15874 Federal Register / Vol. 76, No. 55 / Tuesday, March 22, 2011 / Proposed Rules 

Subject 

(d) Air Transport Association (ATA) of 

America Code 05. 

Reason 

(e) The mandatory continuing 

airworthiness information (MCAI) states: 

* * * * * 

The airworthiness limitations applicable to 

the Safe Life Airworthiness Limitation Items 

(SL ALI) are given in Airbus A330 ALS Part 

1 and A340 ALS Part 1, which are approved 

by the European Aviation Safety Agency 

(EASA). 

The revision 05 of Airbus A340 ALS Part 

1 introduces more restrictive maintenance 

requirements and/or airworthiness 

limitations. Failure to comply with this 

revision constitutes an unsafe condition. 

For A330 aeroplanes, this EASA AD retains 

the requirements of EASA AD 2010–0131, 

which it supersedes. 

For A340 aeroplanes, this EASA AD 

supersedes EASA AD 2009–0192, and 

requires the implementation of the new or 

more restrictive maintenance requirements 

and/or airworthiness limitations as specified 

in Airbus A340 ALS Part 1, revision 05. 

The unsafe condition is fatigue cracking, 

damage, and corrosion in certain structure, 

which could result in reduced structural 

integrity of the airplane. 

Compliance 

(f) You are responsible for having the 

actions required by this AD performed within 

the compliance times specified, unless the 

actions have already been done. 

Restatement of Requirements of Paragraph 

(f)(2) of AD 2006–09–07 

Airworthiness Limitations Revision 

(g) For Model A330–201, –202, –203, –223, 

–243, –301, –302, –303, –321, –322, –323, 

–341, –342, and –343 airplanes: Within 3 

months after June 7, 2006 (the effective date 

of AD 2006–09–07), revise the ALS of the 

Instructions for Continued Airworthiness by 

incorporating Section 9–1 ‘‘Life limits 

monitored parts’’ Revision 05, dated April 7, 

2005, of the Airbus A330 Maintenance 

Planning Document, into the ALS. 

New Requirements of This AD 

Revise the Maintenance Program 

(h) Within 3 months after the effective date 

of this AD: Revise the maintenance program 

by incorporating Airbus A330 ALS Part 1, 

‘‘Safe Life Airworthiness Limitation Items,’’ 

Revision 05, dated July 29, 2010. Comply 

with all Airbus Safe Life ALS Part 1, ‘‘A330 

Airworthiness Limitation Items,’’ Revision 

05, dated July 29, 2010, at the times specified 

therein. Accomplishing the revision in this 

paragraph ends the requirements in 

paragraph (g) of this AD. 

Alternative Intervals or Limits 

(i) Except as provided by paragraph (j)(1) 

of this AD, after accomplishing the actions 

specified in paragraph (h) of this AD, no 

alternatives to the maintenance tasks, 

intervals, or limitations specified in 

paragraph (h) of this AD may be used. 

FAA AD Differences 

Note 2: This AD differs from the MCAI 

and/or service information as follows: 

(1) Although the applicability in the MCAI 

also identifies Airbus Model A340–200 –300, 

–500, and –600 series airplanes; this AD only 

applies to Airbus Model A330–200 and –300 

series airplanes. FAA AD 2011–04–06 

addresses Model A340–200, –300, –500, and 

–600 series airplanes. 

(2) The applicability in the MCAI does not 

specify Model A330–223F and –243F 

airplanes. Those models are listed in the 

applicability of this AD. 

(3) The MCAI requires incorporating 

Airbus A330 ALS Part 1, ‘‘Safe Life 

Airworthiness Limitation Items,’’ Revision 

04, dated January 28, 2010; however, this AD 

requires incorporating Airbus A330 ALS Part 

1, ‘‘Safe Life Airworthiness Limitation Items,’’ 

Revision 05, dated July 29, 2010, which adds 

the airworthiness limitation items for Model 

A330–223F and –243F airplanes. 

Other FAA AD Provisions 

(j) The following provisions also apply to 

this AD: 

(1) Alternative Methods of Compliance 

(AMOCs): The Manager, International 

Branch, ANM–116, FAA, has the authority to 

approve AMOCs for this AD, if requested 

using the procedures found in 14 CFR 39.19. 

In accordance with 14 CFR 39.19, send your 

request to your principal inspector or local 

Flight Standards District Office, as 

appropriate. If sending information directly 

to the International Branch, send it to ATTN: 

Vladimir Ulyanov, Aerospace Engineer, 

International Branch, ANM–116, Transport 

Airplane Directorate, FAA, 1601 Lind 

Avenue, SW., Renton, Washington 98057– 

3356; telephone (425) 227–1138; fax (425) 

227–1149. Information may be e-mailed to: 9- 

ANM-116-AMOC-REQUESTS@faa.gov. 

Before using any approved AMOC, notify 

your appropriate principal inspector, or 

lacking a principal inspector, the manager of 

the local flight standards district office/ 

certificate holding district office. The AMOC 

approval letter must specifically reference 

this AD. 

(2) Airworthy Product: For any requirement 

in this AD to obtain corrective actions from 

a manufacturer or other source, use these 

actions if they are FAA-approved. Corrective 

actions are considered FAA-approved if they 

are approved by the State of Design Authority 

(or their delegated agent). You are required 

to assure the product is airworthy before it 

is returned to service. 

Related Information 

(k) Refer to MCAI EASA Airworthiness 

Directive 2010–0253, dated December 3, 

2010; and Airbus A330 ALS Part 1, ‘‘Safe Life 

Airworthiness Limitation Items,’’ Revision 

05, dated July 29, 2010; for related 

information. 

Issued in Renton, Washington, on March 

14, 2011. 

Ali Bahrami, 

Manager, Transport Airplane Directorate, 

Aircraft Certification Service. 

[FR Doc. 2011–6644 Filed 3–21–11; 8:45 am] 

BILLING CODE 4910–13–P 

SECURITIES AND EXCHANGE 

COMMISSION 

17 CFR Part 240 

[Release No. 34–64087; File No. S7–10–11] 

RIN 3235–AK98 

Beneficial Ownership Reporting 

Requirements and Security-Based 

Swaps 

AGENCY: Securities and Exchange 

Commission. 

ACTION: Proposed rule. 

SUMMARY: To preserve the application of 

our existing beneficial ownership rules 

to persons who purchase or sell 

security-based swaps after the effective 

date of new Section 13(o) of the 

Securities Exchange Act of 1934, we are 

proposing to readopt without change the 

relevant portions of Rules 13d–3 and 

16a–1. The proposals are intended to 

clarify that following the July 16, 2011 

statutory effective date of Section 13(o), 

which was added by Section 766 of the 

Dodd-Frank Wall Street Reform and 

Consumer Protection Act (‘‘Dodd-Frank 

Act’’), persons who purchase or sell 

security-based swaps will remain within 

the scope of these rules to the same 

extent as they are now. 

DATES: Comments should be received on 

or before April 15, 2011. 

ADDRESSES: Comments may be 

submitted by any of the following 

methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/proposed.shtml); 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number S7–10–11 on the subject line; 

or 

• Use the Federal Rulemaking Portal 

(http://www.regulations.gov). Follow the 

instructions for submitting comments. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number S7–10–11. This file number 

should be included on the subject line 

if e-mail is used. To help us process and 

review your comments more efficiently, 

please use only one method. The 

Commission will post all comments on 

the Commission’s Internet website 

(http://www.sec.gov/rules/ 

proposed.shtml). Comments are also 

available for website viewing and 


srobinson on DSKHWCL6B1PROD with PROPOSALS
Federal Register / Vol. 76, No. 55 / Tuesday, March 22, 2011 / Proposed Rules 15875 

1 17 CFR 240.13d–3. 

2 17 CFR 240.16a–1. 

3 15 U.S.C. 78a et seq. 

4Pub. L. 111–203, 124 Stat. 1797. 

5See Section 774 of the Dodd-Frank Act, Pub. L. 

111–203, 124 Stat 1376 (2010), which states that 

Section 766 becomes effective ‘‘360 Days after the 

date of enactment.’’ 

6A ‘‘security-based swap’’ is defined in Section 

3(a)(68) [15 U.S.C. 78c(a)(68), added by Section 

761(a) of the Dodd-Frank Act]. Section 712(d) of the 

Dodd-Frank Act provides that the Commission and 

the Commodity Futures Trading Commission 

(‘‘CFTC’’), in consultation with the Board of 

Governors of the Federal Reserve System (‘‘Federal 

Reserve’’), shall jointly further define, among others, 

the terms ‘‘swap,’’ ‘‘security-based swap,’’ and 

‘‘security-based swap agreement.’’ These terms are 

defined in Sections 721 and 761 of the Dodd-Frank 

Act. The definitions of the terms ‘‘swap,’’ ‘‘securitybased swap,’’ and ‘‘security-based swap agreement,’’ 

and regulations regarding mixed swaps also are 

expected to be the subject of a separate rulemaking 

by the Commission and the CFTC. In addition, 

Section 721(c) and 761(b) of the Dodd-Frank Act 

provide the CFTC and the Commission with the 

authority to define the terms ‘‘swap’’ and ‘‘securitybased swap,’’ among other terms, to include 

transactions that have been structured to evade the 

requirements of subtitles A and B of Title VII, 

respectively, of the Dodd-Frank Act. To assist the 

Commission and CFTC in further defining the terms 

specified above, the Commission and the CFTC 

sought comment from interested parties. See 

Definitions Contained in Title VII of Dodd-Frank 

Wall Street Reform and Consumer Protection Act, 

Release No. 34–62717 (Aug. 13, 2010) [75 FR 51429] 

(advance joint notice of proposed rulemaking 

regarding definitions). 

7 15 U.S.C. 78p. 

8 In addition, the proposed readoption of the 

relevant portions of existing Rules 13d–3 and 16a– 

1(a) is neither intended nor expected to change any 

existing administrative or judicial application or 

interpretation of the rules. 

printing in the Commission’s Public 

Reference Room, 100 F Street, NE., 

Washington, DC 20549, on official 

business days between the hours of 10 

a.m. and 3 p.m. All comments received 

will be posted without change; we do 

not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. 

FOR FURTHER INFORMATION CONTACT: 

Nicholas Panos, Senior Special Counsel, 

at (202) 551–3440, or Anne Krauskopf, 

Senior Special Counsel, at (202) 551– 

3500, Division of Corporation Finance, 

U.S. Securities and Exchange 

Commission, 100 F Street, NE., 

Washington, DC 20549–3628. 

SUPPLEMENTARY INFORMATION: We are 

proposing to readopt without change 

portions of Rules 13d–3 1 and 16a–1 2

under the Securities Exchange Act of 

1934 (‘‘Exchange Act’’).3

Table of Contents 

I. Overview and Background 

A. Overview 

B. Sections 13(d) and 13(g) and Rule 

13d–3 

C. Application of the Section 13 Beneficial 

Ownership Regulatory Provisions to 

Persons Who Purchase or Sell SecurityBased Swaps 

D. Section 16 and Rules 16a–1(a)(1) and 

16a–1(a)(2) 

E. Application of the Section 16 Beneficial 

Ownership Regulatory Provisions to 

Holdings and Transactions in SecurityBased Swaps 

II. Discussion of the Rule Proposals 

A. Beneficial Ownership Determinations 

Under Section 13 

1. Rule 13d–3(a) 

2. Rule 13d–3(b) 

3. Rule 13d–3(d)(1) 

B. Section 16 Beneficial Ownership Rules 

1. Rule 16a–1(a)(1) 

2. Rule 16a–1(a)(2) 

C. General Request for Comment 

III. Paperwork Reduction Act 

A. Background 

B. Burden and Cost Estimates Related to 

the Proposed Amendments 

C. Request for Comment 

IV. Economic Analysis 

A. Introduction 

B. Benefits, Including the Impact on 

Efficiency, Competition and Capital 

Formation 

1. When the Rules We Propose To Readopt 

Already Apply to Persons Who Purchase 

or Sell Security-Based Swaps 

2. If the Rules We Propose Did Not Already 

Apply to Persons Who Purchase or Sell 

Security-Based Swaps 

a. Benefits, Including the Impact on 

Efficiency 

b. Benefits, Including the Impact on 

Competition 

c. Benefits, Including the Impact on Capital 

Formation 

C. Costs, Including the Impact on 

Efficiency, Competition and Capital 

Formation 

1. When the Rules We Propose Already 

Apply to Persons Who Purchase or Sell 

Security-Based Swaps 

2. If the Rules We Propose Did Not Already 

Apply to Persons Who Purchase or Sell 

Security-Based Swaps 

D. Request for Comment 

V. Small Business Regulatory Enforcement 

Fairness Act 

VI. Regulatory Flexibility Act Certification 

VII. Statutory Authority 

I. Overview and Background 

A. Overview 

Section 766 of the Dodd-Frank Act 

amends the Exchange Act by adding 

Section 13(o), which provides that ‘‘[f]or 

purposes of this section and section 16, 

a person shall be deemed to acquire 

beneficial ownership of an equity 

security based on the purchase or sale 

of a security-based swap, only to the 

extent that the Commission, by rule, 

determines after consultation with the 

prudential regulators and the Secretary 

of the Treasury, that the purchase or 

sale of the security-based swap, or class 

of security-based swap, provides 

incidents of ownership comparable to 

direct ownership of the equity security, 

and that it is necessary to achieve the 

purposes of this section that the 

purchase or sale of the security-based 

swaps, or class of security-based swap, 

be deemed the acquisition of beneficial 

ownership of the equity security.’’ 

Section 766 and Section 13(o) 4 become 

effective on July 16, 2011.5

The reason for this rulemaking, as 

discussed in more detail below, is to 

preserve the existing scope of our rules 

relating to beneficial ownership after 

Section 766 of the Dodd-Frank Act 

becomes effective. Absent rulemaking 

under Section 13(o), Section 766 may be 

interpreted to render the beneficial 

ownership determinations made under 

Rule 13d–3 inapplicable to a person 

who purchases or sells a security-based 

swap.6 In that circumstance, it could 

become possible for an investor to use 

a security-based swap to accumulate an 

influential or control position in a 

public company without public 

disclosure. Similarly, a person who 

holds a security-based swap that confers 

beneficial ownership of the referenced 

equity securities under Section 13 and 

existing Rule 13d–3, or otherwise 

conveys such beneficial ownership 

through an understanding or 

relationship based upon the purchase or 

sale of the security-based swap, may no 

longer be considered a ten percent 

holder subject to Section 16 of the 

Exchange Act.7 Further, an insider may 

no longer be subject to Section 16 

reporting and short-swing profit 

recovery through transactions in 

security-based swaps that confer a right 

to receive either the underlying equity 

securities or cash. In addition, private 

parties may have difficulty making, or 

exercising private rights of action to 

seek to have made, determinations of 

beneficial ownership arising from the 

purchase or sale of a security-based 

swap. 

To preserve the application of our 

existing beneficial ownership rules to 

persons who purchase or sell securitybased swaps after the effective date of 

Section 13(o), we are proposing to 

readopt without change the relevant 

portions of Rules 13d–3 and 16a–1. 

These proposals are limited to the 

continued application of these rules by 

the Commission on the same basis that 

they currently apply to persons who use 

security-based swaps.8 While these 

proposals are only intended to preserve 

the existing application of the beneficial 

ownership rules as they relate to 

security-based swaps, our staff is 

engaged in a separate project to develop 

proposals to modernize reporting under 


srobinson on DSKHWCL6B1PROD with PROPOSALS
15876 Federal Register / Vol. 76, No. 55 / Tuesday, March 22, 2011 / Proposed Rules 

9 15 U.S.C. 78m(d). 

10 15 U.S.C. 78m(g). 

11Section 13(d)(1) applies to any equity security 

of a class that is registered pursuant to Section 12 

of the Exchange Act, any equity security issued by 

a ‘‘native corporation’’ pursuant to Section 37(d)(6) 

of the Alaska Native Claims Settlement Act, and 

any equity security described in Exchange Act Rule 

13d–1(i) [17 CFR 240.13d–1(i)]. Rule 13d–1(i) 

explains that for purposes of Regulation 13D–G, 

‘‘the term ‘equity security’ means any equity 

security of a class which is registered pursuant to 

section 12 of that Act, or any equity security of any 

insurance company which would have been 

required to be so registered except for the 

exemption contained in section 12(g)(2)(G) of the 

Act, or any equity security issued by a closed-end 

investment company registered under the 

Investment Company Act of 1940; Provided, Such 

term shall not include securities of a class of nonvoting securities.’’ 

12Adoption of Beneficial Ownership Disclosure 

Requirements, Release No. 34–13291 (Feb. 24, 1977) 

[42 FR 12342]. 

13The Commission, in recognition of the breadth 

of this provision, has emphasized its necessity in 

order ‘‘to obtain disclosure from all those persons 

who have the ability to change or influence 

control.’’ Filing and Disclosure Requirements 

Relating to Beneficial Ownership, Release No. 34– 

14692 (Apr. 21, 1978) [43 FR 18484]. 

14See Example 8 from Release No. 34–13291 for 

an illustration of how Rule 13d–3(b) can apply to 

a grant of an irrevocable proxy. 

15S. Rep. No. 550, at 7 (1967); H.R. Rep. No. 1711, 

at 8 (1968); Full Disclosure of Corporate Equity 

Ownership and in Corporate Takeover Bids, 

Hearings on S. 510 before the S. Banking and 

Currency Comm., 90th Cong. 16 (1967) (‘‘The bill 

now before you has a much closer relationship to 

existing provisions of the Exchange Act regulating 

solicitation of proxies, since acquisitions of blocks 

of voting securities are typically alternatives to 

proxy solicitations, as methods of capturing or 

preserving control.’’); Takeover Bids, Hearings on 

H.R. 14475 and S.510 before the Subcomm. on 

Commerce and Fin. of the H. Comm. on Interstate 

and Foreign Commerce, 90th Cong. (1968). 

16 17 CFR 240.13d–101. 

17See Section 13(d)(6) and Rule 13d–1(b)–(d). 

18 17 CFR 240.13d–102. 

19See Amendments to Beneficial Ownership 

Reporting Requirements, Release No. 34–39538 

(Jan. 12, 1998) [63 FR 2854] for a description of the 

types of persons eligible to file a Schedule 13G. The 

investors eligible to report beneficial ownership on 

Schedule 13G are commonly referred to as qualified 

institutional investors under Rule 13d–1(b), passive 

investors under Rule 13d–1(c), and exempt 

investors under Rule 13d–1(d). Unlike Section 

13(d), Section 13(g) applies regardless of whether 

beneficial ownership has been ‘‘acquir[ed]’’ within 

the meaning of Section 13(d) or is viewed as not 

having been acquired for purposes of Section 13(d). 

For example, persons who obtain all their securities 

before the issuer registers the subject securities 

under the Exchange Act are not subject to Section 

13(d) and persons who acquire not more than two 

percent of a class of subject securities within a 12- 

month period are exempt from Section 13(d) by 

Section 13(d)(6)(B), but in both cases are subject to 

Section 13(g). 

20See Computer Network Corp. v. Spohler [1982 

Transfer Binder] Fed Sec. L. Rep (CCH) ¶ 98,623 at 

93,087 (D.D.C. March 23, 1982). See also, San 

Exchange Act Sections 13(d) 9 and 

13(g).10

B. Sections 13(d) and 13(g) and Rule 

13d–3 

Sections 13(d) and 13(g) require a 

person who is the beneficial owner of 

more than five percent of certain equity 

securities 11 to disclose information 

relating to such beneficial ownership. 

While these statutory sections do not 

define the term ‘‘beneficial owner,’’ the 

Commission has adopted rules that 

determine the circumstances under 

which a person is or may be deemed to 

be a beneficial owner. In order to 

provide objective standards for 

determining when a person is or may be 

deemed to be a beneficial owner subject 

to Section 13(d), the Commission 

adopted Exchange Act Rule 13d–3.12

Application of the standards within 

Rule 13d–3 allows for case-by-case 

determinations as to whether a person is 

or becomes a beneficial owner, 

including a person who uses a securitybased swap. 

Under Rule 13d–3(a), a beneficial 

owner includes any person who directly 

or indirectly has or shares voting power 

and/or investment power over an equity 

security. Voting power includes ‘‘the 

power to vote, or to direct the voting of, 

such security’’ and investment power 

includes ‘‘the power to dispose, or to 

direct the disposition, of such security.’’ 

Identifying each person who possesses 

voting or investment power requires an 

analysis of all of the relevant facts and 

circumstances. Rule 13d–3(a) provides 

that a beneficial owner ‘‘includes any 

person who, directly or indirectly, 

through any contract, arrangement, 

understanding, relationship or 

otherwise, has or shares’’ voting power 

and/or investment power over an equity 

security. The rule, by its terms, provides 

that a person may become a beneficial 

owner through means other than an 

acquisition of securities or formal 

agreement, and that a person may be a 

beneficial owner even if that person 

shares voting or investment power with 

another person and is only able to 

indirectly exercise such power by 

directing the voting or disposition of the 

subject security.13

Rule 13d–3(b) provides that ‘‘[a]ny 

person who, directly or indirectly, 

creates or uses a trust, proxy, power of 

attorney, pooling arrangement or any 

other contract, arrangement, or device 

with the purpose [or] effect of divesting 

such person of beneficial ownership of 

a security or preventing the vesting of 

such beneficial ownership as part of a 

plan or scheme to evade the reporting 

requirements of section 13(d) or (g) of 

the Act shall be deemed for purposes of 

such sections to be the beneficial owner 

of such security.’’ In contrast to Rule 

13d–3(a), application of Rule 13d–3(b) 

may result in a beneficial ownership 

determination even if a person does not 

hold voting and/or investment power.14

Under Rule 13d–3(d)(1), a person is 

deemed a beneficial owner if the person 

has the right to acquire beneficial 

ownership, as defined in Rule 13d–3(a), 

at any time within 60 days. The right 

includes, but is not limited to, any right 

to acquire through the exercise of an 

option, warrant or right, conversion of a 

convertible security, or power to revoke 

a trust or similar agreement. Rule 13d– 

3(d)(1) further provides that if a person 

acquires an option, warrant, right, 

convertible security or power to revoke 

with the purpose or with the effect of 

changing or influencing control of the 

issuer, or as a participant in a 

transaction having such purpose or 

effect, then the person is deemed to be 

a beneficial owner immediately, 

regardless of when the option, right, 

convertible security or power to revoke 

is exercisable or convertible. 

If beneficial ownership, as determined 

in accordance with Rules 13d–3(a), 

13d–3(b) and 13d–3(d)(1), exceeds the 

designated thresholds, beneficial 

owners are required to provide specified 

disclosures. The disclosures are 

intended to be required of persons who 

have the potential to influence or gain 

control of the issuer.15 Specifically, 

Section 13(d) and the rules thereunder 

require that a person file with the 

Commission, within ten days after 

acquiring, directly or indirectly, 

beneficial ownership of more than five 

percent of a class of equity securities, a 

disclosure statement on Schedule 

13D,16 subject to certain exceptions.17

Section 13(g) and the rules thereunder 

enable certain persons who are the 

beneficial owners of more than five 

percent of a class of certain equity 

securities to instead file a short form 

Schedule 13G,18 assuming certain 

conditions have been met.19 These 

statutory provisions and corresponding 

rules also impose obligations on 

beneficial owners to report changes in 

the information filed. 

The beneficial ownership disclosure 

requirements of Schedules 13D and 13G 

were designed to provide disclosures to 

security holders regarding persons 

holding significant positions in public 

companies, such as the identity of the 

beneficial owners, the amount of 

beneficial ownership, the existence of a 

beneficial owner group, and in the case 

of persons who file a Schedule 13D, 

plans or proposals regarding the issuer. 

The disclosures made in Schedules 13D 

and 13G have been viewed as 

contributing to the information available 

to help investors make fully informed 

investment decisions with respect to 

their securities.20 An additional 


srobinson on DSKHWCL6B1PROD with PROPOSALS
Federal Register / Vol. 76, No. 55 / Tuesday, March 22, 2011 / Proposed Rules 15877 

Francisco Real Estate Investors v. REIT of America, 

[1982 Transfer Binder] Fed. Sec. L. Rep. (CCH) 

¶ 98,874, at 94,557 (D. Mass. Nov. 19, 1982), aff’d 

in part, rev’d in part 701 F.2d 1000 (1st Cir. 1983). 

The Commission also has recognized that Section 

13(d) was enacted primarily to provide ‘‘adequate 

disclosure to stockholders in connection with any 

substantial acquisition of securities within a 

relatively short time.’’ Adoption of Beneficial 

Ownership Disclosure Requirements, Release No. 

34–13291, (Feb. 24, 1977) [42 FR 12342] citing S. 

Rep. No. 550, at 7 (1967). 

21H.R. Rep. No. 1655, at 3 (1970); see, e.g., 

Additional Consumer Protection in Corporate 

Takeovers and Increasing the Sec. Act Exemptions 

for Small Businessmen, Hearing Before the Sec. 

Subcomm. of the S. Banking and Currency Comm. 

on S. 336 and S. 343, 91st Cong. (1970). See also 

Bath Indus. v. Blot, 427 F.2d 97, 113 (7th Cir. 1970). 

In addition, disclosures made in compliance with 

Sections 13(d) and 13(g) also provide issuers that 

file registration statements, annual reports, proxy 

statements and other disclosure documents with the 

information they use to disclose all beneficial 

owners of more than five percent of certain classes 

of the issuer’s equity securities as required by Item 

403 of Regulation S–K. [17 CFR 229.403]. See 

generally H.R. Rep. No. 1655. 

22H.R. Rep. No. 1711, at 4 (1968); S. Rep. No. 550, 

at 3 (1968). Both the House and Senate reports 

emphasized that Section 13(d) was enacted ‘‘to 

require full and fair disclosure for the benefit of 

investors while at the same time providing the 

offeror and management equal opportunity to fairly 

present their case.’’ 

23 GAF Corp. v. Milstein, 453 F.2d 709, 717 (2d. 

Cir. 1971), cert. denied, 406 U.S. 910 (1972), cited 

by the Commission at footnote 16 in the following 

administrative proceeding: In the Matter of Harvey 

Katz, Release No. 34–20893 (April 25, 1984). A 

measure of what Congress considered to be large 

and rapid acquisitions is Section 13(d)(6)(B), which 

exempts acquisitions of two percent or less in the 

preceding twelve months. 

24 General Aircraft Corp. v. Lampert, 556 F.2d 90, 

94 (1st Cir. 1977); see also S. Rep. No. 550, at 3 

(‘‘But where no information is available about the 

persons seeking control, or their plans, the 

shareholder is forced to make a decision on the 

basis of a market price which reflects an evaluation 

of the company based on the assumption that the 

present management and its policies will continue. 

The persons seeking control, however, have 

information about themselves and about their plans 

which, if known to investors, might substantially 

change the assumptions on which the market price 

is based.’’). 

25Takeover Bids, Hearings on 14475 and S. 510 

before the Subcomm. on Commerce and Fin. of the 

H. Comm. on Interstate and Foreign Commerce, 

90th Cong. 12 (1968) (statement of Hon. Manuel F. 

Cohen, Chairman, U.S. Securities and Exchange 

Commission, ‘‘But I might ask, how can an investor 

evaluate the adequacy of the price if he cannot 

assess the possible impact of a change in control? 

Certainly without such information he cannot judge 

its adequacy by the current or recent market price. 

That price presumably reflects the assumption that 

the company’s present business, control and 

management will continue. If that assumption is 

changed, is it not likely that the market price might 

change?’’). 

26See note 6 above. 

27Except as provided below regarding Section 16, 

this release does not address whether, or under 

what circumstances, an agreement, contract, or 

transaction that is labeled a security-based swap 

(including one which confers voting and/or 

investment power, grants a right to acquire one or 

more equity securities, or is used with the purpose 

or effect of divesting or preventing the vesting of 

beneficial ownership as part of a plan or scheme to 

evade the beneficial ownership reporting 

requirements) would be a purchase or sale of the 

underlying securit(ies) and treated as such for 

purposes of the federal securities laws, instead of 

a security-based swap. In this regard, among other 

things, the definition of ‘‘swap’’ (and therefore the 

definition of ‘‘security-based swap’’) specifically 

excludes the purchase or sale of one or more 

securities on a fixed or contingent basis, unless the 

agreement, contract, or transaction predicates the 

purchase or sale on the occurrence of a bona fide 

contingency that might reasonably be expected to 

affect or be affected by the creditworthiness of a 

party other than a party to the agreement, contract, 

or transaction. See Sections 1a(47)(B)(v) and (vi) of 

the Commodity Exchange Act, 7 U.S.C. 1a(47)(B)(v) 

and (vi). 

28Exchange Act Section 13(d)(1) applies after a 

person directly or indirectly acquires beneficial 

ownership, regardless of whether the person has 

made an acquisition of the equity securities. 29 15 U.S.C. 78l. 

regulatory objective served by these 

disclosures is to provide management of 

the issuer with information to 

‘‘appropriately protect the interests of its 

security holders.’’ 21 In enacting the 

original Section 13(d) legislation, 

Congress made clear that its new 

regulatory initiative was intended to 

avoid ‘‘tipping the balance of regulation 

either in favor of management or in 

favor of the person [potentially] making 

the takeover bid.’’ 22 In addition to 

providing information to issuers and 

security holders, Section 13(d) was 

adopted with a view toward alerting 

‘‘the marketplace to every large, rapid 

aggregation or accumulation of 

securities, regardless of technique 

employed, which might represent a 

potential shift in corporate control.’’ 23

On the basis of the information 

disclosed, the market would ‘‘value the 

shares accordingly’’ 24 due to the 

increased prospects for price 

discovery.25

C. Application of the Section 13 

Beneficial Ownership Regulatory 

Provisions to Persons Who Purchase or 

Sell Security-Based Swaps 

As noted above, the term ‘‘securitybased swap’’ is defined in Section 

3(a)(68) of the Exchange Act.26 Under 

our existing rules, holders of securitybased swaps may be subject to 

beneficial ownership reporting. As 

explained in more detail below, in cases 

where a security-based swap confers 

voting and/or investment power (or a 

person otherwise acquires such power 

based on the purchase or sale of a 

security-based swap), grants a right to 

acquire an equity security, or is used 

with the purpose or effect of divesting 

or preventing the vesting of beneficial 

ownership as part of a plan or scheme 

to evade the reporting requirements, our 

existing regulatory regime may require 

the reporting of beneficial ownership.27

First, under existing Rule 13d–3(a), to 

the extent a security-based swap 

provides a person, directly or indirectly, 

with exclusive or shared voting and/or 

investment power over the equity 

security through a contractual term of 

the security-based swap or otherwise, 

the person becomes a beneficial owner 

of that equity security. Under Rule 13d– 

3(a), a person may become a beneficial 

owner even though the person has not 

acquired the equity security.28

Second, existing Rule 13d–3(b) 

generally provides that a person is 

deemed to be a beneficial owner if that 

person uses any contract, arrangement, 

or device as part of a plan or scheme to 

evade the beneficial ownership 

reporting requirements. To the extent a 

security-based swap is used with the 

purpose or effect of divesting a person 

of beneficial ownership or preventing 

the vesting of beneficial ownership as 

part of a plan or scheme to evade 

Sections 13(d) or 13(g), the securitybased swap may be viewed as a 

contract, arrangement or device within 

the meaning of those terms as used in 

Rule 13d–3(b). A person using a 

security-based swap, therefore, may be 

deemed a beneficial owner under Rule 

13d–3(b) in this context. 

Finally, under existing Rule 13d– 

3(d)(1), a person is deemed a beneficial 

owner of an equity security if the person 

has a right to acquire the equity security 

within 60 days or holds the right with 

the purpose or effect of changing or 

influencing control of the issuer of the 

security for which the right is 

exercisable, regardless of whether the 

right to acquire originates in a securitybased swap or an understanding in 

connection with a security-based swap. 

This type of right to acquire an equity 

security, if obtained through a securitybased swap, is treated the same as any 

other right to acquire an equity security. 

Acquisition of such a right, regardless of 

its origin, results in a person being 

deemed a beneficial owner under Rule 

13d–3(d)(1). 

D. Section 16 and Rules 16a–1(a)(1) and 

16a–1(a)(2) 

Section 16 was designed both to 

provide the public with information 

about securities transactions and 

holdings of every person who is the 

beneficial owner of more than ten 

percent of a class of equity security 

registered under Exchange Act Section 

12 29 (‘‘ten percent holder’’), and each 

officer and director (collectively, 

‘‘insiders’’) of the issuer of such a 

security, and to deter such insiders from 

profiting from short-term trading in 

issuer securities while in possession of 

material, non-public information. Upon 

becoming an insider, or upon Section 12 


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30 15 U.S.C. 78p(a). 

31 Insiders file these reports on Form 3 [17 CFR 

249.103]. 

32 Insiders file transaction reports on Form 4 [17 

CFR 249.104] and Form 5 [17 CFR 249.105]. 

33 15 U.S.C. 78p(b). 

34 In addition, insiders are subject to the short 

sale prohibitions of Section 16(c) [15 U.S.C. 78p(c)]. 

35See S. Rep. No. 1455, at 55, 68 (1934); See also 

S. Rep. No. 792, at 20–1 (1934); S. Rep. No. 379, 

at 21–2 (1963). 

36Ownership Reports and Trading By Officers, 

Directors and Principal Security Holders, Release 

No. 34–28869 (Feb. 21, 1991) [56 FR 7242]. 

37Rule 13d–3(d). 

38For example, the Commission applied an 

analysis derived from Rule 13d–3(d)(1) in 

publishing its views regarding when equity 

securities underlying a security future that requires 

physical settlement should be counted for purposes 

of determining whether the purchaser of the 

security future is subject to Section 16 as a ten 

percent holder by operation of Rule 16a–1(a)(1). 

Commission Guidance on the Application Certain 

Provisions of the Securities Exchange Act of 1934, 

and Rules Thereunder to Trading in Security 

Futures Products, Release No. 34–46101 (June 21, 

2002) [67 FR 43234] (‘‘Futures Interpretive Release’’) 

at Q 7. 

39Rule 16a–1(a)(2)(i). 

40Rule 16a–1(a)(2)(ii)(F). 

41Rule 16a–1(c)(6). 

42Rule 16a–1(d). Further, Rule 16a–4(a) [17 CFR 

240.16a–4(a)] provides that for purposes of Section 

16, both derivative securities and the underlying 

securities to which they relate are deemed to the be 

the same class of equity securities, except that the 

acquisition or disposition of any derivative security 

must be separately reported. 

43For example, the Futures Interpretive Release, 

at Q&A Nos. 8–13, explains the status of a security 

future as a derivative security for purposes of 

Section 16(a) reporting and Section 16(b) shortswing profit recovery. 

44Ownership Reports and Trading By Officers, 

Directors and Principal Security Holders, Release 

No. 34–28869, at Section III.A (Feb. 21, 1991) [56 

FR 7242]. 

45Rule 16a–1(b) provides that a ‘‘call equivalent 

position’’ is ‘‘a derivative security position that 

increases in value as the value of the underlying 

equity security increases, including, but not limited 

to, a long convertible security, a long call option, 

and a short put option position.’’ 

46Rule 16a–1(h) provides that a ‘‘put equivalent 

position’’ is ‘‘a derivative security position that 

increases in value as the value of the underlying 

equity decreases, including, but not limited to, a 

long put option and a short call option.’’ 

47Rule 16b–6(a). 

48Rule 16b–6(b) generally exempts from Section 

16(b) short-swing profit recovery the exercise or 

conversion of a fixed-price derivative security, 

provided that it is not out-of-the-money. Rule 16b– 

6(c) provides guidance for determining short-swing 

profit recoverable from transactions involving the 

purchase and sale or sale and purchase of derivative 

and other securities. 

49Former Rule 16a–1(c)(3), adopted in Release 

No. 34–28869, excluded from the definition of 

‘‘derivative securities’’ ‘‘securities that may be 

redeemed or exercised only for cash and do not 

permit the receipt of equity securities in lieu of 

cash, if the securities either: (i) Are awarded 

pursuant to an employee benefit plan satisfying the 

provisions of [former] § 240.16b–3(c); or (ii) may be 

redeemed or exercised only upon a fixed date or 

dates at least six months after award, or upon death, 

retirement, disability or termination of 

employment.’’ As a corollary to adopting a broader 

Rule 16b–3 exemption, the Commission rescinded 

former Rule 16a–1(c)(3) in 1996, stating that 

‘‘because the opportunity for profit based on price 

movement in the underlying stock embodied in a 

cash-only instrument is the same as for an 

instrument settled in stock, cash-only instruments 

should be subject to Section 16 to the same extent 

as other issuer equity securities.’’ Ownership 

Reports and Trading by Officers, Directors and 

Principal Security Holders, Release No. 34–37260, 

at Section III.A (May 31, 1996) [61 FR 30376]. 

registration of the class of equity 

security, Section 16(a) 30 requires an 

insider to file an initial report with the 

Commission disclosing his or her 

beneficial ownership of all equity 

securities of the issuer.31 Section 16(a) 

also requires insiders to report 

subsequent changes in such 

ownership.32 To prevent misuse of 

inside information by insiders, Section 

16(b) 33 provides the issuer (or 

shareholders suing on the issuer’s 

behalf) a strict liability private right of 

action to recover any profit realized by 

an insider from any purchase and sale 

(or sale and purchase) of any equity 

security of the issuer within a period of 

less than six months.34

As applied to ten percent holders, 

Congress intended Section 16 to reach 

persons presumed to have access to 

information because they can influence 

or control the issuer as a result of their 

equity ownership.35 Because Section 

13(d) specifically addresses these 

relationships, the Commission adopted 

Rule 16a–1(a)(1) to define ten percent 

holders under Section 16 as persons 

deemed ten percent beneficial owners 

under Section 13(d) and the rules 

thereunder.36 The Section 13(d) 

analysis, such as counting beneficial 

ownership of those derivative securities 

exercisable or convertible within 60 

days,37 is imported into the ten percent 

holder determination for Section 16 

purposes. The application of Rule 16a– 

1(a)(1) is straightforward; if a person is 

a ten percent beneficial owner as 

determined pursuant to Section 13(d) 

and the rules thereunder, the person is 

deemed a ten percent holder under 

Section 16.38

For purposes of Section 16(a) 

reporting obligations and Section 16(b) 

short-swing profit recovery, Rule 16a– 

1(a)(2) uses a different definition of 

‘‘beneficial owner.’’ Once a person is 

subject to Section 16, for reporting and 

profit recovery purposes, Rule 16a– 

1(a)(2) defines ‘‘beneficial owner’’ based 

on whether the person has or shares a 

direct or indirect pecuniary interest in 

the securities. A ‘‘pecuniary interest’’ in 

any class of equity securities means ‘‘the 

opportunity, directly or indirectly, to 

profit or share in any profit derived 

from a transaction in the subject 

securities.’’ 39 An ‘‘indirect pecuniary 

interest’’ in any class of equity securities 

includes, but is not limited to ‘‘a 

person’s right to acquire equity 

securities through the exercise or 

conversion of any derivative security, 

whether or not presently exercisable.’’ 40

‘‘Derivative securities’’ are ‘‘any option, 

warrant, convertible security, stock 

appreciation right, or similar right with 

an exercise or conversion privilege at a 

price related to an equity security, or 

similar securities with a value derived 

from the value of an equity security, but 

shall not include [* * *] rights with an 

exercise or conversion privilege at a 

price that is not fixed.’’ 41 Equity 

securities of an issuer are ‘‘any equity 

security or derivative security relating to 

an issuer, whether or not issued by that 

issuer.’’ 42

This framework recognizes that 

holding derivative securities is 

functionally equivalent to holding the 

underlying equity securities for Section 

16 purposes because the value of the 

derivative securities is a function of or 

related to the value of the underlying 

equity security.43 Just as an insider’s 

opportunity to profit begins upon 

purchasing or selling issuer common 

stock, the opportunity to profit begins 

when an insider engages in transactions 

in derivative securities that provide an 

opportunity to obtain or dispose of the 

stock at a fixed price.44 Establishing or 

increasing a call equivalent position 45

(or liquidating or decreasing a put 

equivalent position) 46 is deemed a 

purchase of the underlying security, and 

establishing or increasing a put 

equivalent position (or liquidating or 

decreasing a call equivalent position) is 

deemed a sale of the underlying 

security.47

Rule 16a–1(a)(2) and the related rules 

described above recognize the 

functional equivalence of derivative 

securities and the underlying equity 

securities by providing that transactions 

in derivative securities are reportable, 

and matchable with transactions in 

other derivative securities and in the 

underlying equity.48 For example, shortswing profits obtained by buying call 

options and selling the underlying 

stock, or buying the underlying stock 

and buying put options, are recoverable. 

This functional equivalence extends to 

all fixed-price derivative securities, 

whether issued by the issuer or a third 

party, and whether the form of 

settlement is cash or stock.49


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50Ownership Reports and Trading by Officers, 

Directors and Principal Security Holders, Release 

No. 34–34514, at Section III.G (Aug. 10, 1994) [59 

FR 42449]; Ownership Reports and Trading by 

Officers, Directors and Principal Security Holders, 

Release No. 34–37260, at Section IV.H (May 31, 

1996) [61 FR 30376]. 

51Each report must provide the following 

information: (1) The date of the transaction; (2) the 

term; (3) the number of underlying shares; (4) the 

exercise price (i.e., the dollar value locked in); (5) 

the non-exempt disposition (acquisition) of shares 

at the outset of the term; (6) the non-exempt 

acquisition (disposition) of shares at the end of the 

term (and at such earlier dates, if any, where events 

under the equity swap cause a change in a call or 

put equivalent position); (7) the total number of 

shares held after the transaction; and (8) any other 

material terms. Release No. 34–37260, at Section 

IV.H. 

52 General Instruction 8 to Form 4 [17 CFR 

249.104] (U.S. SEC 1475 (08–07)) and Form 5 [17 

CFR 249.105] (U.S. SEC 2270 (1–05)), as amended 

in Release No. 34–37260, at Section IV.I. 53See Section 766(b) of the Dodd-Frank Act, 

which amends Sections 13(d) and 13(g) to provide 

that a person ‘‘becomes or is deemed to become a 

beneficial owner * * * upon the purchase or sale 

of a security-based swap that the Commission may 

define by rule * * *.’’ 

54These rights to acquire beneficial ownership 

are not security-based swaps within the meaning of 

Section 13(o) because they are purchases and sales 

of securities. In this regard, the definition of ‘‘swap’’ 

in Section 721 of the Dodd-Frank Act (and therefore 

the definition of ‘‘security-based swap’’) excludes 

purchases and sales of securities, whether on a 

fixed or contingent basis. Under the Dodd-Frank 

Act, the term ‘‘security’’ is as defined in the 

Securities Act and the Exchange Act, which 

includes options, warrants, and rights to subscribe 

to or purchase a security and any convertible 

securities as well as the securities issuable upon 

exercise or conversion of such securities. In 

addition, Section 721 of the Dodd-Frank Act 

excludes from the definition of ‘‘swap’’ any put, call, 

straddle, option or privilege on any security, 

certificate of deposit, or group or index of 

securities, including any interest therein or based 

on the value thereof, that is subject to the Securities 

Act of 1933 and the Exchange Act. Furthermore, 

Section 13(o) does not affect the treatment of 

‘‘security-based swap agreements’’ as defined in the 

Dodd-Frank Act. For example, Section 762(d)(5) of 

the Dodd-Frank Act clarifies that Section 16 

continues to apply to security-based swap 

agreements. 

55For example, beneficial owners who file a 

Schedule 13D and use a security-based swap will 

remain subject to the obligation to comply with 

Items 6 (‘‘Contracts, Arrangements, Understandings 

or Relationships With Respect to Securities of the 

Issuer’’) and 7 (‘‘Material to be Filed as Exhibits’’) 

and provide disclosures relating to the securitybased swap depending upon the security-based 

swap’s terms. In addition, beneficial owners who 

file a Schedule 13G pursuant to Rule 13d-1(b) or 

otherwise rely upon Rule 13d-1(b) to govern a 

future reporting obligation may be required to make 

disclosures on Schedule 13D instead based upon 

their purchase or sale of a security-based swap. See 

In the Matter of Perry Corp., Release No. 34–60351 

(July 21, 2009). 

E. Application of the Section 16 

Beneficial Ownership Regulatory 

Provisions to Holdings and Transactions 

in Security-Based Swaps 

As described above, solely for 

purposes of determining who is subject 

to Section 16 as a ten percent holder, 

Rule 16a–1(a)(1) uses the beneficial 

ownership tests applied under Section 

13(d) and its implementing rules, 

including Rules 13d–3(a), 13d–3(b), and 

Rule 13d–3(d)(1). As a result, for 

example, a person who has the right to 

acquire securities that would cause the 

person to own more than ten percent of 

a class of equity securities through a 

security-based swap that confers a right 

to receive equity at settlement or 

otherwise would be subject to Section 

16 as a ten percent holder under 

existing Rule 16a–1(a)(1). Once a person 

is subject to Section 16, in order to 

determine what securities are subject to 

Section 16(a) reporting and Section 

16(b) short-swing profit recovery for any 

insider (whether an officer, director or 

ten percent holder), existing Rule 16a– 

1(a)(2) looks to the insider’s pecuniary 

interest (i.e., opportunity to profit) in 

the securities. Under existing rules, this 

concept includes an indirect pecuniary 

interest in securities underlying fixedprice derivative securities, including 

security-based swaps, whether settled in 

cash or stock. Consistent with the 

derivative securities analysis, the 

Commission has stated that Section 16 

consequences would arise from an 

equity swap transaction where either 

party to the transaction is a Section 16 

insider with respect to a security to 

which the swap agreement relates.50

The Commission has provided 

interpretive guidance regarding how 

equity swap transactions should be 

reported,51 and adopted transaction 

code ‘‘K’’ to be used in addition to any 

other applicable code in reporting 

equity swap and similar transactions so 

that they can be easily identified.52 An 

equity swap involving a single security, 

or a narrow-based security index, is a 

security-based swap as defined in 

Section 3(a)(68). 

II. Discussion of the Rule Proposals 

New Section 13(o) provides that a 

person shall be deemed a beneficial 

owner of an equity security based on the 

purchase or sale of a security-based 

swap only to the extent we adopt rules 

after making certain determinations and 

consulting with the prudential 

regulators and the Secretary of the 

Treasury. The regulatory provisions 

under which beneficial ownership 

determinations are currently made with 

respect to security-based swaps were 

enacted or adopted before Section 13(o). 

Accordingly, we are proposing to 

readopt the relevant portions of Rules 

13d–3 and 16a–1 following consultation 

with the prudential regulators and the 

Secretary of Treasury to assure that 

these provisions continue to apply to a 

person who purchases or sells a 

security-based swap upon effectiveness 

of Section 13(o). 

The purpose of the proposed 

rulemaking is solely to preserve the 

regulatory status quo and provide the 

certainty and protection that market 

participants have come to expect with 

the existing disclosures required by the 

rules promulgated under Sections 13(d), 

13(g) and 16(a). While the use of 

security-based swaps has not been 

frequently disclosed in Schedule 13D 

and 13G filings, we are proposing to 

readopt Rules 13d–3(a), (b) and (d)(1) 

and the relevant portions of Rules 16a– 

1(a)(1) and (a)(2) to further the policy 

objectives of and foster compliance with 

these rules upon the effectiveness of 

Section 13(o). 

Given the language in Section 13(o), 

as well as the newly amended Sections 

13(d) and 13(g),53 we are proposing to 

readopt these rules to remove any doubt 

that they will continue to allow for the 

same determinations of beneficial 

ownership that they do today. 

Readoption of these rule provisions is 

intended to ensure that persons who use 

security-based swaps remain subject to 

the Section 13(d), Section 13(g) and 

Section 16 regulatory regimes to the 

same extent such persons are now. 

Moreover, the proposed rulemaking is 

designed to preserve the private right of 

action provided by Section 16(b) and 

not disturb any other existing right of 

action. 

Section 13(o) will not render the 

existing beneficial ownership regulatory 

provisions inapplicable to persons who 

obtain beneficial ownership 

independently from a security-based 

swap. For example, Rule 13d–3(d)(1) 

will continue to apply to persons who 

obtain a right to acquire equity 

securities if the right does not arise from 

the purchase or sale of a security-based 

swap. Rights, options, warrants, or 

conversion or certain revocation 

privileges, if acquired or held by 

persons under circumstances that do not 

arise from the purchase or sale of a 

security-based swap, will remain subject 

to Sections 13(d), 13(g) and 16 and may 

continue to be treated under Rule 13d– 

3(d)(1) as the acquisition of beneficial 

ownership,54 and Rules 16a–1(a)(1) and 

16a–1(a)(2) will continue to apply. 

Furthermore, Schedule 13D will 

continue to require certain disclosures 

relating to the purchase or sale of 

security-based swaps notwithstanding 

Section 13(o).55


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15880 Federal Register / Vol. 76, No. 55 / Tuesday, March 22, 2011 / Proposed Rules 

56Our staff has consulted with the Federal 

Reserve, the Office of the Comptroller of the 

Currency, the Farm Credit Administration, the 

Federal Housing Finance Agency, and the Federal 

Deposit Insurance Corporation. Our staff also 

consulted with the CFTC. 

57Acquisitions, Tender Offers, and Solicitations, 

Release No. 34–8392 (Aug. 30, 1968) [33 FR 14109]. 

A. Beneficial Ownership Determinations 

under Section 13 

Section 13(o) provides that a person 

shall be deemed to acquire beneficial 

ownership of an equity security based 

on the purchase or sale of a securitybased swap only to the extent that the 

Commission meets certain conditions 

and adopts a rule. Although the 

proposal to readopt Rule 13d–3(a), Rule 

13d–3(b), and Rule 13d–3(d)(1) is being 

made in part pursuant to Section 13(o), 

we are not proposing any revision to the 

existing rule text. The proposed rules 

are the same as the existing rules in all 

respects. 

1. Rule 13d–3(a) 

We are proposing to readopt without 

change Rule 13d–3(a) to address any 

uncertainty with regard to the 

application of Rule 13d–3(a) to a person 

who purchases or sells a security-based 

swap. If readopted, a determination 

could continue to be made that a 

beneficial owner of equity securities 

includes any person who, directly or 

indirectly, through any contract, 

arrangement, understanding, 

relationship or otherwise, has or shares 

voting power and/or investment power 

over the securities based on the 

purchase or sale of a security-based 

swap. Following initial consultation 

with the prudential regulators 56 and the 

Secretary of the Treasury, we 

preliminarily believe that: 

• A person’s possession of voting 

and/or investment power in an equity 

security based on the purchase or sale 

of a security-based swap is no different 

from voting or investment power in an 

equity security that exists 

independently from a security-based 

swap when (1) a security-based swap 

confers, or (2) an arrangement, 

understanding or relationship based on 

the purchase or sale of the securitybased swap conveys, voting and/or 

investment power in an equity security. 

Security-based swaps therefore can 

provide incidents of ownership 

comparable to direct ownership of the 

underlying equity security within the 

meaning of Section 13(o) to the extent 

that the security-based swap confers, or 

an arrangement, understanding or 

relationship based upon the purchase or 

sale of the security-based swap conveys, 

voting and/or investment power in an 

equity security; and 

• Retaining the existing regulatory 

treatment of security-based swaps in 

Rule 13d–3(a) is necessary to achieve 

the purpose of Section 13 so that 

Sections 13(d) and 13(g) continue to 

require the filing of beneficial 

ownership reports that produce 

disclosure by persons who have the 

ability or potential to change or 

influence control of the issuer. In 

addition, these persons may have the 

means to acquire significant amounts of 

equity securities wholly or partly based 

upon the purchase or sale of a securitybased swap. As a result, these persons 

may have the potential to effect a 

change of control transaction or 

preserve or influence control of an 

issuer. In the case of Schedule 13D 

filers, these persons would be required 

to disclose their plans or proposals. 

Disclosures made in beneficial 

ownership reports are in the public 

interest and necessary for the protection 

of investors because they provide 

information about certain transactions 

and related acquisitions of beneficial 

ownership that: could disclose a 

potential shift in corporate control; 

impact the transparency and efficiency 

of our capital markets; and contribute to 

price discovery. 

2. Rule 13d–3(b) 

We are proposing to readopt without 

change Rule 13d–3(b) to address any 

uncertainty with regard to the continued 

application of Rule 13d–3(b) to a person 

who purchases or sells a security-based 

swap. Rule 13d–3(b) provides that a 

person is deemed to be a beneficial 

owner if that person uses any contract, 

arrangement, or device as a means to 

divest or prevent the vesting of 

beneficial ownership as part of a plan or 

scheme to evade the beneficial 

ownership reporting requirements. If 

readopted, Rule 13d-3(b) would 

continue to apply to any person that 

uses a security-based swap as part of a 

plan or scheme to evade reporting 

beneficial ownership and thereby 

accumulate influential or control 

positions in public issuers without 

disclosure. 

Following initial consultation with 

the prudential regulators and the 

Secretary of the Treasury, we 

preliminarily believe that: 

• A person’s use of a security-based 

swap to divest or prevent the vesting of 

beneficial ownership as part of a plan or 

scheme to evade the application of 

Sections 13(d) or 13(g) is no different 

from a plan or scheme that uses a 

contract, arrangement or device that 

exists independently from a securitybased swap. In this context, a person 

would be deemed to have beneficial 

ownership, and thus incidents of 

ownership comparable to direct 

ownership, but for the plan or scheme 

based in whole or in part upon the 

purchase or sale of a security-based 

swap; and 

• Retaining the existing regulatory 

treatment of security-based swaps in 

Rule 13d–3(b) is necessary to achieve 

the purpose of Section 13 so that 

Sections 13(d) and 13(g) continue to 

require the filing of beneficial 

ownership reports that produce 

disclosure by persons who have the 

ability or potential to change or 

influence control of the issuer. In 

addition, these persons may have the 

means to acquire significant amounts of 

equity securities based in whole or in 

part upon the purchase or sale of a 

security-based swap, and therefore the 

potential to effect a change of control 

transaction or preserve or influence 

control of an issuer. In the case of 

Schedule 13D filers, these persons 

would be required to disclose their 

plans or proposals. Disclosures made in 

beneficial ownership reports are in the 

public interest and necessary for the 

protection of investors because they 

provide information about certain 

transactions and related acquisitions of 

beneficial ownership that: could 

disclose a potential shift in corporate 

control; impact the transparency and 

efficiency of our capital markets; and 

contribute to price discovery. 

3. Rule 13d–3(d)(1) 

We are proposing to readopt without 

change Rule 13d–3(d)(1) to address any 

uncertainty with regard to the continued 

application of Rule 13d–3(d)(1) to a 

person who purchases or sells a 

security-based swap. Rule 13d–3(d)(1) 

provides that a person will be deemed 

to be a beneficial owner of equity 

securities if the person has the right to 

acquire beneficial ownership of the 

securities within 60 days, or at any time 

if the right is held for the purpose of 

changing or influencing control. If 

readopted, Rule 13d–3(d)(1) would 

continue to apply to any person that 

obtains such a right based on the 

purchase or sale of a security-based 

swap. 

The Commission has long recognized 

the importance of having the beneficial 

ownership reporting regime account for 

contingent interests in equity securities 

arising from investor use of derivatives, 

such as options, warrants or rights. The 

Commission adopted Rule 13d–3, the 

predecessor to Rule 13d–3(d)(1), on 

August 30, 1968,57 approximately one 

month after Congress enacted Section 


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58See Act of July 29, 1968, Pub. L. 90–439, 82 

Stat. 454. 

59The Futures Interpretive Release provides two 

examples at Q & A No. 17 that explain when equity 

securities underlying a security future that requires 

physical settlement should be counted for purposes 

of determining whether the purchaser of the 

security future is subject to Regulation 13D–G by 

operation of Rule 13d–3(d)(1). 

60See Filing and Disclosure Requirements 

Relating to Beneficial Ownership, Release No. 34– 

14692 (Apr. 21, 1978) [43 FR 18484]. 

61 Item 403 of Regulation S–K requires an issuer 

to disclose in certain filings the name and amount 

of beneficial ownership held by any person known 

to be the beneficial owner of more than five percent 

of a class of its voting securities. Item 403 also 

requires the issuer to identify the name and amount 

of beneficial ownership held by each of its 

directors, director nominees and executive officers, 

regardless of whether the person’s beneficial 

ownership exceeds five percent. We have not 

proposed to readopt Item 403 of Regulation S–K 

because Item 403 provides that the disclosures 

required are to be determined in accordance with 

the beneficial ownership determinations made 

under Rule 13d–3. 

62We propose to readopt the portion of Rule 16a– 

1(a)(1) that precedes the proviso applicable to 

qualified institutions. The relevant portion of Rule 

16a–1(a)(1) proposed for readoption reads as 

follows: ‘‘(a) The term beneficial owner shall have 

the following applications: (1) Solely for purposes 

of determining whether a person is a beneficial 

owner of more than ten percent of any class of 

equity securities registered pursuant to section 12 

of the Act, the term ‘‘beneficial owner’’ shall mean 

any person who is deemed a beneficial owner 

pursuant to section 13(d) of the Act and the rules 

thereunder * * *.’’ 

13(d).58 The Commission also has 

treated futures contracts for equity 

securities the same as options, warrants, 

or rights for purposes of determining 

beneficial ownership.59 When 60 days 

or less are left until the right to acquire 

may be exercised, or if a right has been 

acquired for the purpose or with the 

effect of changing or influencing control 

of the issuer of securities, we believe 

that treating the holder of the right as if 

the person is a beneficial owner under 

Rule 13d–3(d)(1) is necessary to achieve 

the purpose of Section 13 given the 

person’s potential to influence or 

change control of the issuer.60

Following initial consultation with 

the prudential regulators and the 

Secretary of the Treasury, we 

preliminarily believe that: 

• A person’s right to acquire an 

equity security within 60 days based on 

the purchase or sale of a security-based 

swap is no different from a right to 

acquire the underlying equity security 

that exists independently from a 

security-based swap. A right to acquire 

an equity security within 60 days is 

comparable to direct ownership of the 

equity security because direct 

ownership is contingent, in some cases, 

only upon the exercise of that right and 

may result in the potential to change or 

influence control of the issuer upon 

acquisition of the equity security for 

which the right is exercisable. Securitybased swaps, therefore, can provide 

incidents of ownership comparable to 

direct ownership of the underlying 

equity security within the meaning of 

Section 13(o) to the extent that the 

security-based swap confers a right to 

acquire an equity security within 60 

days; 

• A person who acquires or holds, 

with the purpose or effect of changing 

or influencing control of an issuer, a 

right to acquire an equity security based 

on the purchase or sale of a securitybased swap is no different from a person 

who acquires or holds a right to acquire 

an equity security with the purpose of 

changing or influencing control of the 

issuer that exists independently from a 

security-based swap. Rights acquired or 

held in this context may be used in 

furtherance of a plan or proposal to 

change control of the issuer, and such 

rights to acquire equity securities may 

otherwise influence an issuer if held by 

a person intending to effect a change of 

control transaction or preserve or 

influence control of an issuer. Securitybased swaps, therefore, can provide 

incidents of ownership comparable to 

direct ownership of the underlying 

equity security within the meaning of 

Section 13(o) to the extent that the 

security-based swap confers a right to 

acquire an equity security to a person 

that holds the right with the purpose or 

with the effect of changing or 

influencing control of the issuer or 

otherwise in connection with or as a 

participant in any transaction having 

such purpose or effect; and 

• Retaining the existing regulatory 

treatment of security-based swaps under 

Rule 13d–3(d)(1) is necessary to achieve 

the purpose of Section 13 so that 

Sections 13(d) and 13(g) continue to 

require the filing of beneficial 

ownership reports that disclose certain 

transactions by persons who have the 

ability or potential to change or 

influence control of the issuer. These 

persons may have the means to acquire 

significant amounts of equity securities 

based in whole or in part upon the 

purchase or sale of a security-based 

swap, and therefore the potential to 

effect a change of control transaction or 

preserve or influence control of an 

issuer. In the case of Schedule 13D 

filers, these persons would be required 

to disclose their plans or proposals. 

Disclosures made in beneficial 

ownership reports are in the public 

interest and necessary for the protection 

of investors because they provide 

information about certain transactions 

and related acquisitions of beneficial 

ownership that: could disclose a 

potential shift in corporate control; 

impact the transparency and efficiency 

of our capital markets; and contribute to 

price discovery. 

Request for Comment 

1. In lieu of readopting the existing 

language of Rules 13d–3(a), 13d–3(b), 

and 13d–3(d)(1), should we instead 

adopt a new rule or amend the existing 

rules to specify the circumstances in 

which a purchase or sale of a securitybased swap may confer a contingent or 

other interest in an equity security that, 

if held, could result in a person being 

deemed a beneficial owner for purposes 

of Sections 13(d) and 13(g)? 

2. Are there any other rules or 

disclosure requirements that should be 

readopted or amended, such as Item 403 

of Regulation S–K,61 to preserve their 

existing application following 

effectiveness of Section 13(o)? 

3. Should the Commission and/or 

staff provide interpretive guidance 

regarding how to provide disclosure 

with regard to security-based swaps in 

Schedules 13D or 13G? If so, what type 

of interpretive guidance would be 

appropriate? 

4. How common is the use of securitybased swaps to obtain incidents of 

ownership, such as voting or investment 

power, comparable to direct ownership 

in an issuer? 

5. Are there other factors or features 

of security-based swaps we should 

consider for purposes of making the 

determinations required under Section 

13(o) with regard to the relevant 

provisions of Rule 13d–3? 

6. Does voting or investment power, a 

scheme to evade beneficial ownership 

reporting, or a right to acquire an equity 

security, when each arises from the 

purchase or sale of a security-based 

swap, differ materially from when each 

exists independently from a securitybased swap? 

B. Section 16 Beneficial Ownership 

Rules 

1. Rule 16a–1(a)(1) 

We are proposing to readopt without 

change a portion of Rule 16a–1(a)(1) 62

to preserve, solely for purposes of 

determining whether a person is a ten 

percent holder, the application of the 

relevant provisions within Rule 13d–3 

to a person who uses a security-based 

swap. The proposed readoption of Rule 

16a–1(a)(1) would not change the rule’s 

provision that shares held by 

institutions eligible to file beneficial 

ownership reports on Schedule 13G that 

are held for clients in a fiduciary 

capacity in the ordinary course of 


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63Securities not held in such a fiduciary capacity, 

however, must be counted in determining whether 

a Schedule 13G qualified institutional investor is a 

ten percent holder. This exclusion applies only to 

qualified institutions who acquire or hold securities 

of the issuer in the ordinary course of business 

without the purpose or effect of influencing or 

changing control, and thereby qualify to use 

Schedule 13G pursuant to Rule 13d–1(b)(1)(i). The 

exclusion does not apply to persons who qualify to 

use Schedule 13G as passive investors pursuant to 

Rule 13d–1(c), or as exempt investors pursuant to 

Rule 13d–1(d). 

64We propose to readopt the portion of Rule 16a– 

1(a)(2) that precedes subparagraph (ii). The relevant 

portion of Rule 16a–1(a)(2) proposed for readoption 

reads as follows: ‘‘(2) Other than for purposes of 

determining whether a person is a beneficial owner 

of more than ten percent of any class of equity 

securities registered under Section 12 of the Act, 

the term beneficial owner shall mean any person 

who, directly or indirectly, through any contract, 

arrangement, understanding, relationship or 

otherwise, has or shares a direct or indirect 

pecuniary interest in the equity securities, subject 

to the following: (i) The term pecuniary interest in 

any class of equity securities shall mean the 

opportunity, directly or indirectly, to profit or share 

in any profit derived from a transaction in the 

subject securities.’’ 65 44 U.S.C. 3501 et seq. 

business are not counted for purposes of 

determining ten percent holder status.63

Following initial consultation with 

the prudential regulators and the 

Secretary of the Treasury, we 

preliminarily believe that: 

• For the same reasons and in the 

same circumstances as described above 

for Rule 13d–3(a), Rule 13d–3(b) and 

Rule 13d–3(d)(1), solely for purposes of 

determining whether a person is a ten 

percent holder subject to Section 16, the 

purchase or sale of a security-based 

swap, or class of security-based swap, 

can provide incidents of ownership 

comparable to direct ownership of the 

equity security within the meaning of 

Section 16; and 

• The inclusion of equity securities 

based on the purchase or sale of a 

security-based swap, or class of 

security-based swap, for purposes of 

calculating ten percent holder status is 

necessary to achieve the purpose of 

Section 16, so that Section 16 continues 

to reach all persons that, under the 

Section 16 regime, are presumptively 

deemed to have access to inside 

information based on influence or 

control of the issuer through ownership 

of equity securities. 

2. Rule 16a–1(a)(2) 

The proposal to readopt without 

change a portion of Rule 16a–1(a)(2) 64

is intended solely to preserve the 

existing Section 16(a) reporting of 

security-based swap holdings and 

transactions and correspondingly to 

prevent the potential use of securitybased swaps to engage in short-swing 

trading outside the scope of Section 

16(b) short-swing profit recovery. The 

proposal to readopt would not change or 

otherwise affect any aspect of the 

pecuniary interest analysis and 

treatment of derivative securities under 

Section 16. 

Following initial consultation with 

the prudential regulators and the 

Secretary of the Treasury, we 

preliminarily believe that: 

• Because an insider’s opportunity to 

profit through a security-based swap is 

no different from the opportunity to 

profit through transactions in any other 

fixed–price derivative security, and 

hence no different from the opportunity 

to profit through transactions in the 

underlying equity security, holdings 

and transactions in security-based 

swaps that are fixed–price derivative 

securities can provide incidents of 

ownership comparable to direct 

ownership of the underlying equity 

security within the meaning of Section 

13(o); and 

• Retaining the existing treatment of 

security-based swaps is necessary to 

achieve the purpose of Section 16 so 

that Section 16 continues to reach 

holdings and transactions that insiders 

can potentially use to profit based on 

misuse of inside information. 

Request for Comment 

7. In lieu of readopting the existing 

language of Rule 16a–1(a)(1), should the 

rule instead be amended to specifically 

reference security-based swaps? If so, in 

what manner? 

8. In lieu of readopting the existing 

language of Rule 16a–1(a)(2), should the 

rule or any related rule that governs the 

treatment of derivative securities under 

Section 16 instead be amended to 

specifically reference security-based 

swaps? If so, in what manner? 

9. Are there other factors that we 

should consider for purposes of making 

the determinations required under 

Section 13(o) with regard to Rule 16a– 

1(a)(1)? 

10. Are there other factors that we 

should consider for purposes of making 

the determinations required under 

Section 13(o) with regard to Rule 16a– 

1(a)(2)? 

C. General Request for Comment 

We request and encourage any 

interested person to submit comments 

on any aspect of our proposals, other 

matters that might have an impact on 

the proposals, and any other suggestions 

for changes. We solicit comments 

particularly from the point of view of 

issuers, shareholders, prospective 

investors, financial analysts, and market 

participants. With respect to any 

comments, we note that they are of 

greatest assistance to our rulemaking 

initiative if accompanied by supporting 

data and analysis of the issues 

addressed in those comments and by 

alternatives to our proposals where 

appropriate. 

III. Paperwork Reduction Act 

The rule proposals affect ‘‘collection 

of information’’ requirements within the 

meaning of the Paperwork Reduction 

Act of 1995, the PRA.65 An agency may 

not conduct or sponsor, and a person is 

not required to respond to, a collection 

of information unless it displays a 

currently valid OMB control number. 

We already have control numbers for 

Schedules 13D (OMB Control No. 3235– 

0145) and 13G (OMB Control No. 3235– 

0145) and Forms 3 (OMB Control No. 

3235–0104) and 4 (OMB Control No. 

3235–0287) and 5 (OMB Control No. 

3235–0362). These schedules and forms 

contain item requirements that outline 

the information a reporting person must 

disclose. 

A. Background 

We are proposing to readopt without 

change portions of the rules enabling 

determinations of beneficial ownership 

to be made for purposes of Sections 

13(d), 13(g) and 16 of the Exchange Act. 

The proposals are intended to clarify 

that following the effective date of 

Section 13(o), security-based swaps will 

remain within the scope of these rules 

to the same extent as they are now. 

B. Burden and Cost Estimates Related to 

the Proposed Amendments 

Preparing and filing a report on any 

of these schedules or forms is a 

collection of information. The hours and 

costs associated with preparing the 

disclosure, filing the schedules or forms 

and retaining records required by these 

rules constitute reporting and cost 

burdens imposed by each collection of 

information. If the rules we propose are 

readopted, reporting persons will 

remain obligated to disclose the same 

information that they were previously 

required to report on these schedules or 

forms. We therefore believe that if the 

rules are readopted, the overall 

information collection burden will 

remain approximately the same because 

beneficial ownership will remain 

reportable on the same basis as it is 

now. 

C. Request for Comment 

We request comment on this 

Paperwork Reduction Act Analysis. 

Pursuant to 44 U.S.C. 3506(c)(2)(B), we 

solicit comments to: 

• Evaluate whether the proposed 

collection of information is necessary 


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66 15 U.S.C. 78w(a)(2). 

67 15 U.S.C. 78c(f). 

68 15 U.S.C. 80a–2(c). 

for the proper performance of the 

functions of the agency, including 

whether the information will have 

practical utility; 

• Determine whether there are ways 

to enhance the quality, utility, and 

clarity of the information to be 

collected; and 

• Evaluate whether there are ways to 

minimize the burden of the collection of 

information on those persons who are to 

respond, including through the use of 

automated collection techniques or 

other forms of information technology. 

Persons submitting comments on the 

collection of information requirements 

should direct the comments to the 

Office of Management and Budget, 

Attention: Desk Officer for the 

Securities and Exchange Commission, 

Office of Information and Regulatory 

Affairs, Washington, DC 20503, and 

should send a copy to Elizabeth M. 

Murphy, Secretary, Securities and 

Exchange Commission, 100 F Street, 

NE., Washington, DC 20549–1090, with 

reference to File No. S7–10–11. 

Requests for materials submitted to 

OMB by the Commission with regard to 

these collections of information should 

be in writing, refer to File No. S7–10– 

11, and be submitted to the Securities 

and Exchange Commission, Office of 

Investor Education and Advocacy, 100 F 

Street, NE., Washington, DC 20549– 

0123. 

IV. Economic Analysis 

A. Introduction 

Section 23(a)(2) of the Exchange Act 

requires us, when adopting rules under 

the Exchange Act, to consider the 

impact on competition that the rules we 

adopt would have, and prohibits us 

from adopting any rule that would 

impose a burden on competition not 

necessary or appropriate in furtherance 

of that Act.66 Further, Section 3(f) of the 

Exchange Act 67 and Section 2(c) of the 

Investment Company Act 68 require us, 

when engaging in rulemaking where we 

are required to consider or determine 

whether an action is necessary or 

appropriate in the public interest, to 

consider, in addition to the protection of 

investors, whether the action will 

promote efficiency, competition and 

capital formation. We have considered 

and discussed below the effects of the 

rules proposed for readoption on 

efficiency, competition, and capital 

formation, as well as the benefits and 

costs associated with the proposed 

rulemaking. 

In order to more fully analyze the 

potential effects of readopting rules that 

are designed to preserve the regulatory 

status quo upon the effectiveness of 

Section 13(o), we have performed the 

analysis below in two separate ways. 

First, we analyze the impact of the 

proposed readoption compared to the 

status quo, in which the rules already 

apply to a person who purchases or sells 

a security-based swap. Second, we 

analyze the impact as if our rules did 

not already apply to persons who 

purchase or sell security-based swaps. 

B. Benefits, Including the Impact on 

Efficiency, Competition and Capital 

Formation 

1. When the Rules We Propose To 

Readopt Already Apply to Persons Who 

Purchase or Sell Security-Based Swaps 

The proposal to readopt certain 

provisions of Rule 13d–3 and Rule 16a– 

1 would preserve the continued 

administration of existing rules adopted 

to improve the transparency of 

information available to investors, 

issuers and the marketplace. The 

proposal is intended to preserve that 

transparency regarding beneficial 

ownership positions and the intentions 

of persons who hold such positions, as 

well as the holdings of and transactions 

by Section 16 insiders. We are 

proposing to readopt, without change, 

rules that, when applied, may result in 

disclosure of beneficial ownership and 

insiders’ holdings and transactions in 

equity securities. In addition, one of the 

rules proposed for readoption, Rule 

16a–1(a)(2), also identifies transactions 

that may be subject to the private right 

of action to recover short-swing profit 

for the issuer provided by Section 16(b). 

The proposal is being made solely to 

preserve the regulatory status quo 

regarding beneficial ownership 

reporting under Sections 13(d) and (g), 

Section 16 insider status as a ten 

percent holder, insider holding and 

transaction reporting under Section 

16(a), and insider short-swing profit 

liability under Section 16(b). 

Application of the rules also will 

provide certainty regarding the Section 

16(b) private right of action to recover 

insiders’ short-swing profits for the 

issuer. Because the rules we propose are 

already in place and will remain 

unchanged, readoption and 

effectiveness of these rules should have 

minimal benefits, and little, if any, new 

effect on efficiency, competition, or 

capital formation or on the persons 

required to make the disclosures as a 

result of the application of the rules. 

Beneficial owners who use securitybased swaps are already subject to these 

rules and are required to make any 

applicable disclosures. Because only a 

limited number of beneficial ownership 

reports contain disclosure that relates to 

security-based swaps, the potential 

effect of this rulemaking should be 

minimal. Shareholders, issuers, market 

participants and any other persons who 

rely upon the disclosures being made as 

a result of application of the rules 

similarly will receive little, if any, new 

benefit and are unlikely to experience 

any new impact on efficiency, 

competition or capital formation 

because the regulatory environment will 

remain the same as it is today. 

2. If the Rules We Propose Did Not 

Already Apply to Persons Who 

Purchase or Sell Security-Based Swaps 

If one were to analyze the effect of 

readopting the rules we propose as if 

they did not already apply to a person 

who purchases or sells a security-based 

swap, there would be new benefits, as 

well as a beneficial effect on efficiency, 

competition and capital formation. 

These benefits could extend to 

beneficial owners required to comply 

with disclosure requirements as a result 

of the application of the rules we 

propose to readopt. These benefits also 

may extend to persons relying upon 

these disclosures, including prospective 

investors, shareholders, issuers, and 

other market participants. Any such 

benefits, if realized, would be 

attributable both to the removal of any 

regulatory uncertainty and to the 

resulting preservation of transparency. 

a. Benefits, Including the Impact on 

Efficiency 

Applying the rules to a person who 

purchases or sells a security-based swap 

confers a benefit to market participants 

by providing market transparency and 

removing, in some cases, information 

asymmetry. Prospective investors, 

shareholders, issuers and other market 

participants benefit from the 

transparency provided through 

disclosure made available by persons 

subject to Sections 13 and 16. For 

example, a Schedule 13D filing may 

disclose a potential change of control 

transaction and assist a shareholder in 

making an investment decision that 

would maximize the return on an 

investment. Disclosures made on 

Schedule 13G may identify for the 

marketplace important investment 

decisions made by institutional 

investors and other large shareholders 

or may provide notice to investors, 

issuers and the market regarding voting 

blocks of securities that have the 

potential to affect or influence control of 

an issuer. 


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69See note 22 above. 

70See Luigi Guiso et al., Trusting the Stock 

Market, 63 J. Fin. 2557 (2008) (finding that trust in 

the fairness of the financial system is correlated 

with higher levels of stock market participation). 

71See Merritt B. Fox, Randall Morck, Bernard 

Yeung & Artyom Durnev, Law, Share Price 

Accuracy, and Economic Performance: the New 

Evidence, 102 Mich L. Rev. 331 (2003) (empirical 

study of the value of disclosure requirements in 

enhancing investment efficiency); see also Studies 

in Resource Allocation Processes at p. 413 (Kenneth 

J. Arrow & Leonid Hurwicz eds., 2007) (explaining 

the relationship between informational efficiency 

and Pareto efficiency of resource allocation). 

Applying the rules to a person who 

purchases or sells a security-based swap 

assures that Section 16 will reach a 

person that, under the Section 16 

regime, is presumptively deemed to 

have access to inside information based 

on influence or control of the issuer 

through equity ownership. In addition, 

applying the rules to a person who 

purchases or sells a security-based swap 

means that an insider (whether an 

officer, director, or ten percent holder) 

is required to report beneficial 

ownership with respect to transactions 

and holdings in a security-based swap 

that confers an indirect pecuniary 

interest in issuer equity securities. 

These reports, like other Section 16(a) 

reports, may provide shareholders and 

other market participants with useful 

information regarding insiders’ views of 

the performance or prospects of the 

issuer. 

Transparency of trading by persons 

covered by Sections 13 and 16, and 

transparency of accumulations of 

material ownership blocks or voting 

power based on the purchase or sale of 

a security-based swap, would increase 

informational efficiency in securities 

markets in particularly important areas, 

especially where a Schedule 13D filing 

may be the first required disclosure of 

an intended change of control of an 

issuer. Transparency confers a benefit 

by assuring the availability of 

information upon which investors may 

rely to make informed investment and 

voting decisions. The level of 

transparency provided by Rules 13d– 

1(a) and 16a–1 also may contribute to 

market efficiency because it could help 

facilitate the accurate pricing of 

securities. If the rules did not apply to 

a person who purchases or sells a 

security-based swap, investors and 

market participants, such as financial 

analysts and broker dealers, would not 

have information regarding the use of 

security-based swaps by persons subject 

to Sections 13 and 16, including major 

investors. The transparency provided by 

the application of our rules should help 

the market accurately price securities 

and may enable purchasers and sellers 

of securities to receive a benefit by 

avoiding costs, if any, associated with 

participation in transactions based on 

mispriced securities. For example, 

market efficiency should increase 

because the market will have readily 

available information about acquisitions 

of securities that involve the potential to 

change or influence control of an issuer 

in connection with the purchase or sale 

of a security-based swap. If persons who 

purchase or sell security-based swaps 

were excluded from this regulatory 

scheme, an incentive could arise to use 

security-based swaps to effect or 

influence the outcome of a change of 

control transaction. In addition, the 

pricing of a security would not readily 

reflect, if at all, ownership interests in 

the issuer derived from security-based 

swaps. In such circumstances, the 

application of the rules we propose for 

readoption would have the benefit of 

eliminating this incentive while 

increasing the quality of information 

available to price securities. 

b. Benefits, Including the Impact on 

Competition 

Public availability of information 

about the existence of persons who use 

security-based swaps and have the 

potential to change or influence control 

of the issuer affects competition in the 

market for corporate control. If bidders 

that use securities-based swaps comply 

with the beneficial ownership 

disclosure requirements, the balance 

Congress sought to strike between 

issuers and prospective bidders will not 

tip away from issuers.69 Providing equal 

access to information regarding persons 

who use security-based swaps and have 

the ability to change or influence 

control of an issuer reinforces a 

legislative objective of Section 13(d) by 

assuring that a person will not be able 

to implement a change of control 

transaction by means of a large, 

undisclosed position. Applying our 

rules to persons who purchase or sell 

security-based swaps enables issuers to 

consider information about competitors 

in the market for corporate control, 

including those who may be able to 

offer a new or competing strategic 

alternative. Schedule 13D and 13G 

filings also may deliver greater certainty 

to market participants who make 

strategic, voting, or investment 

decisions wholly or partly based upon 

the information disclosed, and could 

reduce speculation about future plans or 

proposals relating to an issuer. For 

example, market participants may not 

be discouraged from introducing 

strategic plans or proposals to an issuer 

out of concern that an undisclosed 

interest in the issuer derived from a 

security-based swap could interrupt 

execution of their plan or proposal. 

Section 16 is intended to provide the 

public with information about the 

securities transactions and holdings of 

officers, directors, and ten percent 

holders, and to mitigate informational 

advantages they may have in trading 

issuer securities. Applying Rule 16a– 

1(a)(1) to beneficial ownership based on 

the purchase or sale of a security-based 

swap discourages persons from unfairly 

profiting in trades based on the ability 

to become a ten percent holder partly or 

wholly based on the use of securitybased swaps without becoming subject 

to Section 16. Applying Rule 16a– 

1(a)(2), which defines ‘‘beneficial 

ownership’’ based on pecuniary interest 

in issuer equity securities, to persons 

who purchase or sell security-based 

swaps prevents the development of a 

trading market potentially favoring any 

insider (whether an officer, director, or 

ten percent holder) to the extent that: 

• Holdings and transactions involving 

security-based swaps may not be 

reported, thereby depriving investors of 

potentially useful information; and 

• Insiders have the opportunity to 

misuse their potential informational 

advantages in trading without regard to 

potential short-swing profit liability. 

c. Benefits, Including the Impact on 

Capital Formation 

Making information publicly available 

generally lowers an issuer’s cost of 

capital and facilitates capital formation, 

in comparison to what the cost of 

capital otherwise might be if the rules 

did not already apply to a person who 

purchases or sells a security-based 

swap. If the rules apply to a person who 

purchases or sells a security-based 

swap, the resulting transparency could 

favorably affect investor confidence in 

the capital markets and thereby not 

compromise capital formation.70 If our 

rules require persons who use securitybased swaps to provide disclosures in 

Schedules 13D and 13G and Forms 3, 4 

and 5, investors will not insist on a 

higher risk premium in publicly-traded 

equity securities and consequently 

reduce capital formation. Informed 

investor decisions generally promote 

capital formation.71

In addition, market participants 

would benefit from the predictability 

associated with a regulatory 

environment in which all persons who 

have the potential to influence or 

change control of an issuer are 

definitively subject to the same 

beneficial ownership reporting rules. If 

there were questions as to whether our 


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Federal Register / Vol. 76, No. 55 / Tuesday, March 22, 2011 / Proposed Rules 15885 

rules applied to persons who purchase 

or sell security-based swaps, market 

participants would have to accept more 

operational and legal risk because of the 

potentially unregulated treatment of 

persons who use security-based swaps 

with incidents of ownership comparable 

to direct ownership, as well as persons 

who have arrangements, 

understandings, or relationships 

concerning voting and/or investment 

power, the opportunity to acquire equity 

securities, or a plan or scheme to evade 

Sections 13(d) and 13(g) in connection 

with the purchase or sale of a securitybased swap. By applying our rules to all 

persons who have the potential to 

influence or change control of the 

issuer, market participants would have 

assurance that securities pricing may 

reflect information derived from 

security-based swaps when Sections 

13(d), 13(g), and 16 require reporting. 

The certainty provided by this 

consistent regulatory treatment could 

foster investor confidence and 

participation in the capital markets 

generally, and should not impair capital 

formation. 

The rules we propose for readoption 

also would provide the SEC access to 

ownership and transaction information 

that would not be available if the rules 

did not already apply to a person who 

purchases or sells a security-based 

swap. The availability of this data 

should enhance the ability of the 

Commission and its staff to study and 

address issues that relate to this 

information. Ready access to this 

information also will continue to enable 

the Commission to exercise efficiently 

its enforcement mandate in this market 

segment, and thereby confer a benefit to 

all market participants by offering 

assurance that the integrity of security 

pricing is protected, and is otherwise 

consistent with the legislative purpose 

of Sections 13(d), 13(g), 13(o), and 16. 

C. Costs, Including the Impact on 

Efficiency, Competition and Capital 

Formation 

1. When the Rules We Propose Already 

Apply to Persons Who Purchase or Sell 

Security-Based Swaps 

We preliminarily believe that the 

rules we propose would not, as a 

practical matter, impose any new costs 

on market participants, given that the 

proposed rulemaking is intended only 

to preserve the regulatory status quo. 

Although it is difficult to determine the 

number of entities and the costs to 

entities that are required to comply with 

the rules we propose to readopt, we 

believe that readoption of the rules 

would result in minimal, if any, costs to 

any person or entity (either small or 

large) and would have little, if any, 

burden on efficiency, competition or 

capital formation because the regulatory 

environment will remain the same as it 

is today. 

Regulation 13D–G currently applies to 

any person that acquires or is deemed 

to acquire or hold beneficial ownership 

of more than five percent of certain 

classes of equity securities. The 

proposed readoption of the relevant 

provisions of Rule 13d–3 would not 

result in any change to the beneficial 

ownership reporting obligations of the 

persons now subject to the beneficial 

ownership regulatory provisions. 

Similarly, Section 16 applies to any 

person that acquires or is deemed to 

acquire more than ten percent of certain 

classes of equity securities, and the 

proposed readoption of Rule 16a–1(a)(1) 

would not result in any change in 

determining whether a person is subject 

to Section 16 as a ten percent holder. 

Further, for all insiders, the 

requirements for Section 16(a) reporting 

and Section 16(b) liability are based on 

whether the insider has a pecuniary 

interest in the securities, including 

indirectly through ownership of and 

transactions in fixed-price derivative 

securities, such as security-based swaps, 

whether settled in cash or stock. 

Accordingly, the proposed readoption of 

Rule 16a–1(a)(2) would not result in any 

change in determining reportable 

holdings and transactions, or 

transactions subject to short-swing 

profit recovery. 

Because the rules proposed for 

readoption are applied today in 

determining whether a person is 

required to report beneficial ownership 

and insiders’ holdings and transactions 

on Schedules 13D and 13G and Forms 

3, 4 and 5, we do not believe the 

proposed rules will alter the costs 

associated with compliance. These 

schedules and forms already prescribe 

beneficial ownership information that a 

reporting person must disclose, and the 

proposed rulemaking does not broaden 

the scope of the information required to 

be reported on the respective schedules 

and forms. The compliance burden 

associated with completion of the 

relevant schedule or form may be 

greater or lesser depending on the 

relative simplicity of the beneficial 

ownership interest. We recognize that 

the cost of complying with the 

beneficial ownership reporting regime 

can include the cost of analyzing 

whether the particular interest requires 

reporting. If it is determined that the 

interest held constitutes beneficial 

ownership, and the amount of the 

beneficial ownership interest exceeds 

the relevant threshold, the owner must 

complete and file a schedule and/or 

form. The compliance burden associated 

with the readopted rules, however, 

including costs associated with legal 

and other professional fees, may 

decrease because of the regulatory 

certainty that this rulemaking is 

providing. Furthermore, the persons 

incurring this compliance burden may 

already be subject to a reporting 

obligation based on an earlier 

application of these rules, and may not 

be reporting beneficial ownership for 

the first time as a direct result of the 

purchase or sale of security-based 

swaps. 

If the rules we propose are readopted, 

reporting persons will remain obligated 

to disclose the information currently 

required to be reported on these 

schedules or forms. We therefore believe 

that the overall compliance burden of 

the rules we propose to readopt will 

remain the same. In addition, we do not 

believe that compliance costs, or the 

disclosure provided to effect 

compliance, will affect competition 

among filers. 

We also believe that shareholders, 

issuers, market participants and any 

other persons who rely upon the 

disclosures being made as a result of 

application of the rules we propose 

similarly will not be subjected to any 

new cost, or experience any new impact 

on efficiency, competition or capital 

formation because the rules we propose 

to readopt are already in place and will 

remain unchanged. 

2. If the Rules We Propose Did Not 

Already Apply to Persons Who 

Purchase or Sell Security-Based Swaps 

Costs could increase for a person who 

purchases or sells a security-based swap 

and immediately or eventually incurs 

the cost of filing or amending a 

beneficial ownership report if the 

person did not already determine that a 

reporting obligation existed based on his 

or her purchase or sale of a securitybased swap. Further, an insider could 

incur costs from potential short-swing 

profit recovery arising out of a 

transaction in a security-based swap. 

Application of our rules to a person 

who purchases or sells a security-based 

swap may affect competition. For 

example, a person who becomes a ten 

percent holder partly or wholly based 

on the use of a security-based swap 

would not be in a position to profit in 

trades prompted by a statutorily 

presumed informational advantage 

accentuated by the absence of a 

reporting requirement. In addition, 

beneficial owners who compete in the 

market for corporate control would lose 


srobinson on DSKHWCL6B1PROD with PROPOSALS
15886 Federal Register / Vol. 76, No. 55 / Tuesday, March 22, 2011 / Proposed Rules 

72Pub. L. 104–121, Title II, 110 Stat. 847, 873. 

a competitive advantage upon the 

required disclosure of their beneficial 

ownership positions and any plans or 

proposals. 

Upon application of the rules we 

propose to readopt, beneficial owners 

may accomplish their objectives with 

less efficiency, and the completion of 

change of control transactions may be 

delayed, due to potential interruptions 

that may arise or alternatives that might 

emerge as a result of public disclosures. 

If our rules did not already apply to a 

person who purchases or sells a 

security-based swap, that person could 

accumulate a large beneficial ownership 

position through the use of a securitybased swap without public disclosure. 

This beneficial ownership position 

otherwise could have been used to 

implement or influence the outcome of 

a change of control transaction without 

alerting an issuer or the marketplace of 

these intentions. We believe, however, 

that the benefits of our rules would 

justify these costs. 

The impact, if any, of the readoption 

of the rules we propose on capital 

formation should be insignificant. 

Compliance costs arising under the 

beneficial ownership reporting regime 

based on the purchase or sale of a 

security-based swap are not expected to 

redirect capital that otherwise could 

have been allocated to capital formation. 

Capital formation should not be affected 

by a possible decline in the use of 

security-based swaps resulting from the 

application of our rules to a person who 

purchases or sells a security-based 

swap, given that capital formation 

ordinarily is not dependent upon the 

proceeds from transactions in securitybased swaps. 

D. Request for Comment 

We request comment on the costs and 

benefits associated with the individual 

rules, including identification and 

assessments of any costs and benefits 

not discussed in this analysis. In 

addition to the specific inquiries made 

throughout this release, we solicit 

comments on the usefulness of the rule 

proposals to reporting persons, 

registrants, and the marketplace at large. 

We encourage commentators to identify, 

discuss, analyze, and supply relevant 

data, information, or statistics regarding 

any such costs or benefits, as well as 

any costs and benefits not already 

defined. We also request qualitative 

feedback on the nature of the benefits 

and costs described above. Finally, we 

also request comment on the following: 

• Would readoption of the rules 

promote efficiency, competition and 

capital formation? 

• Would the proposed rules, if 

readopted, have an adverse effect on 

competition or impose a burden on 

competition that is neither necessary 

nor appropriate in furthering the 

purposes of the Exchange Act? 

Commentators are requested to provide 

empirical data and other factual support 

for their views if possible. 

V. Small Business Regulatory 

Enforcement Fairness Act 

For purposes of the Small Business 

Regulatory Enforcement Fairness Act of 

1996,72 a rule is ‘‘major’’ if it has 

resulted, or is likely to result in: 

• An annual effect on the economy of 

$100 million or more; 

• A major increase in costs or prices 

for consumers or individual industries; 

or 

• Significant adverse effects on 

competition, investment or innovation. 

We request that commentators 

provide empirical data on (a) the annual 

effect on the economy; (b) any increase 

in costs or prices for consumers or 

individual industries; and (c) any effect 

on competition, investment or 

innovation. 

VI. Regulatory Flexibility Act 

Certification 

We hereby certify pursuant to 5 U.S.C. 

605(b) that this proposal, if adopted, 

would not have a significant economic 

impact on a substantial number of small 

entities. This proposal relates to 

beneficial ownership reporting and 

reporting by insiders of their 

transactions and holdings. The proposal 

would not amend existing rules or 

introduce new rules, and relates only to 

the readoption of existing rules. For this 

reason, it would not change the 

regulatory status quo and therefore the 

proposal should not have a significant 

economic impact on a substantial 

number of small entities. 

In proposing to readopt these rules, 

we have considered their potential 

impact on the small entities that might 

be required to complete the schedules 

and forms. We do not collect 

information to estimate the number of 

small entities that would be subject to 

the rules we propose, if readopted, 

because the beneficial ownership 

schedules and forms do not capture 

specific information about the size of 

the reporting entity. We also do not 

collect information about small entities 

that might obtain beneficial ownership 

based on the purchase or sale of a 

security-based swap, or whether such 

beneficial ownership is directly 

responsible for triggering a reporting 

obligation. 

Nevertheless, the staff has not noted 

that there are a significant number of 

entities of any size making beneficial 

ownership reports based on the 

purchase or sale of security based 

swaps. The incidence of small entities 

who report beneficial ownership based 

on the purchase or sale of a securitybased swap appears to be rare. 

Moreover, due to their size, small 

businesses or small organizations would 

not ordinarily be expected to make 

beneficial ownership reports because 

they are less likely to have funds to 

make purchases exceeding the sizable 

thresholds that trigger a reporting 

obligation. 

Finally, in most cases, the existing 

disclosure obligations are generally not 

likely to be burdensome for small 

entities. To the extent a small entity 

would be required to report beneficial 

ownership based on the purchase or sale 

of a security-based swap, it is likely that 

it could fulfill its reporting obligation by 

filing an abbreviated Schedule 13G so 

long as it does not hold beneficial 

ownership with the purpose or with the 

effect of changing or influencing control 

of an issuer. Schedule 13G is commonly 

referred to as a ‘‘short form’’ because less 

detailed disclosure is required by 

comparison to Schedule 13D. 

Accordingly, we do not believe the 

proposals, if adopted, would have a 

significant economic impact on small 

entities. 

We encourage written comments 

regarding this certification. We request 

in particular that commenters describe 

the nature of any impact on small 

entities and provide empirical data to 

support the extent of the impact. 

VII. Statutory Authority 

The proposed readoptions contained 

in this release are made under the 

authority set forth in Sections 3(a)(11), 

3(b), 13, 16, 23(a) of the Exchange Act, 

Sections 30 and 38 of the Investment 

Company Act of 1940. 

List of Subjects in 17 CFR Part 240 

Reporting and recordkeeping 

requirements, Securities. 

Text of the Proposed Amendments 

For the reasons set out in the 

preamble, the Commission proposes to 

amend Title 17, chapter II, of the Code 

of Federal Regulations as follows: 

PART 240—GENERAL RULES AND 

REGULATIONS, SECURITIES 

EXCHANGE ACT OF 1934 

1. The general authority citation for 

Part 240 is revised and the following 


srobinson on DSKHWCL6B1PROD with PROPOSALS
Federal Register / Vol. 76, No. 55 / Tuesday, March 22, 2011 / Proposed Rules 15887 

citations are added in numerical order 

to read as follows: 

Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 

77s, 77z–2, 77z–3, 77eee, 77ggg, 77nnn, 

77sss, 77ttt, 78c, 78d, 78e, 78f, 78g, 78i, 78j, 

78j–1, 78k, 78k–1, 78l, 78m, 78n, 78n–1, 78o, 

78o–4, 78p, 78q, 78s, 78u–5, 78w, 78x, 78ll, 

78mm, 80a–20, 80a–23, 80a–29, 80a–37, 80b– 

3, 80b–4, 80b–11, and 7201 et seq.; 18 U.S.C. 

1350; and 12 U.S.C. 5221(e)(3), unless 

otherwise noted. 

* * * * * 

Section 240.13d–3 is also issued under 

Pub. L. 111–203 § 766, 124 Stat. 1799 (2010). 

Section 240.16a–1(a) is also issued under 

Pub. L. 111–203 § 766, 124 Stat. 1799 (2010). 

* * * * * 

Dated: March 17, 2011. 

By the Commission. 

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2011–6685 Filed 3–21–11; 8:45 am] 

BILLING CODE 8011–01–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[REG–131947–10] 

RIN 1545–BJ71 

Property Traded on an Established 

Market; Hearing Cancellation 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Cancellation of notice of public 

hearing on proposed rulemaking. 

SUMMARY: This document cancels a 

public hearing on a proposed 

rulemaking relating to determining 

when property is traded on an 

established market (that is, publicly 

traded) for purposes of determining the 

issue price of a debt instrument. 

DATES: The public hearing originally 

scheduled for April 13, 2011 at 10 a.m. 

is cancelled. 

FOR FURTHER INFORMATION CONTACT: 

Funmi Taylor of the Publications and 

Regulations Branch, Legal Processing 

Division, Associate Chief Counsel 

(Procedure and Administration) at (202) 

622–7180 (not a toll-free number). 

SUPPLEMENTARY INFORMATION: A notice 

of proposed rulemaking and a notice of 

public hearing that appeared in the 

Federal Register on Friday, January 7, 

2011 (76 FR 1101) announced that a 

public hearing was scheduled for April 

13, 2011, at 10 a.m. in the IRS 

Auditorium, Internal Revenue Building, 

1111 Constitution Avenue, NW., 

Washington, DC. The subject of the 

public hearing is under section 1273(b) 

of the Internal Revenue Code. 

The public comment period for the 

proposed rulemaking expired on March 

8, 2011. The notice of proposed 

rulemaking and notice of public hearing 

instructed those interested in testifying 

at the public hearing to submit an 

outline of the topics to be addressed. As 

of Tuesday, March 15, 2011, no one has 

requested to speak. Therefore, the 

public hearing scheduled for April 13, 

2011, is cancelled. 

LaNita VanDyke, 

Chief, Publications and Regulations Branch, 

Legal Processing Division, Associate Chief 

Counsel (Procedure and Administration). 

[FR Doc. 2011–6603 Filed 3–21–11; 8:45 am] 

BILLING CODE 4830–01–P 

DEPARTMENT OF THE TREASURY 

Internal Revenue Service 

26 CFR Part 1 

[REG–149335–08] 

RIN 1545–BI57 

Sales-Based Royalties and Vendor 

Allowances; Hearing 

AGENCY: Internal Revenue Service (IRS), 

Treasury. 

ACTION: Notice of public hearing on 

proposed rulemaking. 

SUMMARY: This document provides 

notice of public hearing on a notice of 

proposed rulemaking relating to the 

capitalization and allocation of royalties 

that are incurred only upon the sale of 

property produced or property acquired 

for resale (sales-based royalties) and 

adjusting the cost of merchandise 

inventory for an allowance, discount, or 

price rebated based on merchandise 

sales (sales-based vendor allowances). 

The regulations modify the simplified 

production method and the simplified 

resale method of allocating capitalized 

costs between ending inventory and cost 

of goods sold. The regulations affect 

taxpayers that incur capitalizable salesbased royalties and earn sales-based 

vendor allowances. 

DATES: The public hearing is being held 

on Wednesday, April 13, 2011, at 10 

a.m. The IRS must receive outlines of 

the topics to be discussed at the hearing 

by Monday, March 28, 2011. 

ADDRESSES: The public hearing is being 

held in the auditorium, Internal 

Revenue Building, 1111 Constitution 

Avenue, NW., Washington, DC. Send 

submissions to: CC: PA: LPD: PR (REG– 

149335–08), room 5203, Internal 

Revenue Service, P. O. Box 7604, Ben 

Franklin Station, Washington, DC 

20044. Submissions may be handdelivered Monday through Friday 

between the hours of 8 a.m. and 4 p.m. 

to CC: PA: LPD: PR (REG–149335–08), 

Courier’s Desk, Internal Revenue 

Service, 1111 Constitution Avenue, 

NW., Washington, DC. Alternatively, 

taxpayers may submit electronic 

outlines of oral comments via the 

Federal eRulemaking Portal at http:// 

www.regulations.gov. 

FOR FURTHER INFORMATION CONTACT: 

Concerning the proposed regulations, 

John Roman Faron at (202) 622–4930; 

concerning submissions of comments, 

the hearing, and/or to be placed on the 

building access list to attend the 

hearing, Richard A. Hurst at 

Richard.A.Hurst@irscounsel.treas.gov or 

(202) 622–7180 (not toll-free numbers). 

SUPPLEMENTARY INFORMATION: The 

subject of the public hearing is the 

notice of proposed rulemaking (REG– 

149335–08) that was published in the 

Federal Register on Friday, December 

17, 2010 (75 FR 78940). 

Persons, who wish to present oral 

comments at the hearing that submitted 

written comments, must submit an 

outline of the topics to be discussed and 

the amount of time to be devoted to 

each topic (signed original and eight (8) 

copies) by Monday, March 28, 2011. 

A period of 10 minutes is allotted to 

each person for presenting oral 

comments. After the deadline for 

receiving outlines has passed, the IRS 

will prepare an agenda containing the 

schedule of speakers. Copies of the 

agenda will be made available, free of 

charge, at the hearing or in the Freedom 

of Information Reading Room (FOIA RR) 

(Room 1621) which is located at the 

11th and Pennsylvania Avenue, NW., 

entrance, 1111 Constitution Avenue, 

NW., Washington, DC. 

Because of access restrictions, the IRS 

will not admit visitors beyond the 

immediate entrance area more than 

30 minutes before the hearing starts. For 

information about having your name 

placed on the building access list to 

attend the hearing, see the FOR FURTHER

INFORMATION CONTACT section of this 

document. 

LaNita Van Dyke, 

Chief, Publications and Regulations Branch, 

Legal Processing Division, Associate Chief 

Counsel (Procedure and Administration). 

[FR Doc. 2011–6601 Filed 3–21–11; 8:45 am] 

BILLING CODE 4830–01–P 


srobinson on DSKHWCL6B1PROD with PROPOSALS