31 Pa. Code § 21.34 - Long-term profits incident to options

(a) The following provisions apply to long-term profits incident to options:

(1) To the extent specified in subsection (b), the Insurance Commissioner exempts as not comprehended within the purposes of section 302.1(2) of the act (40 P. S. § 422.1(2)) any transaction or transactions involving the purchase and sale, or sale and purchase, of any equity security if such purchase is pursuant to the exercise of an option or similar right acquired more than six months before its exercise, or acquired pursuant to the terms of an employment contract entered into more than 6 months before its exercise.

(2) The profits inuring to the insurer in the transactions may not exceed the difference between the proceeds of sale and the lowest market price of any security of the same class within 6 months before or after the date of sale.

(3) Nothing in this subsection shall be deemed to enlarge the amount of profit which would inure to the insurer in the absence of this section.

(b) Also exempted from section 302.1(2) of the act shall be the disposition of a security purchased in a transaction specified in subsection (a) under a plan or agreement for merger or consolidation, or reclassification of the insurer's securities, or for the exchange of its securities for the securities of another person which has acquired its assets, or which is in control, as defined in 368(c) of the Internal Revenue Code of 1954, as amended, of a person which has acquired its assets, if the terms of the plan or agreement are binding upon all stockholders of the insurer except to the extent that dissenting stockholders may be entitled, under statutory provisions or provisions contained in the certificate of incorporation, to receive the appraised or fair value of their holdings.

(c) The exemptions provided by subsections (a) and (b) do not apply to any transaction made unlawful by section 302.1(3) of the act (40 P. S. § 422.1(3)), or by any rules and regulations thereunder.

(d) The burden of establishing the market price of a security for the purpose of this section shall rest upon the person claiming the exemption.

Notes

31 Pa. Code § 21.34