Determining whether a person holds political office often requires careful consideration and varies considerably depending on the nature and structure of the company`s activities. A note to Rule 16a-1(f) contains two benchmarks: first, the term „political decision-making function“ does not include trivial political decision-making functions. Second, persons referred to as `senior managers` under Article 401(b) of Regulation S-K are considered to be `senior managers` under Article 16. In many cases, persons identified as agents in a proxy circular will also be rating agents covered by section 16, and vice versa. While little or no analysis is required to designate the individuals listed above with the titles listed above as executives, companies face a factual determination of who holds „political office.“ Officers of a company`s parent company or subsidiaries may also be directors of a company if they hold such political positions for the company. Unfortunately, the SEC has issued surprisingly few guidance on this point. However, in the SEC`s most recent challenge, the court`s decision focused primarily on this „policy-making function.“ Of course, each entity must investigate its own facts and circumstances and apply the criteria set out in Rule 16a-1(f) to determine who within the Corporation is to be considered an officer under Article 16. Companies can generally have between six and 12 employees under section 16. Some companies tend to broaden the category beyond what is necessary and increase their administrative burden without corresponding benefits. Companies that over-designate section 16 public servants may have difficulty managing timely section 16 reporting and may unnecessarily expose some employees to scrutiny and burden under section 16.
If a company has fewer than five officers, the executive compensation disclosure includes fewer than five near-Earth objects, which may prompt SEC staff to comment to confirm that the disclosure includes all of the company`s near-Earth objects. Staff will generally not object if an entity has fewer than five near-Earth objects, if the entity can confirm that the number of near-Earth objects equals the number of senior managers and that the disclosure of executive compensation includes all near-Earth objects. „Officer“ means the President, any Vice-President assigned to a business unit, department or primary function (e.g., Sales, Administration or Finance), any other senior officer exercising a political decision-making function or any other person exercising similar political functions for the Issuer. Officers of subsidiaries may be considered officers of the issuer when they perform such political functions on behalf of the issuer. Securities Act of 1933, Rule 501(f), 17 C.F.R. § 230.501(f). The definition of officer in section 16 is designed to apply narrowly to the small subset of senior executives of the enterprise who perform important strategic functions. In addition to an objective analysis of a person`s duties and responsibilities, a company`s organization and reporting lines often help inform the analysis.
What is the difference between section 16 officers and „officers“ of an enterprise? His former college buddy Sam Baker has just been named CFO of Dixie Candles, Inc. While talking to Sam about his promotion, Dixie`s CEO casually mentioned that Sam is now of course a „Section 16 agent“ as the CFO serves as both the senior CFO and the chief accounting officer for the company. In her excitement, Sam forgot to ask exactly what an Article 16 officer is, so she calls you for a quick introduction. The definition of „staff member“ in section 16 is given in rules 16a-1 et seq. Certain officers are specifically considered „officers“ under section 16, including the president, chief financial officer, chief accounting officer (or, if there is no chief accountant, controller) and any vice-president responsible for a business unit, department or primary function (such as sales, administration or finance). In addition, any other officer holding a political office or any other person exercising similar political functions for the Corporation is deemed to be an „officer“ under Rule 16a-1(f). All officers of subsidiaries who also hold political office for the Corporation are considered officers within the meaning of the definition.