SEC/CORPORATE -

US District Court Holds That Discretionary Tax Withholding is Exempt Under 16b-3 -

Several companies have received shareholder letters seeking to recover short-swing profits from insiders under Section 16(b) of the Securities Exchange Act of 1934, alleging that such insiders made non-exempt purchases of stock within six months of having shares withheld either for payment of the exercise price of employee stock options or to satisfy tax liabilities upon the vesting of restricted stock units (resulting in deemed dispositions of those shares). In each case, the shareholder has claimed that the Rule 16b-3(e) exemption (for transactions between an issuer and its officers and directors) is only available for such dispositions when the withholding is automatic, without an election by the insider or the company. On April 26, the United States District Court for the Southern District of Texas granted a motion to dismiss in JD. Jordan v. Robert Flexton, et al., No.4:16-CV03316, holding that dispositions of restricted stock units to cover tax withholding are compensation related transactions designed to be exempt under Section 16b-3(e) of the Securities Exchange Act of 1934.