1207007 Informal Interpretation

Date:
Rule:
801.2, 802.21
Staff:
Michael Verne
Response/Comments:

  1) I agree that this is enough to constitute an acquisition of voting securities when the RSUs are granted. 2) If the vesting is deferred and the RSUs lose voting rights, they are no longer voting securities, but are convertible to voting stock when they eventually vest. 3) If Step 1 was filed for, as long as the vesting does not cross another threshold, the vesting would be exempt under 802.21 K Walsh concurs.

Question

From:

(Redacted)

Sent:

Tuesday, July 17, 2012 2:52 PM

To:

Verne, B. Michael

Subject:

Question regard RSUs

Mike,

Howshould the following series of events be treated in determining when anacquisition is, or acquisitions are, made:

1. Officer is granted restricted stock units in his companythat vest at a future date, but the RSUs include voting rights and rights todividends at the time of the grant. The RSU cannot be sold until they vest.

2. If the officer elects to defer vesting for whateverreason (usually tax reasons), while deferred, the RSUs lose voting rights andthe right to dividends! but do gain the right to dividend equivalents(essentially the cash equivalent to the dividends that would be paid had thevesting not been deferred). Since the RSUs have not vested, they cannot besold.

3. At the end of the deferral period, the RSUs vest, and theofficer gains voting rights, dividend rights, and the right to dispose of theshares.

AsI understand the PNO's position, the grant of R5Us described in #1 is an acquisitionof beneficial ownership in voting shares of the company. Would the deferralunder #2 be considered a disposition / loss of beneficial ownership thosevoting shares, with the result being that when the RSUs vest after deferral, itis another potentially reportable acquisition, of essentially the same shares?

About Informal Interpretations

Informal interpretations provide guidance from previous staff interpretations on the applicability of the HSR rules to specific fact situations. You should not rely on them as a substitute for reading the Act and the Rules themselves. These materials do not, and are not intended to, constitute legal advice.

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