THE ASSOCIATION OF THE BAR
OF THE CITY OF NEW YORK
42 WEST 44^TH STREET
NEW YORK, NY 10036-6689
COMMITTEE ON SECURITIES REGULATION

April 16, 2001

Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Attention: Jonathan G. Katz, Secretary

Re: Disclosure of Equity Compensation Plan Information
File No. S7-04-01

Ladies and Gentlemen:

This letter is submitted on behalf of The Association of the Bar of the City of New York by the Committee on Securities Regulation (the "Committee") in response to Release Nos. 33-7944 and 34-43892, dated January 26, 2001 (the "Release"), in which the Securities and Exchange Commission (the "Commission") has requested comments on its proposed amendments regarding disclosure of the number of securities authorized for issuance under and received by, or allocated to, participants pursuant to equity compensation plans. Our Committee is composed of lawyers with diverse perspectives on securities issues, including members of law firms, counsel to corporations, investment banks and investors, and academics.

We believe that disclosure of the type proposed by the Commission is appropriate in order to provide investors with relevant data regarding all equity compensation plans and arrangements of an issuer, thereby permitting investors to assess, among other things, the potential for economic and voting power dilution arising from such arrangements. However, we believe it is important that the disclosure should present the information in a consistent format, avoid unnecessary duplication of information already required to be contained in a registrant's filings and present the information in a manner that is meaningful to investors. Our primary suggestions are that: (1) the Annual Report on Form 10-K, rather than the proxy statement, should be the location for the disclosure in all cases; (2) registrants should be permitted to present information on an aggregate basis as appropriate; (3) the disclosure requirements regarding individual awards should be modified to focus more precisely on relevant information; (4) the weighted average exercise price of outstanding options should be a required disclosure; and (5) registrants should be permitted to satisfy the new disclosure requirements by cross-referencing information already provided in the financial statements.

Location of the Disclosure.

We believe the proposed disclosures should be required in the registrant's Annual Report on Form 10-K, rather than in the proxy statement, whether or not a compensation plan is being submitted in any given year for stockholder approval. This would provide a consistent location, year to year, for the disclosure of this information, and make it easier for investors to locate. Further, the availability on EDGAR of SEC filings of registrants ensures that all interested persons who wish to review such information will have immediate access once the Form 10-K is filed.

In addition, location in the Form 10-K is less burdensome on a registrant which, if it has many different compensation plans, could incur considerable increased printing and mailing expenses due to the longer length of the proxy statement which must be distributed to all shareholders. This is particularly true if, in addition to the required tabular information, narrative information must also be disclosed concerning the features of various plans that have been adopted in a prior year without shareholder approval. To the extent that, in a particular year, the shareholders of an issuer are asked to vote on approval of a plan or a change to a plan, the information with respect to that plan would continue to be included in the proxy. However, in those cases, the registrant should be able to refer the shareholders to the Form 10-K for the description of all the other equity compensation plans and arrangements presently in effect. Presented in this manner, investors will be able more easily to compare the equity compensation arrangements of the issuer with other registrants, without the need of checking whether, for any particular registrant in any particular year, the information has moved from the Form 10-K to the proxy statement or vice versa.

Locating the new disclosures in the Form 10-K also avoids unnecessary duplication of information. As noted by the SEC Staff, many issuers already disclose most of the material information required by proposed Item 201 of Regulation S-K in their financial statements included in the Form 10-K pursuant to the requirements of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation". In addition, for many of these issuers, equity-based compensation to outside advisors or consultants is non-existent or de minimus. Accordingly, many issuers are already providing most, though not necessarily all, of the information called for by proposed by Item 201. To the extent the information required by proposed Item 201 is additive and/or duplicative to such information, the Form 10-K is the most logical place to include the new information. This would allow for easier access by investors to the totality of information and would enhance the ability to cross-reference within the same document (see our suggestion below under "Cross Reference to Financial Statements and Other Documents"). In addition, we believe that the information required by the proposed rule is primarily financial in nature (particularly, if, as suggested below, the weighted average exercise price of outstanding options is an additional disclosure item), and therefore is more appropriately disclosed within the context of the financial data about the registrant, which is contained in the Form 10-K (rather than within the context of executive compensation, which is the focus of the information contained in the proxy statement).

Aggregate Information.

We do not believe the inclusion of separate information for each plan would yield meaningful information to investors, but believe such requirement could present a considerable burden on registrants. We believe presentation of aggregate information, grouping similar plans together, rather than granular plan by plan information, will be more valuable to investors. By simplifying the data presentation, aggregation will provide a clearer and more coherent view of the nature of the company's overall equity compensation policy and an easier to comprehend presentation of the potential economic and voting dilution attendant by the outstanding awards. Information could be aggregated into categories based on the types of plans (i.e., key employee vs. broad-based employee plans), or the purpose of the plans (i.e., stock purchase vs. stock option), or by plans previously approved by shareholders versus those that have not, or by such other categories of aggregation as determined by the registrant to make the information presented meaningful.

Disclosure Regarding Individual Arrangements.

With respect to individual arrangements, the information in columns (b) and (e) of proposed Item 201(d)(1) (i.e., number of securities authorized for issuance under the plan and number of securities remaining available for future issuance, respectively) do not seem appropriate, as individual arrangements are generally entered into on an ad hoc basis. Rather, information regarding actual awards granted in the past year (column (c) of proposed Item 201(d)(1)) and information regarding number of securities to be issued upon exercise of outstanding options, warrants or rights (column (d) of proposed Item 201(d)(1)), as well as the weighted average exercise price of the aggregate outstanding awards, is most relevant for these types of arrangements.

It is also our view that the requirement under Item 201(d)(4) of separate disclosure regarding any individual awards that constituted 25% or more of the total individual awards should be deleted. We note that this 25% calculation is not required with respect to grants under plans. Unless otherwise required to be described under the current disclosure scheme (for example, under Item 404 of S-K), the disclosure of these arrangements will not necessarily enhance a shareholder's understanding of the economic or voting impact of these individual arrangements and may have anti-competitive effects which would not be in the registrant's or its shareholders' best interests.

We finally note that, pursuant to Statement of Financial Accounting Standards No. 123, registrants are required to disclose information regarding equity instruments used to acquire goods and services, other than employee services, to the extent those disclosures are important in understanding the effects of those transactions on a registrant's financial statements. Accordingly, for those registrants for which such arrangements are material, the disclosures required by proposed Item 201(d)(ii) are already being made in their financial statements; such registrants should therefore be permitted to cross-reference to such information in their financial statements, as noted below under "Cross-Reference to Financial Statements or Other Documents".

Weighted Average Exercise Price.

Under Item 201(d)(1), an additional column should be added to the proposed table to show the weighted average exercise price of outstanding options, warrants or rights under plans as well as individual arrangements. This would provide valuable information to investors who wish to measure the economic impact of the plans and arrangements and conform the information with that which is required in the financial statements of the registrant under Statement of Financial Accounting Standards No. 123.

Cross Reference to Financial Statements and Other Documents

As noted above, many registrants will have already provided information in the footnotes to their financial statements which satisfies, to a substantial degree, the substantive requirements of proposed Item 201. We believe that a registrant, in satisfying the requirements of Item 201, should be permitted to comply with proposed Item 201 by cross-referencing the sections of its financial statements contained in the Form 10-K which disclose such information, rather than being required to restate it for the purposes of Item 201. This ability to cross-reference should not be limited to instances where a registrant has included all the information required by Item 201 in the footnotes, but should also apply where only a portion of the Item 201 information appears in the financial statements. In the latter case, the balance of the Item 201 information would be set forth in the Form 10-K (or elsewhere in the financial statements). Cross-referencing would not impose a significant burden on investors and follows the Plain English rules of eliminating repetitive disclosure. We note, by way of analogy, that Item 101(b) of Regulation S-K (financial information about segments) and Item 101(d) of Regulation S-K (financial information about geographic areas) currently permit incorporation by reference to the financial statements in lieu of duplicative disclosure.

In addition, in order to provide investors with a complete description of all plans, the requirement in proposed Item 201(d)(3) should be extended to all plans, regardless of whether such plan was adopted without shareholder approval. This requirement of a plan description should be permitted to be satisfied with either new text or a cross reference to another filing of the registrant. With a description available (or a reference to an earlier filing, as the case may be), investors will be able more easily to review and understand the equity compensation scheme of the registrant.

Other Comments

With respect to whether the equity compensation plan disclosure should be required in registration statements filed under the Securities Act of 1933, we believe that disclosure should be required in a registration statement for an initial public offering (or any other S-1), because there would be no prior public disclosure available to enable an investor in the IPO to measure potential dilution from outstanding stock options and shares reserved for future issuance under plans. Following completion of the IPO, the registrant would move the disclosure to its Form 10-K. Thereafter, we do not believe the Item 201 information should have to be disclosed in registration statements, except through incorporation by reference to the Form 10-K

Members of the Committee would be pleased to answer any questions you might have regarding our comments, and to meet with the Staff if that would assist the Commission's efforts.

Respectfully submitted,

/s/ Charles M. Nathan

Charles M. Nathan, Chair of Committee on Securities Regulation

/s/ Neila B. Radin

Neila B. Radin, Chair of the Mergers & Acquisitions Subcommittee

Members of Committee
Charles M. Nathan, Chair
Julie M. Allen
William T. Allen
Craig Stuart Barrack
Mark H. Barth
Anthony J. Bosco
Stuart Bressman
Robert E. Buckholz, Jr.
Lawrence A. Cunningham
Richard A. Drucker
Elizabeth Q. Duncan
Mitchell S. Fishman
Alan R. Friedman
Salvatore Graziano
David J. Greenwald
Adele Hogan
Peter J. Loughran
Michael E. Lubowitz
John A. Marzulli, Jr.
Aileen C. Meehan
Rise B. Norman
Arthur Y.D. Ong
David Walter Pollak
Neil Radey
Neila B. Radin
Walter G. Ricciardi
Kathy Hellenbrand Rocklen

(Executive Committee)

Kathryn E. Schneider
Stephen J. Schulte
James Q. Walker
Lawrence J. Zweifach