Rule 16b-3 Exemption Flowchart

Summary

This flowchart can help you to determine whether a stock transaction between the company and an officer or director will qualify for an exemption from liability pursuant to Rule 16b-3 (17 C.F.R. § 240.16b-3) under the Securities Exchange Act of 1934, as amended. Insiders, including directors, officers, and beneficial owners of 10% or more of a class of registered shares of a company are subject to Exchange Act Section 16(b), known as the "short-swing profits" rules. These rules generally require those insiders to disgorge any profits they realize from the sale of company shares within six months after when company shares were purchased or a purchase of company shares within six months after company shares were sold. Certain exceptions to these rules are contained in Rules 16b-1 through 16b-8.