC Sets Final Effective Date

FDIC--93--33

June 21, 1993

Gerald J. Gervino, Senior Attorney

You have requested confirmation that the FDIC will not require compliance with the provisions of the new Securities and Exchange Commission Rule 16b--3 by securities issuers within our jurisdiction prior to the effective date of the provisions as applied to issuers subject to the jurisdiction of the SEC. New Rule 16b--3 imposes requirements which employer stock benefit plans must satisfy in order to qualify for an exemption from the short-swing liability provisions of section 16 of the Securities Exchange Act of 1934, as amended.

The FDIC has adopted the new Rule 16b--3 by cross-reference from § 335.411 of our regulations, 57 FR 4703 (1992). Like the SEC, we initially established a delayed effective date for the new Rule 16b--3 in particular. Our effective date was set at June 30, 1993. The SEC, which had an earlier effective date, has announced a delay until September 30, 1993 for the effectiveness of the new Rule 16b--3. The SEC indicated that it might be making substantive changes in the new Rule before that date.

As of yet, no new changes have been announced for the new Rule 16b--3. There is no assurance that the SEC will not amend its regulations between our effective date of June 30, 1993 and the SEC's adjusted effective date of September 30, 1993. We cannot discount the possibility that the SEC will again delay the effective date of its 1991 amendments to the new Rule 16b--3. In either of these two cases, banks filing under Part 335 might be subjected to an extra adjustment of their plans in addition to that required for entities filing with the SEC. You feel that banks subject to Part 335 should not be subjected to this duplication and expense.

Because the SEC's change in effective dates is not a part of the new Rule 16b--3 and is not clearly incorporated by reference into Part 335 by § 335.411 of our regulations, you request confirmation that the SEC will not require compliance with the new Rule 16b--3 until September 30, 1993 or such later date as the SEC determines will be the effective date of the new Rule 16b--3 for securities issuers subject to the SEC's jurisdiction.

When we adopted the SEC's comprehensive revision of the its rule on ownership reports and insider trading, we set an effective date later than the SEC's original effective date because our adoption date was subsequent to the SEC adoption. This gave insured nonmember banks at least as much advance notice for compliance with the new Rule 16b--3 and the rest of the SEC's revision to its regulations under section 16 of the Act. 56 FR 7265 (1991). By postponing its effective date in contemplation of possible changes in the regulation, the SEC has placed insured nonmember banks in a disadvantaged position. This was not contemplated at the time of our revision and was never our intent. The resulting inequity is inconsistent with § 335.411(a) of our regulations. § 335.411(a) provides:

Persons subject to section 16 of the Act with respect to securities registered under Part 335 shall follow the applicable and currently effective SEC regulations issued under section 16 of the Act (17 CFR 240.16a--1 through 240.16e--1). . . . [Emphasis Supplied].

While we have authority to delay the effectiveness of an SEC rule, where appropriate, the above language of our regulation precludes application of an SEC regulation under § 335.411(a) until that regulation is effective. For both of the reasons set forth above, we will not consider the provisions of the new Rule 16b--3 mandatory for banks subject to Part 335 until the SEC has made its amendments effective.

If you have any further questions, please write or call me at (202) 898-3723.


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