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section 16(b) is applicable, then respondent “would be correct,
at least insofar as the granting of the option being deemed to be
a purchase is concerned”. Petitioner’s only argument that the
1991 amendment does not apply is that the exercise of the option
is a “discretionary transaction”.
The language to which petitioner refers regarding
discretionary transactions is found in 17 C.F.R. sec. 240.16b-
3(d), which provides:
Any transaction involving a grant, award or other
acquisition from the issuer (other than a Discretionary
Transaction) shall be exempt if: * * * (3) The issuer
equity securities so acquired are held by the officer
or director for a period of six months following the
date of such acquisition, provided that this condition
shall be satisfied with respect to a derivative
security if at least six months elapse from the date of
acquisition of the derivative security to the date of
disposition of the derivative security (other than upon
exercise or conversion) or its underlying equity
security. [Emphasis added.]
Final Rule: Ownership Reports and Trading by Officers,
Directors, and Principal Security Holders, 61 Fed. Reg. 30376,
30393 (June 14, 1996). This rule exempts a transaction from
section 16(b) (i.e., the transaction would not be subject to
section 16(b) liability) if the option is not a discretionary
transaction and is held for 6 months from the date of grant
before it is disposed of. We note that this regulation became
effective in 1996 and does not apply to petitioner’s 1994 taxable
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