Section 16(b) of the Securities Exchange Act of 1934 and Insider Trading Involving Issuer-Granted Employee Stock Options 57 Denver Law Journal 1979-1980

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57 Denv. L.J. 71 (1979-1980)
Section 16(b) of the Securities Exchange Act of 1934 and Insider Trading Involving Issuer-Granted Employee Stock Options

handle is hein.journals/denlr57 and id is 87 raw text is: SECTION 16(b) OF THE SECURITIES EXCHANGE ACT
OF 1934 AND INSIDER TRADING INVOLVING
ISSUER-GRANTED EMPLOYEE STOCK
OPTIONS
by JOHN M. HUSBAND & ALBERT THEODORE POWERS*
I. Section 16(b) Generally ..................................... 72
A. Background of Section 16(b) ............................ 72
B. Reporting of Holding and Transactions Pursuant to Section
16 (a) ................................................... 76
C. Jurisdiction and Venue ................................. 77
D. Statute of Lim itations ................................... 77
E. General Exem ptions .................................... 78
1. Exemptions Applicable to the Exchange Act Generally 78
2. Exemptions Applicable to Section 16(b) Specifically .. 78
a. R ule 16b-3 ...................................... 79
b. R ule 16b-6 ..................................... 82
F. D efinitions .............................................. 83
1. Equity Securities .................................... 83
2. C lass ............................................... 84
3. Beneficial Ownership ................................ 85
4. Insiders ............................................. 86
a. O ffi cer .......................................... 86
b. D irector ........................................ 86
c. Ten Percent Owner ............................. 87
5. Purchase and Sale ................................... 87
a. G enerally ....................................... 87
b. Per Se-Objective Approach ...................... 88
c. Pragmatic-Subjective Approach .................. 89
6. Six M onth Holding Period .......................... 91
G. Computation of Recoverable Profits ..................... 91
II. Application of Section 16(b) to Insider Trading Involving Issuer-
Granted Employee Stock Options ............................ 92
A . G enerally ............................................... 92
B. Unexercised O ptions .................................... 92
C . Exercised O ptions ....................................... 92
D. Unexercised and Unsold Options ........................ 95
E . Exam ples ............................................... 96
III. C onclusions ................................................. 101
Mr. Husband received a B.A. from Ohio State University, a J.D. from University of
Toledo, and is associated with the law firm of Holland & Hart, Denver, Colorado. Mr. Powers
received a B.A. from University of Denver, a J.D. from University of Pennsylvania, an LL.M.
from New York University, and is associated with the law firm of Davis, Graham & Stubbs,
Denver, Colorado.