1)All sales and purchases within 6 months are included;
2)Damages calculated as to maximize the gain to he company;
3)Match highest sale price against lowest purchase price within relevant period; continue until you can go no further.
d)Insiders--insiders are officers (named officers and those persons functioning as officers), dirs (actually serving or who authorized deputization of another), and beneficial owners of more than 10% of the shares. Insider status for officers and dirs is determined at the time they made a purchase or sale. Transactions made before taking office is NOT within section 16(b), but those made after leaving office are subject to the statute if they can be matched with a transaction made while in office. Liability is imposed on a beneficial owner only if he owned more than 10% of the shares at the time of both the purchase and sale.
e)"Purchase or Sale"--this includes any purchase of stock. Unorthodox transactions that result in the acquisition or deposition of stock (e.g., merger for stock, redemption of stock) are also purchases and sales.
E.SECTION 16(B) COMPARED TO RULE 10B-5:
a)Covered Securities--Section 16(b) applies to securities registered under the 1934 act; rule 10b-5 applies to all securities.
b)Inside Information--Section 16(b) allows recovery for short-swing profits regardless of whether they are attributable to misrepresentations or inside info; rule 10b-5 recovery is available only where there was a misrepresentation or a trade based on inside info.
c)Plaintiff--recovery under section 16(b) belongs to the corp, while rule 10b-5 recovery belongs to the injured purchaser or seller.
d)Overlapping Liability--it is possible that insiders who make short-swing profits by use of inside info could be liable under both section 16(b) and rule 10b-5.
F.COMMON LAW LIABILITY FOR INSIDER TRADING--insider trading constitutes breach of fiduciary duties owed to the corp, so the corp can recover profits made from insider trading
a)Common Law Liability Compared To Section 16(b) Liability--both common law and section 16(b) liability run against insiders and in favor of the corp. However, unlike section 16(b), the common law theory applies to all corps (not just those withregistered securities), recovery can be had against any corporate insider, the purchase and sale is NOT limited by a six-month period, and the transaction must be based on the inside info.
b)Common Law Liability Compared to Rule 10b-5 Liability--the theories of recovery are similar except that under the common law recovery runs to the corp (not to the injured purchaser or seller), there is no purchaser or seller requirement, and noninsiders (tippees) have not yet been held liable.
VII.RIGHTS OF SHAREHOLDERS
1.RIGHT TO VOTE IN GENERAL--shs may generally vote for the election and removal of dirs, to amend the articles or bylaws, and on major corporate action or fundamental changes.
a)Who May Vote--the right to vote is held by shs of record as of the record date;
b)Restrictions on Right--shares may be either voting or nonvoting, or have multiple votes per share.
2.SHAREHOLDER MEETINGS--generally, shs can act only at meetings duly called and noticed at which a quorum is present.
a)Compare--informal action--statutes permit sh action without a meeting if there is unanimous written consent of all shs entitled to vote.
a)Straight Voting--this system of voting allows one vote for each share held and applies to all matters other than director elections, which may be subject to cumulative voting. Certain fundamental changes (e.g., merger) frequently require higher shareholder approval.
b)Cumulative Voting For Director--this system allows each share one vote for each director to be elected, and the votes may be cast all for one candidate or divided among candidates as the sh chooses, thereby helping minority shs to elect a dir. Cumulative voting may be mandatory or permissive.
4.VOTING BY PROXY--a proxy authorizes another person to vote a shareholder's shares. The proxy usually must be in writing, and its effective period is statutorily limited unless it is validly irrevocable.
a)Revocability--a proxy is normally revocable by the sh at any time, although it may be made irrevocable if expressly stated and coupled with an interest in the shares themselves. Absent written notice to the corp, the death or incapacity of a sh does NOT revoke a proxy. a sh may revoke a proxy by notifying the proxy holder, giving a new proxy to someone else, or by personally attending the meeting and voting.
b)Proxy Solicitation--almost all shs of publicly held corps vote by proxy. Solicitations of proxies are regulated by the Securities Exchanges Act of 1934 Section 14a, federal proxy rules and, in some cases, state law. Federal proxy rules apply to the solicitation of all proxies of registered securities, but NOT to nonmanagement solicitation of 10 or fewer shs. The term "solicitation" is broadly interpreted by the SEC to include any part of a plan leading to a formal solicitation, e.g., inspection of shareholder list.
1)1992 amendments--the SEC revised the proxy rules to make it easier for shs to communicate with each other. Significant changes include: a safe harbor for communications that don't involve solicitation of voting authority, relaxation of requirements involving broadcast of published communications, relaxed preliminary filing requirements for solicitations, and removing communications between shs concerning proxy voting from definition of "solicitation."
2)Requirement of Full Disclosure--the proxy rules require full and accurate disclosure of all pertinent facts and the identities of all proxy participants, disclosure of compensation paid to certain officers and dirs, and disclosure of conflict-of-interest transactions involving more than $60, 000.
3)Inclusion of Shareholder Proposal--shareholder proposals must be included in corporate proxy materials if the proponent is a record owner or beneficial owner of at least 1% or $1000 worth of securities entitled to vote on the matter. The proposal must not exceed 500 words.
I)Exceptions--a proposal need NOT be included if it: is not a proper subject for shareholder action, would be illegal, is false or misleading, seeks redress of a personal claim, relates to operations accounting to less than 5% of the corp's total assets and is not otherwise related to the corp's business, concerns a matter beyond the corp's power to effectuate, relates to ordinary business operations, relates to an election to office, is counter to a proposal submitted by the corp at the same meeting, is moot or duplicate, deals with the same subject matter as a very unsuccessful prior proposal, or relates to specific amounts of cash or stock dividends.
ii)Private right of action--a private right of action is available to a sh whose proposal was rejected by the corp on the ground that it fails within one of the exceptions.
iii)Providing shareholder lists--a sh has a right to obtain a list of shs or to have his communication included with the corporate proxy materials.
4)Remedies for violation of proxy rules--these include suit by the SEC to enjoin violations or to set aside an election and individual suits, class actions, or derivative suits by the shs (In a private suit, the P must show materiality and causation, but causation is normally presumed from materiality. Fairness to the corp is NOT a defense to a violation of proxy rules ). The court may rescind corporate action resulting from a misleading proxy solicitation or award damages.
c)Expenses Incurred In Proxy Contests--corporate funds may be used by management with respect to reasonable proxy solicitation expenses incurred in order to obtain a quorum for the annual meeting or regarding controversy over corporate policy (as opposed to a personnel controversy). The corp may, with sh approval, voluntarily pay the reasonable expenses to insurgents who win a proxy contest involving policy.