Release No. 33-8732A Release No. 34-54302A Release No. IC-27444A

Securities and Exchange Commission

Executive Compensation and Related Person Disclosure
Section V.A.

V. Certain Relationships and Related Transactions Disclosure

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A. Transactions with Related Persons

We are adopting amendments to Item 404 to make the certain relationships and related transactions disclosure requirements clearer and easier to follow. The revisions retain the principles for disclosure of related person transactions that were previously specified in Item 404(a), but no longer include all of the instructions that served to delineate what transactions are reportable or excludable from disclosure based on bright lines that can depart from a more appropriate materiality analysis. Instead, Item 404(a) as amended consists of a general statement of the principle for disclosure, followed by specific disclosure requirements and instructions. The instructions to Item 404(a) explain the related persons covered by the Item, the scope of transactions covered by the Item, the method for computation of the amount involved in the transaction, special requirements regarding indebtedness, the interaction with Item 402, the materiality of certain interests, and the circumstances in which disclosure need not be provided.

Item 404(a) as adopted extends to disclosure of indebtedness, by consolidating the disclosure formerly required under Item 404(a) regarding transactions involving the company and related persons with the disclosure regarding indebtedness which had been separately required by Item 404(c) prior to these amendments. We have consolidated these two provisions substantially as proposed in order to eliminate confusion regarding the circumstances in which each item applied and to streamline duplicative portions of Item 404.

1. Broad Principle for Disclosure

Item 404(a) as proposed and adopted articulates a broad principle for disclosure; it states that a company must provide disclosure regarding:

• Any transaction since the beginning of the companys last fiscal year, or any currently proposed transaction;
• In which the company was or is to be a participant;
• In which the amount involved exceeds $120,000; and
• In which any related person had or will have a direct or indirect material interest.

As proposed, amended Item 404(a) no longer includes an instruction that is repetitive of the general materiality standard applicable to the Item.⁴¹² By omitting this instruction, we do not intend to change the materiality standard applicable to Item 404(a). The materiality standard for disclosure embodied in Item 404(a) prior to these amendments is retained; a company must disclose based on whether the related person had or will have a direct or indirect material interest in the transaction. The materiality of any interest will continue to be determined on the basis of the significance of the information to investors in light of all the circumstances.⁴¹³ As was the case before adoption of amended Item 404(a), the relationship of the related persons to the transaction, and with each other, the importance of the interest to the person having the interest and the amount involved in the transaction are among the factors to be considered in determining the materiality of the information to investors.

We are also eliminating as proposed an instruction to Item 404(a) which had indicated that the dollar threshold is not a bright line materiality standard.⁴¹⁴ It remains true, however, that when the amount involved in a transaction exceeds the prescribed threshold ($120,000 under the amended rule we adopt today), a company should evaluate whether the related person has a direct or indirect material interest in the transaction to determine if disclosure is required. We eliminated the instruction because it was repetitive of the general materiality standard applicable to the Item. We believe that application of the materiality principles under the Item are more consistent with a principles-based approach and will lead to more appropriate disclosure outcomes than application of the instruction that was eliminated. By deleting this instruction, we do not intend to change the materiality standard applicable to Item 404(a). As was the case with Item 404(a) prior to adoption of these amendments, there may be situations where, although the instructions to Item 404(a) do not expressly provide that disclosure is not required, the interest of a related person in a particular transaction is not a direct or indirect material interest. In that case, information regarding such interest and transaction is not required to be disclosed under Item 404(a).

In addition, as proposed the amendments:

• Call for disclosure if a company is a participant in a transaction, rather than if it is a party to the transaction, as participant more accurately connotes the companys involvement;
• Modify the $60,000 threshold for disclosure to $120,000 to adjust for inflation;
• Include a defined term for transaction to provide that it includes a series of similar transactions and to make clear its broad scope; and
• Include a defined term for related persons.⁴¹⁵

As was the case before these amendments, disclosure is required for three years in registration statements filed pursuant to the Securities Act or the Exchange Act.⁴¹⁶

One commenter questioned whether changing the test of company involvement from being a party to a transaction to being a participant in a transaction is intended to be a substantive change.⁴¹⁷ The purpose of this change is to more accurately connote the companys involvement in a transaction by clarifying that being a participant encompasses situations where the company benefits from a transaction but is not technically a contractual party to the transaction.⁴¹⁸

Commenters expressed diverse views on the appropriate disclosure threshold. While some commenters supported increasing the threshold for disclosure from $60,000 to $120,000,⁴¹⁹ others recommended retaining the $60,000 threshold,⁴²⁰ using a minimal dollar threshold,⁴²¹ not including any de minimis dollar threshold,⁴²² or increasing the threshold even further through use of a sliding scale.⁴²³ We believe that a fixed dollar amount for the disclosure threshold will provide the most certainty as to the size of transactions that must be tracked for disclosure purposes under Item 404,⁴²⁴ and that increasing the dollar amount of the threshold based on inflation is appropriate given the amount of time that has elapsed since it was last set nearly twenty-five years ago.

Finally, the rule changes include as proposed a technical modification. Prior to todays amendments, Item 404(a) stated that disclosure was required regarding situations involving the registrant or any of its subsidiaries. Because companies must include subsidiaries in making materiality determinations in all circumstances, the reference to subsidiaries is superfluous, and we have therefore eliminated it. This modification does not change the scope of disclosure required under the Item.⁴²⁵

a. Indebtedness

Section 402 of the Sarbanes-Oxley Act prohibits most personal loans by a company to its officers and directors.⁴²⁶ This development raises the issue of whether disclosure of indebtedness of the sort required under our rules prior to the amendments should be maintained. We believe that the approach to disclosure of indebtedness involving related persons that we adopt today is appropriate because of the scope of the direct and indirect interests covered by our disclosure requirements, because related persons include persons not covered by the prohibitions, and because there are certain exceptions to the prohibitions. We have, however, eliminated the distinction between indebtedness and other types of related person transactions.

As a result of integrating what had been required to be disclosed under paragraph (c) of Item 404 into paragraph (a) of Item 404, the rule proposals would have changed the situations in which indebtedness disclosure is necessary by requiring disclosure of indebtedness transactions with regard to all related persons covered by the related person transaction disclosure requirement, including significant shareholders.⁴²⁷ Some commenters questioned whether disclosure of indebtedness of significant shareholders would be useful to investors and whether companies would have access to the information necessary to provide this disclosure.⁴²⁸ In response to these comments, the amendments do not require disclosure of indebtedness transactions of significant shareholders (or their immediate family members).⁴²⁹ Another result of integrating the disclosure requirements that had been specified in paragraph (c) of Item 404 into paragraph (a) of Item 404, is that the rule changes set a $120,000 threshold and require disclosure if there is a direct or indirect material interest in an indebtedness transaction, while prior to these amendments Item 404(c) required disclosure of all indebtedness exceeding $60,000.⁴³⁰ For example, under amended Item 404(a) disclosure is required if an executive officer had a material indirect interest in an indebtedness transaction (exceeding $120,000) between the company and another entity due to that executive officers ownership interest in the other entity. Disclosure of material indirect interests of related persons in transactions involving the company will be required by Item 404(a) as amended, just as it was prior to adoption of these amendments. We believe that disclosure requirements for indebtedness and for other related person transactions should be congruent. In particular, we believe that loans by companies other than financial institutions should be treated like any other related person transactions; however, as discussed below,⁴³¹ we address certain ordinary course loans by financial institutions in an instruction to Item 404(a).

b. Definitions

We have defined the terms transaction, related person and amount involved substantially as proposed in order to streamline Item 404(a) and to clarify the broad scope of financial transactions and relationships covered by the rule.

The term transaction has a broad scope in Item 404(a).⁴³² This term is not to be interpreted narrowly, but rather broadly includes, but is not limited to, any financial transaction, arrangement or relationship or any series of similar transactions, arrangements or relationships. The definition of transaction also specifically notes that the term includes indebtedness and guarantees of indebtedness.

The definition of related person identifies the persons covered, and clarifies the time periods during which they are covered. The term related person⁴³³ means any person who was in any of the following categories at any time during the specified period for which disclosure under paragraph (a) of Item 404 is required:

• Any director or executive officer of the company and his or her immediate family members; and
• If disclosure were provided in a proxy or information statement relating to the election of directors, any nominee for director and the immediate family members of any nominee for director.

In addition, a security holder known to the company to beneficially own more than five percent of any class of the companys voting securities or any immediate family member of any such person, when a transaction in which such security holder or family member had a direct or indirect material interest occurred or existed, is also a related person.

The definition of related person that we have adopted will require disclosure of related person transactions involving the company and a person (other than a significant shareholder or immediate family member of such shareholder) that occurred during the last fiscal year, if the person was a related person during any part of that year.⁴³⁴ A person who had a position or relationship giving rise to the person being a related person during only part of the last fiscal year may have had a material interest in a transaction with the company during that year. While prior to these amendments Item 404(a) did not indicate whether disclosure was required for the transaction in this situation, the history of Item 404 suggests that disclosure was required if the requisite relationship existed at the time of the transaction, even if the person was no longer a related person at the end of the year.⁴³⁵ We believe that, because of the potential for abuse and the close proximity in time between the transaction and the persons status as a related person, it is appropriate to require disclosure for transactions in which the person had a material interest occurring at any time during the fiscal year. For example, it is possible that a material interest of a person in a transaction during this timeframe could influence the persons performance of his or her duties.

We believe that transactions with persons who have been or who will become significant shareholders (or their immediate family members), but are not at the time of the transaction, raise different considerations and are harder to track, and thus we are excluding them as proposed. Disclosure will be required, however, regarding a transaction that begins before a significant shareholder becomes a significant shareholder, and continues (for example, through the on-going receipt of payments) on or after the time that the person becomes a significant shareholder.

We are adopting the definition of immediate family member as proposed. Under Item 404(a), the term immediate family member means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, and any person (other than a tenant or employee) sharing the household of any director, nominee for director, executive officer, or significant shareholder of the company. The amended definition differs from the former definition in that it includes stepchildren, stepparents, and any person (other than a tenant or employee) sharing the household of a director, nominee for director, executive officer, or significant shareholder of the company.⁴³⁶

The amended definition of amount involved is adopted as proposed.⁴³⁷ The definition incorporates two concepts that were included in Item 404 prior to these amendments regarding how to determine the amount involved in transactions, and clarifies that the amounts reported must be in dollars even if the amount was set or expensed in a different currency. As adopted, the term amount involved means the dollar value of the transaction, or series of similar transactions, and includes:

• In the case of any lease or other transaction providing for periodic payments or installments, the aggregate amount of all periodic payments or installments due on or after the beginning of the companys last fiscal year, including any required or optional payments due during or at the conclusion of the lease or other transaction providing for periodic payments or installments;⁴³⁸ and
• In the case of indebtedness, the largest aggregate amount of all indebtedness outstanding at any time since the beginning of the companys last fiscal year and all amounts of interest payable on it during the last fiscal year.⁴³⁹

2. Disclosure Requirements

Subparagraphs of Item 404(a) as adopted provide the disclosure requirements for related person transactions. The company will be required to describe the transaction, including:

• The persons name and relationship to the company;
• The persons interest in the transaction with the company, including the related persons position or relationship with, or ownership in, a firm, corporation, or other entity that is a party to or has an interest in the transaction; and
• The approximate dollar value of the amount involved in the transaction and of the related persons interest in the transaction.⁴⁴⁰

Companies will also be required to disclose any other information regarding the transaction or the related person in the context of the transaction that is material to investors in light of the circumstances of the particular transaction.

As was the case prior to adoption of these amendments, the dollar value of the related persons interest in the transaction will be computed without regard to the amount of the profit or loss involved in the transaction.⁴⁴¹ One commenter pointed out that the proposals expanded the application of this provision to also cover the computation of the amount involved when the provision was moved from an instruction into the body of Item 404(a).⁴⁴² In streamlining Item 404(a), we did not intend to change the scope of the prior instruction. Therefore, the final rule clarifies the context in which profit or loss is not to be considered.

Consistent with the principles-based approach that we are applying to related person transaction disclosure, we are eliminating an instruction that, in the case of a related person transaction involving a purchase or sale of assets by or to the company otherwise than in the ordinary course of business, called for specific disclosure of the cost of the assets to the purchaser, and if acquired within two years of the transaction, the cost of the assets to the seller and related information about the price of the assets. We note, however, that if such information is material under the revised standards of Item 404(a), because, for example, the recent purchase price to the related person is materially less than the sale price to the company, or the sale price to the related person is materially more than the recent purchase price to the company, disclosure of such prior purchase price and related information about the prices could be required.

Prior to adoption of todays amendments, disclosure was required under Item 404(c) regarding amounts possibly owed to the company under Section 16(b) of the Exchange Act.⁴⁴³ We believe that the purpose of related person transaction disclosure differs from the purpose of Section 16(b), and one commenter expressed support for eliminating this requirement.⁴⁴⁴ Accordingly, the rule amendments eliminate this former Section 16(b)-related disclosure requirement.

3. Exceptions

Some categories of transactions do not fall within the principle for disclosure and therefore Item 404(a) as amended includes disclosure exceptions that we believe are consistent with our principles-based approach.⁴⁴⁵ The first category of transactions involves compensation. Disclosure of compensation to an executive officer will not be required if:

• The compensation is reported pursuant to Item 402 of Regulation S-K; or
• The executive officer is not an immediate family member and such compensation would have been reported under Item 402 as compensation earned for services to the company if the executive officer was a named executive officer, and such compensation had been approved, or recommended to the board of directors of the company for approval, by the compensation committee of the board of directors (or group of independent directors performing a similar function) of the company.⁴⁴⁶

As proposed, this disclosure exception would have required compensation committee approval of an executive officers compensation if that executive officers compensation was not reported under Item 402. However, one commenter noted that in accordance with listing standards, compensation committees may only need to recommend to the board of directors, rather than approve, the compensation of executive officers (other than the chief executive officer).⁴⁴⁷ We believe that it is appropriate for this disclosure exception to apply a standard that is consistent with the listing standards and we have thus modified this exception from the proposal accordingly. Finally, as proposed disclosure of compensation to a director will not be required if the compensation is reported pursuant to the director compensation disclosure requirement in Item 402(k).⁴⁴⁸

As we explained in the Proposing Release, since the disclosure either would be reported under Item 402, or would not be required under Item 402, we do not believe that these particular compensation transactions fall within our Item 404 disclosure principle, or they will have already been disclosed. Transactions involving compensation that do not fall within these exceptions, such as compensation of immediate family members, are within the scope of the principle for disclosure in amended Item 404(a).⁴⁴⁹ These exceptions thus clarify the limited situations in which disclosure of compensation to related persons is not required under Item 404.

The second category of transactions involves three types of situations that we believe do not raise the potential issues underlying our principle for disclosure. First, in the case of transactions involving indebtedness, as proposed we have adopted amendments so that the following items of indebtedness may be excluded from the calculation of the amount of indebtedness and need not be disclosed because they do not have the potential to impact the parties as do the transactions for which disclosure is required: amounts due from the related person for purchases of goods and services subject to usual trade terms, for ordinary business travel and expense payments and for other transactions in the ordinary course of business.⁴⁵⁰ Also, in the case of a transaction involving indebtedness, the amendments provide, as proposed, that if the lender is a bank, savings and loan association, or broker-dealer extending credit under Federal Reserve Regulation T⁴⁵¹ and the loans are not disclosed as nonaccrual, past due, restructured or potential problems,⁴⁵² disclosure under paragraph (a) of Item 404 may consist of a statement, if correct, that the loans to such persons satisfied the following conditions:

• They were made in the ordinary course of business;
• They were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable loans with persons not related to the lender; and
• They did not involve more than the normal risk of collectibility or present other unfavorable features.⁴⁵³

This exception is based on the exception that was included in Instruction 3 to Item 404(c) prior to these amendments, and has been modified as proposed to be more consistent with the prohibition of the Sarbanes-Oxley Act on personal loans to officers and directors.⁴⁵⁴

Second, we are adopting as proposed an instruction indicating that a person who has a position or relationship with a firm, corporation, or other entity that engages in a transaction with the company shall not be deemed to have an indirect material interest within the meaning of paragraph (a) of Item 404 if:

• The interest arises only: (i) from the persons position as a director of another corporation or organization that is a party to the transaction; or (ii) from the direct or indirect ownership by such person and all other related persons, in the aggregate, of less than a ten percent equity interest in another person (other than a partnership) which is a party to the transaction; or (iii) from both such position and ownership; or
• The interest arises only from the persons position as a limited partner in a partnership in which the person and all other related persons, have an interest of less than ten percent, and the person is not a general partner of and does not have another position in the partnership.⁴⁵⁵

Finally, disclosure will not be required under paragraph (a) of Item 404 in three other types of circumstances. First, disclosure will not be required under paragraph (a) of Item 404 as to any transaction where the rates or charges involved in the transaction are determined by competitive bids, or the transaction involves the rendering of services as a common or contract carrier, or public utility, at rates or charges fixed in conformity with law or governmental authority.⁴⁵⁶ We had proposed to eliminate this exception because we considered such bright-line presumptions as inconsistent with our principles-based approach to the rule. We are persuaded, however, by a commenter who indicated that the prior exception embodied a conclusion that the terms of these types of transactions would likely not be influenced by the related persons and therefore should be excluded as not material.⁴⁵⁷ As a result, the instruction is retained in the rule as adopted.

Second, disclosure need not be provided under paragraph (a) of Item 404 if the transaction involves services as a bank depositary of funds, transfer agent, registrar, trustee under a trust indenture, or similar services.⁴⁵⁸ We had proposed to eliminate this exception. We are persuaded by commenters concerns that eliminating this exception may be detrimental to financial institutions and may not result in additional meaningful disclosure.⁴⁵⁹ Accordingly, we are retaining this exception.

Third, we are adopting an exception indicating that disclosure need not be provided pursuant to paragraph (a) of Item 404 if the interest of the related person arises solely from the ownership of a class of equity securities of the company and all holders of that class of equity securities of the company received the same benefit on a pro rata basis.⁴⁶⁰ Commenters expressed concern that our proposal to eliminate the former exception⁴⁶¹ would require disclosure if a related person receives over $120,000 in dividends on company stock in a year, even though those dividends are paid on the same terms as for all other stockholders.⁴⁶² We are persuaded by the commenters that related person transaction disclosure is not necessary for transactions where a related person receives pro rata dividends or returns on the ownership of equity securities, and therefore we have adopted an instruction to provide an exception from disclosure in these limited circumstances.⁴⁶³

Some commenters requested that we create a new exception for transactions undertaken in the ordinary course of business of the company and conducted on the same terms that the company offers generally in transactions with persons who are not related persons.⁴⁶⁴ Former Item 404(a) did not include such an ordinary course of business disclosure exception, and we are not persuaded that it should be expanded to include one. In this regard, we note that transactions which should properly be disclosed under Item 404(a) might be excluded under an ordinary course of business exception, such as employment of immediate family members of officers and directors. However, we note that whether a transaction which was not material to the company or the other entity involved and which was undertaken in the ordinary course of business of the company and on the same terms that the company offers generally in transactions with persons who are not related persons, are factors that could be taken into consideration when performing the materiality analysis for determining whether disclosure is required under the principle for disclosure.

⁴¹² Prior to todays amendments, Instruction 1 to Item 404(a) had stated that [t]he materiality of any interest is to be determined on the basis of the significance of the information to investors in light of all the circumstances of the particular case. The importance of the interest to the person having the interest, the relationship of the parties to the transaction with each other and the amount involved in the transactions are among the factors to be considered in determining the significance of the information to investors.

⁴¹³ See Basic v. Levinson and TSC Industries v. Northway.

⁴¹⁴ Prior to todays amendments, Instruction 9 to Item 404(a) had stated that There may be situations where, although these instructions do not expressly authorize nondisclosure, the interest of a person specified in paragraphs (a)(1) through (4) in a particular transaction or series of transactions is not a direct or indirect material interest. In that case, information regarding such interest and transaction is not required to be disclosed in response to this paragraph.

⁴¹⁵ The related persons covered by the amended Item are discussed below in Section V.A.1.b.

⁴¹⁶ However, if the disclosure is being incorporated by reference into a registration statement on Form S-4, the additional two years of disclosure will not be required, as specified in Instruction 1 to Item 404.

⁴¹⁷ See letter from Sullivan. See also letter from SCSGP.

⁴¹⁸ For example, disclosure would be required if a company benefits from a transaction with a related person that the company has arranged and in which it participates, notwithstanding the fact that it is not a party to a contract.

⁴¹⁹ See, e.g., letters from BRT and Sullivan.

⁴²⁰ See, e.g., letters from Amalgamated and CalSTRS.

⁴²¹ See letter from Teamsters (recommending a $250 disclosure threshold).

⁴²² See, e.g., letters from CII and ISS.

⁴²³ See letter from SCSGP recommending a disclosure threshold for companies that are not small business issuers of the greater of $120,000 or a percentage (which it believes could be as low as two percent) of consolidated gross revenues of the recipient for certain types of transactions.

⁴²⁴ The disclosure threshold in amended Item 404(a) of Regulation S-B is the lesser of $120,000 or one percent of the average of the small business issuers total assets at year-end for the last three completed fiscal years because we believe that transactions that are below $120,000 can be significant for small business issuers given their relative size.

⁴²⁵ For the same reason, we have eliminated as proposed the references to subsidiaries in the compensation committee interlocks and insider participation in compensation decisions disclosure requirement adopted in Item 407(e)(4). This revision does not change the scope of disclosure required under the rule.

⁴²⁶ Codified in Section 13(k) of the Exchange Act [15 U.S.C. 78m(k)].

⁴²⁷ Prior to todays amendments, the related person transaction disclosure requirement in Item 404(a) covered significant shareholders, while the indebtedness disclosure requirement in Item 404(c) did not. The significant shareholders covered by Item 404(a) as adopted will continue to be any security holder who is known to the company to beneficially own more than five percent of any class of the companys voting securities. See Instruction 1.b.i. to Item 404(a).

⁴²⁸ See, e.g., letter from Sullivan. See also, letter from SCSGP.

⁴²⁹ See Instruction 4.b. to Item 404(a). Disclosure would be required, however, if the significant shareholder (or such shareholders immediate family member) was also a related person specified in Instruction 1.a. to Item 404(a), for example, if the significant shareholder was also an executive officer.

⁴³⁰ Prior to these amendments, Item 404(c) also had required disclosure of some specific indirect interests of directors, nominees for director, and executive officers of the company in indebtedness through corporations, organizations, trusts, and estates. Disclosure of these specific interests had been required by subparagraphs (c)(4) and (c)(5) of Item 404. Under the amendments, these subparagraphs have been eliminated as duplicative and the need for disclosure in these situations will be determined using a materiality analysis under the principle for disclosure in Item 404(a).

⁴³¹ See Section V.A.3. below.

⁴³² Instruction 2 to Item 404(a).

⁴³³ Instruction 1 to Item 404(a).

⁴³⁴ As proposed, the principle for disclosure that we have adopted only applies to nominees for director if disclosure is being provided in a proxy or information statement involving the election of directors. Also, as proposed, ongoing disclosure is not required regarding nominees for director who were not elected (unless a nominee has been nominated again for director).

⁴³⁵ This position, which had been included in the proxy rule provisions that were the precursor to Item 404, was deleted from those provisions in 1967 as duplicative of a note that applied to all of the disclosure required in Schedule 14A (including the related party disclosure requirement in Schedule 14A). Adoption of Amendments to Proxy Rules and Information Rules, Release No. 34-8206 (Dec. 14, 1967) [32 FR 20960], at Schedule 14A - Item7(f). Before todays amendments, Note C to Schedule 14A provided that [i]nformation need not be included for any portion of the period during which such person did not hold any such position or relationship, provided a statement to that effect is made. We have amended Note C to Schedule 14A as proposed so that it will no longer apply to disclosure of related person transactions.

⁴³⁶ The persons included in these additions to the definition are also included in the definition of family member in General Instruction A.1.(a)(5) to Securities Act Form S-8.

⁴³⁷ Instruction 3 to Item 404(a).

⁴³⁸ Prior to todays amendments, Instruction 3 to Item 404(a) had provided guidance regarding computing the amount involved in lease or other agreements providing for periodic payments or installments.

⁴³⁹ Prior to todays amendments, the basis for determining the amount involved in indebtedness transactions had been set forth in Item 404(c).

⁴⁴⁰ Because of the manner in which the amount involved in the transaction is calculated for indebtedness, as discussed above, disclosure with respect to indebtedness will include the largest aggregate amount of principal outstanding during the period for which disclosure is provided, as well as the amount of principal and interest paid during the period for which disclosure is provided, the aggregate amount of principal outstanding as of the latest practicable date, and the rate or amount of interest payable on the indebtedness. Item 404(a)(5).

⁴⁴¹ Item 404(a)(4).

⁴⁴² See letter from Sullivan.

⁴⁴³ This requirement had been set forth in Instruction 4 to Item 404(c) prior to these amendments.

⁴⁴⁴ See letter from SCSGP.

⁴⁴⁵ Instructions 4, 5, 6 and 7 to Item 404(a).

⁴⁴⁶ Instruction 5.a. to Item 404(a).

⁴⁴⁷ See letter from NYCBA.

⁴⁴⁸ Instruction 5.b. to Item 404(a).

⁴⁴⁹ One commenter believed that the proposals would have eliminated disclosure of related person transactions involving the employment of immediate family members. See letter from CRPTF. Item 404(a), as amended, continues to require disclosure of these types of related person transactions when the threshold for disclosure has been met and the immediate family member has or will have a direct or indirect material interest.

⁴⁵⁰ Instruction 4.a. to Item 404(a), which is based on Instruction 2 to Item 404(c) as it was stated prior to todays amendments.

⁴⁵¹ 12 CFR Part 220.

⁴⁵² See Item III.C.1. and 2. of Industry Guide 3, Statistical Disclosure by Bank Holding Companies [17 CFR 229.802(c)].

⁴⁵³ Instruction 4.c. to Item 404(a).

⁴⁵⁴ Specifically, the language that was in Instruction 3 to paragraph (c) of Item 404 prior to these amendments has been modified to replace the reference comparable transactions with other persons with the phrase comparable loans with persons not related to the lender.

⁴⁵⁵ Instruction 6 to Item 404(a) to Item 404(a). This amendment is based on the language that was in parts A and B of Instruction 8 to Item 404(a) prior to these amendments. This amendment omits the portion of that instruction (Instruction 8.C.) regarding interests arising solely from holding an equity or a creditor interest in a person other than the company that is a party to the transaction, when the transaction is not material to the other person. This exception may have resulted in inappropriate non-disclosure of transactions without regard to whether they were material to the company. In addition, we are eliminating the language that had been set forth in Instruction 6 to Item 404(a) to Item 404(a) prior to these amendments, which had covered a subset of transactions now covered by Instruction 6 to Item 404(a), as amended, and therefore was duplicative.

⁴⁵⁶ Instruction 7.a. to Item 404(a).

⁴⁵⁷ Letter from SCSGP.

⁴⁵⁸ Instruction 7.b. to Item 404(a).

⁴⁵⁹ See, e.g., letters from American Bankers Association (American Bankers); Compass Bancshares; and Whitney Holding Corporation (Whitney Holding).

⁴⁶⁰ Instruction 7.c. to Item 404(a).

⁴⁶¹ Before the adoption of these amendments, Instruction 7.c. to Item 404(a) provided that no information was required under Item 404(a) for transactions where the interest of the related person arose solely from the ownership of securities of the company and such person received no extra or special benefit not shared on a pro rata basis.

⁴⁶² See, e.g., letters from SCSGP and Sullivan.

⁴⁶³ The instruction as adopted differs from the language of Instruction 7.C. prior to these amendments in that it is limited to ownership of a class of equity securities rather than securities generally and focuses on benefits being provided pro rata to the holders of that class rather than the absence of certain extra or special benefits.

⁴⁶⁴ See, e.g., letters from SCSGP and Sullivan.