17 CFR 229.404 - (Item 404) Transactions with related persons, promoters and certain control persons.

§ 229.404 (Item 404) Transactions with related persons, promoters and certain control persons.
(a) Transactions with related persons. Describe any transaction, since the beginning of the registrant's last fiscal year, or any currently proposed transaction, in which the registrant was or is to be a participant and the amount involved exceeds $120,000, and in which any related person had or will have a direct or indirect material interest. Disclose the following information regarding the transaction:
(1) The name of the related person and the basis on which the person is a related person.
(2) The related person's interest in the transaction with the registrant, including the related person's position(s) or relationship(s) with, or ownership in, a firm, corporation, or other entity that is a party to, or has an interest in, the transaction.
(3) The approximate dollar value of the amount involved in the transaction.
(4) The approximate dollar value of the amount of the related person's interest in the transaction, which shall be computed without regard to the amount of profit or loss.
(5) In the case of indebtedness, disclosure of the amount involved in the transaction shall include the largest aggregate amount of principal outstanding during the period for which disclosure is provided, the amount thereof outstanding as of the latest practicable date, the amount of principal paid during the periods for which disclosure is provided, the amount of interest paid during the period for which disclosure is provided, and the rate or amount of interest payable on the indebtedness.
(6) Any other information regarding the transaction or the related person in the context of the transaction that is material to investors in light of the circumstances of the particular transaction.
Instructions to Item 404(a). 1. For the purposes of paragraph (a) of this Item, the term related person means:
a. Any person who was in any of the following categories at any time during the specified period for which disclosure under paragraph (a) of this Item is required:
i. Any director or executive officer of the registrant;
ii. Any nominee for director, when the information called for by paragraph (a) of this Item is being presented in a proxy or information statement relating to the election of that nominee for director; or
iii. Any immediate family member of a director or executive officer of the registrant, or of any nominee for director when the information called for by paragraph (a) of this Item is being presented in a proxy or information statement relating to the election of that nominee for director, which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law of such director, executive officer or nominee for director, and any person (other than a tenant or employee) sharing the household of such director, executive officer or nominee for director; and
b. Any person who was in any of the following categories when a transaction in which such person had a direct or indirect material interest occurred or existed:
i. A security holder covered by Item 403(a) (§ 229.403(a)); or
ii. Any immediate family member of any such security holder, which means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law of such security holder, and any person (other than a tenant or employee) sharing the household of such security holder.
2. For purposes of paragraph (a) of this Item, a transaction includes, but is not limited to, any financial transaction, arrangement or relationship (including any indebtedness or guarantee of indebtedness) or any series of similar transactions, arrangements or relationships.
3. The amount involved in the transaction shall be computed by determining the dollar value of the amount involved in the transaction in question, which shall include:
a. In the case of any lease or other transaction providing for periodic payments or installments, the aggregate amount of all periodic payments or installments due on or after the beginning of the registrant's last fiscal year, including any required or optional payments due during or at the conclusion of the lease or other transaction providing for periodic payments or installments; and
b. In the case of indebtedness, the largest aggregate amount of all indebtedness outstanding at any time since the beginning of the registrant's last fiscal year and all amounts of interest payable on it during the last fiscal year.
4. In the case of a transaction involving indebtedness:
a. The following items of indebtedness may be excluded from the calculation of the amount of indebtedness and need not be disclosed: Amounts due from the related person for purchases of goods and services subject to usual trade terms, for ordinary business travel and expense payments and for other transactions in the ordinary course of business;
b. Disclosure need not be provided of any indebtedness transaction for the related persons specified in Instruction 1.b. to paragraph (a) of this Item; and
c. If the lender is a bank, savings and loan association, or broker-dealer extending credit under Federal Reserve Regulation T (12 CFR part 220) and the loans are not disclosed as nonaccrual, past due, restructured or potential problems (see Item III.C.1. and 2. of Industry Guide 3, Statistical Disclosure by Bank Holding Companies (17 CFR 229.802(c))), disclosure under paragraph (a) of this Item may consist of a statement, if such is the case, that the loans to such persons:
i. Were made in the ordinary course of business;
ii. Were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with persons not related to the lender; and
iii. Did not involve more than the normal risk of collectibility or present other unfavorable features.
5.a. Disclosure of an employment relationship or transaction involving an executive officer and any related compensation solely resulting from that employment relationship or transaction need not be provided pursuant to paragraph (a) of this Item if:
i. The compensation arising from the relationship or transaction is reported pursuant to Item 402 (§ 229.402); or
ii. The executive officer is not an immediate family member (as specified in Instruction 1 to paragraph (a) of this Item) and such compensation would have been reported under Item 402 (§ 229.402) as compensation earned for services to the registrant if the executive officer was a named executive officer as that term is defined in Item 402(a)(3) (§ 229.402(a)(3)), and such compensation had been approved, or recommended to the board of directors of the registrant for approval, by the compensation committee of the board of directors (or group of independent directors performing a similar function) of the registrant.
b. Disclosure of compensation to a director need not be provided pursuant to paragraph (a) of this Item if the compensation is reported pursuant to Item 402(k) (§ 229.402(k)).
6. A person who has a position or relationship with a firm, corporation, or other entity that engages in a transaction with the registrant shall not be deemed to have an indirect material interest within the meaning of paragraph (a) of this Item where:
a. The interest arises only:
i. From such person's position as a director of another corporation or organization that is a party to the transaction; or
ii. From the direct or indirect ownership by such person and all other persons specified in Instruction 1 to paragraph (a) of this Item, in the aggregate, of less than a ten percent equity interest in another person (other than a partnership) which is a party to the transaction; or
iii. From both such position and ownership; or
b. The interest arises only from such person's position as a limited partner in a partnership in which the person and all other persons specified in Instruction 1 to paragraph (a) of this Item, have an interest of less than ten percent, and the person is not a general partner of and does not hold another position in the partnership.
7. Disclosure need not be provided pursuant to paragraph (a) of this Item if:
a. The transaction is one where the rates or charges involved in the transaction are determined by competitive bids, or the transaction involves the rendering of services as a common or contract carrier, or public utility, at rates or charges fixed in conformity with law or governmental authority;
b. The transaction involves services as a bank depositary of funds, transfer agent, registrar, trustee under a trust indenture, or similar services; or
c. The interest of the related person arises solely from the ownership of a class of equity securities of the registrant and all holders of that class of equity securities of the registrant received the same benefit on a pro rata basis.
(b) Review, approval or ratification of transactions with related persons.
(1) Describe the registrant's policies and procedures for the review, approval, or ratification of any transaction required to be reported under paragraph (a) of this Item. While the material features of such policies and procedures will vary depending on the particular circumstances, examples of such features may include, in given cases, among other things:
(i) The types of transactions that are covered by such policies and procedures;
(ii) The standards to be applied pursuant to such policies and procedures;
(iii) The persons or groups of persons on the board of directors or otherwise who are responsible for applying such policies and procedures; and
(iv) A statement of whether such policies and procedures are in writing and, if not, how such policies and procedures are evidenced.
(2) Identify any transaction required to be reported under paragraph (a) of this Item since the beginning of the registrant's last fiscal year where such policies and procedures did not require review, approval or ratification or where such policies and procedures were not followed.
Instruction to Item 404(b). Disclosure need not be provided pursuant to this paragraph regarding any transaction that occurred at a time before the related person became one of the enumerated persons in Instruction 1.a.i., ii., or iii. to Item 404(a) if such transaction did not continue after the related person became one of the enumerated persons in Instruction 1.a.i., ii., or iii. to Item 404(a).
(c) Promoters and certain control persons.
(1) Registrants that are filing a registration statement on Form S-1 under the Securities Act (§ 239.11 of this chapter) or on Form 10 under the Exchange Act (§ 249.210 of this chapter) and that had a promoter at any time during the past five fiscal years shall:
(i) State the names of the promoter(s), the nature and amount of anything of value (including money, property, contracts, options or rights of any kind) received or to be received by each promoter, directly or indirectly, from the registrant and the nature and amount of any assets, services or other consideration therefore received or to be received by the registrant; and
(ii) As to any assets acquired or to be acquired by the registrant from a promoter, state the amount at which the assets were acquired or are to be acquired and the principle followed or to be followed in determining such amount, and identify the persons making the determination and their relationship, if any, with the registrant or any promoter. If the assets were acquired by the promoter within two years prior to their transfer to the registrant, also state the cost thereof to the promoter.
(2) Registrants shall provide the disclosure required by paragraphs (c)(1)(i) and (c)(1)(ii) of this Item as to any person who acquired control of a registrant that is a shell company, or any person that is part of a group, consisting of two or more persons that agree to act together for the purpose of acquiring, holding, voting or disposing of equity securities of a registrant, that acquired control of a registrant that is a shell company. For purposes of this Item, shell company has the same meaning as in Rule 405 under the Securities Act (17 CFR 230.405) and Rule 12b-2 under the Exchange Act (17 CFR 240.12b-2).
(d) Smaller reporting companies. A registrant that qualifies as a “smaller reporting company,” as defined by § 229.10(f)(1), must provide the following information in order to comply with this Item:
(1) The information required by paragraph (a) of this Item for the period specified there for a transaction in which the amount involved exceeds the lesser of $120,000 or one percent of the average of the smaller reporting company's total assets at year end for the last two completed fiscal years;
(2) The information required by paragraph (c) of this Item; and
(3) A list of all parents of the smaller reporting company showing the basis of control and as to each parent, the percentage of voting securities owned or other basis of control by its immediate parent, if any.
Instruction to Item 404(d). 1. Include information for any material underwriting discounts and commissions upon the sale of securities by the smaller reporting company where any of the persons specified in paragraph (a) of this Item was or is to be a principal underwriter or is a controlling person or member of a firm that was or is to be a principal underwriter.
2. For smaller reporting companies information shall be given for the period specified in paragraph (a) of this Item and, in addition, for the fiscal year preceding the small reporting company's last fiscal year.
Instructions to Item 404. 1. If the information called for by this Item is being presented in a registration statement filed pursuant to the Securities Act or the Exchange Act, information shall be given for the periods specified in the Item and, in addition, for the two fiscal years preceding the registrant's last fiscal year, unless the information is being incorporated by reference into a registration statement on Form S-4 (17 CFR 239.25), in which case, information shall be given for the periods specified in the Item.
2. A foreign private issuer will be deemed to comply with this Item if it provides the information required by Item 7.B. of Form 20-F (17 CFR 249.220f) with more detailed information provided if otherwise made publicly available or required to be disclosed by the issuer's home jurisdiction or a market in which its securities are listed or traded.
[71 FR 53252, Sept. 8, 2006, as amended at 73 FR 964, Jan. 4, 2008]

Title 17 published on 2013-04-01

no entries appear in the Federal Register after this date.

This is a list of United States Code sections, Statutes at Large, Public Laws, and Presidential Documents, which provide rulemaking authority for this CFR Part.

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United States Code
U.S. Code: Title 15 - COMMERCE AND TRADE

§ 77e - Prohibitions relating to interstate commerce and the mails

§ 77f - Registration of securities

§ 77g - Information required in registration statement

§ 77h - Taking effect of registration statements and amendments thereto

§ 77j - Information required in prospectus

§ 77k - Civil liabilities on account of false registration statement

§ 77s - Special powers of Commission

15 U.S. Code § 32, 33 - Repealed.

15 U.S. Code § 32, 33 - Repealed.

§ 77aa - Schedule of information required in registration statement

§ 77ddd - Exempted securities and transactions

§ 77eee - Securities required to be registered under Securities Act

§ 77ggg - Qualification of indentures covering securities not required to be registered

§ 77hhh - Integration of procedure with Securities Act and other Acts

§ 77iii - Effective time of qualification

§ 77jjj - Eligibility and disqualification of trustee

§ 77nnn - Reports by obligor; evidence of compliance with indenture provisions

§ 77sss - Rules, regulations, and orders

§ 78c - Definitions and application

§ 78i - Manipulation of security prices

§ 78j - Manipulative and deceptive devices

15 U.S. Code § 32, 33 - Repealed.

15 U.S. Code § -

§ 78m - Periodical and other reports

§ 78n - Proxies

15 U.S. Code § 32, 33 - Repealed.

15 U.S. Code § -

15 U.S. Code § 32, 33 - Repealed.

§ 78w - Rules, regulations, and orders; annual reports

15 U.S. Code § -

§ 78mm - General exemptive authority

15 U.S. Code § 79 to 79z–6 - Repealed.

15 U.S. Code § 79 to 79z–6 - Repealed.

15 U.S. Code § 79 to 79z–6 - Repealed.

15 U.S. Code § 79 to 79z–6 - Repealed.

15 U.S. Code § 79 to 79z–6 - Repealed.

15 U.S. Code § 79 to 79z–6 - Repealed.

15 U.S. Code § 79 to 79z–6 - Repealed.

15 U.S. Code § 79 to 79z–6 - Repealed.

15 U.S. Code § 79 to 79z–6 - Repealed.

15 U.S. Code § 79 to 79z–6 - Repealed.

§ 7201 - Definitions

§ 7202 - Commission rules and enforcement

U.S. Code: Title 18 - CRIMES AND CRIMINAL PROCEDURE

Title 17 published on 2013-04-01

The following are ALL rules, proposed rules, and notices (chronologically) published in the Federal Register relating to 17 CFR 229 after this date.

  • 2014-04-02; vol. 79 # 63 - Wednesday, April 2, 2014
    1. 79 FR 18483 - Extension of Comment Period for Asset-Backed Securities Release
      GPO FDSys XML | Text
      SECURITIES AND EXCHANGE COMMISSION
      Extension of comment period.
      Comments should be received on or before April 28, 2014.
      17 CFR Parts 200, 229, 230, 232, 239, 240, 243, and 249