ALI-ABA Course of Study Fundamentals of Employee Benefits Law May 16-18, 2012 Washington, D.C.

Transcription

1 493 ALI-ABA Course of Study Fundamentals of Employee Benefits Law May 16-18, 2012 Washington, D.C. Securities Law Issues Relating to Employee Benefits Plans By Brian W. Berglund Bryan Cave LLP St. Louis, Missouri Brian W. Berglund. All Rights Reserved.

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3 495 TABLE OF CONTENTS I. INTRODUCTION...1 II. REGISTRATION OBLIGATIONS UNDER THE SECURITIES ACT...1 A. GENERAL RULE What is a Security?...1 (a) Definition...1 (b) Interest in an Employee Benefit Plan Sale of Security Exemption from Registration...4 (a) Qualified Plans...4 (b) Nonqualified Deferred Compensation Plan Interests...5 (c) Other Exemptions...7 B. REGISTRATION...10 III. REGISTRATION AND REPORTING OBLIGATIONS UNDER THE EXCHANGE ACT...11 A. REGISTRATION UNDER SECTIONS 12 AND 15(D) Section Section 15(d)...11 B. SHORT-SWING PROFIT LIABILITY AND INSIDER REPORTS UNDER SECTION Short-Swing Profit Recovery...11 (a) General Rule...11 (b) Non-Discretionary Tax-Conditioned Plans...12 (c) Discretionary Transactions...12 IV. EMPLOYEE BENEFITS ASPECTS OF THE SARBANES-OXLEY ACT OF A. HISTORY...13 B. BLACKOUT RULES Background Summary of Section Blackout Disclosure Requirements Notice Timing Requirements Notice Content Requirements Method of Delivery Penalties General Observations...17 C. PROHIBITED TRADING TRANSACTIONS...17 V. EMPLOYEE BENEFITS ASPECTS OF EXECUTIVE COMPENSATION DISCLOSURE RULES...18 A. BACKGROUND...18 B. SUMMARY COMPENSATION TABLE...19 Page i

4 496 C. OUTSTANDING EQUITY AWARDS...20 D. RETIREMENT AND OTHER POST-EMPLOYMENT BENEFITS...20

5 497 SECURITIES LAW ISSUES RELATING TO EMPLOYEE BENEFIT PLANS I. Introduction. Securities issues with respect to employee benefit plans primarily arise under the Securities Act of 1933 ( Securities Act ) and the Securities Exchange Act of 1934 ( Exchange Act ). Section II of this outline will address the registration obligations of employee benefit plans under the Securities Act. Section III will address the registration and reporting obligations of employee benefit plans under the Exchange Act. Section IV will address the blackout rules added by the Sarbanes-Oxley Act of Section V will describe the recently amended Securities and Exchange Commission ( SEC ) executive compensation disclosure rules. II. Registration Obligations Under The Securities Act. A. General Rule. The Securities Act prohibits the offer or sale of securities unless either a registration statement has been filed with the Securities and Exchange Commission ( SEC ) or an exemption from registration is applicable. The threshold question in analyzing a securities issue in the employee benefit plan context is whether a security exists. If a security exists, it must be determined whether an offer or a sale of that security has occurred. If so, the security must be registered unless an exemption applies. Registration under the Securities Act applies on a transactional basis. EXAMPLE: SlideCo wishes to sell shares of its common stock in an initial public offering, and so files a registration statement with respect to the securities to be issued in the initial public offering. The securities sold in the initial public offering are covered by the registration statement, but resales of the securities are not. 1. What is a Security? (a) (b) Definition. Security is broadly defined in the Securities Act to include, among others things, a note, stock, bond, option, and participation interest in an investment contract. 1/ Interest in an Employee Benefit Plan. One of the more difficult questions for employee benefit plans is whether a participant s interest in a plan constitutes a security within the meaning of the Securities Act. As noted above, a security will exist if there is a participation interest in an investment contract. (i) In SEC v. W.J. Howey Co., the Supreme Court formulated a test for determining when an interest in an investment 1/ Securities Act 2(1). 1