Section R590-68-16 - Exemption From Subsection 31A-5-303(2) of Acquisitions of Shares of Stock and Stock Options Under Certain Stock Bonus, Stock Option, or Similar Plans(1) For purposes of this section, the following terms apply:(a) "Plan" means any plan, whether set forth in a formal written document and whether approved in its entirety at one time.(b) "Qualified stock option" and "employee stock purchase plan" mean the same as those terms are defined in Sections 422 and 423 of the Internal Revenue Code.(c) "Restricted stock option" means the same as that term is defined in Subsection 424(b) of the Internal Revenue Code.(d) "Exercise of an option, warrant, or right" does not include: (i) the making of an election to receive, under a plan, an award of compensation in the form of stock or credits, provided that the election is made before the making of the award and that the election is irrevocable until at least six months after termination of employment;(ii) the subsequent crediting of such stock;(iii) the making of an election as to a time for delivery of the stock after termination of employment, provided that the election is made at least six months before delivery;(iv) the fulfillment of a condition to the absolute right to receive stock; or(v) the acceptance of certificates for shares of stock.(2)(a) An acquisition of shares of stock is exempt from Subsection 31A-5-303(2) if the plan complies with this section.(b) Notwithstanding Subsection (2)(a), an acquisition of shares of stock is not exempt if it is: (i) acquired upon the exercise of an option, warrant, or right, pursuant to a stock bonus, profit sharing, retirement, incentive, thrift, savings, or similar plan;(ii) an acquisition of a qualified or a restricted stock option pursuant to a qualified or a restricted stock option plan; or(iii) a stock option pursuant to an employee stock purchase plan by a director or officer of an insurer issuing a stock or stock option.(3)(a) The plan shall be approved, directly or indirectly, by: (i) affirmative votes of the holders of a majority of the securities of the insurer present, or represented, and entitled to vote at a duly held meeting; or(ii) written consent of the holders of a majority of the securities of an insurer entitled to vote.(b) The insurer shall furnish the same information concerning the plan, in writing, to the holders of record of the securities entitled to vote for the plan, if: (i) the vote or written consent was not solicited under the proxy rules of the NAIC in effect at the time of a vote or written consent; and(ii) a proxy vote was solicited to approve or disapprove the plan.(c) The information required by Subsection (2)(b) shall be furnished on or before the date of the first annual meeting of security holders held after the later of:(i) the date Section 31A-5-303 first applies to the insurer; or(ii) the acquisition of an equity security for which an exemption is claimed.(d)(i) Written information may be furnished by mail to the last known address of the security holders of record within 30 days before the date of mailing.(ii) The written information shall be filed with the commissioner no later than the date the written information is first provided to security holders of the insurer.(e) "Insurer," for the purposes of this Subsection (3), includes a predecessor corporation if the plan or obligation to participate is assumed by the insurer in connection with the succession.(4) Selection of a director or officer of the insurer may be subject to discretion if: (a) the director or officer may be allocated stock;(b) the director or officer may be granted qualified, restricted, or employee stock purchase plan stock options pursuant to the plan;(c) a determination must be made regarding the number or maximum number of shares of stock that may be allocated to a director or officer, or that may be covered by qualified, restricted, or employee stock purchase plan stock options granted to a director or officer.(5) If a selection in Subsection (4) is subject to discretion, the discretion shall be exercised as follows: (a) with respect to the participation of a director:(i) by the board of directors of the insurer, a majority of the board and a majority of the directors acting in the matter are disinterested persons;(ii) by a committee of three or more persons having full authority to act in the matter, of the members of which are disinterested persons; or(iii) in accordance with the plan if the plan:(A) specifies the number or maximum number of shares of stock that directors may acquire or are subject to qualified, restricted, or employee stock purchase plan stock options granted to directors and the terms upon which, and the times at which, or the periods within which, the stock may be acquired or the options may be acquired and exercised; or(B) sets forth, by formula or otherwise, effective and determinable limitations based upon earnings of the insurer, dividends paid, compensation received by participants, option prices, market value of shares, outstanding shares or percentages outstanding from time to time, or similar factors; or(b) with respect to the participation of officers who are not directors:(i) by the board of directors of the insurer or a committee of three or more directors; or(ii) by a committee of three or more persons having full authority to act in the matter, of the members of which are disinterested persons.(c) For the purposes of this Subsection (5), a director or committee member is a disinterested person only if the person is not eligible at the time the discretion is exercised, and has not at any time within the past year, been eligible for selection as a person to whom stock may be allocated or to whom qualified, restricted, or employee stock purchase plan stock options are granted pursuant to the plan, or any other plan of the insurer, or any of its affiliates entitling the participants to acquire stock, or qualified, restricted, or employee stock purchase plan stock options of the insurer or any of its affiliates.(d) This Subsection (5) does not apply to an option granted, or other equity security acquired, before the date that Subsections 31A-5-303(1) through 31A-5-303(3) first applied to a class of equity security of an insurer.(6)(a) For a participant that a plan limits the aggregate dollar amount or the aggregate number of shares of stock that may be allocated, or are subject to qualified, restricted, or employee stock purchase plan stock options granted, pursuant to the plan, the limitations may be established on an annual basis, or for the duration of the plan, whether the plan has a fixed termination date, and may be determined either by fixed or maximum dollar amounts, or fixed or maximum numbers of shares, or by formulas based upon earnings of the insurer, dividends paid, compensation received by participants, option prices, market value of shares, outstanding shares, or percentages outstanding from time to time, or similar factors that will result in an effective and determinable limitation.(b) The limitations may be subject to a provision for adjustment of the plan or of stock allocable or portions outstanding to prevent dilution or enlargement of rights.Utah Admin. Code R590-68-16
Adopted by Utah State Bulletin Number 2023-12, effective 6/9/2023