§ 58-7-145. Restrictions on purchase and sale of equity securities of domestic companies. - North Carolina Statutes

§58‑7‑145.  Restrictions on purchase and sale of equity securitiesof domestic companies.

(a)        Statement ofOwnership of Equity Securities. – Every person who is directly or indirectlythe beneficial owner of more than ten percent (10%) of any class of any equitysecurity of a domestic stock insurance company or who is a director or anofficer of such company shall file in the office of the Commissioner on orbefore the first day of June, 1966, or within 10 days after he becomes suchbeneficial owner, director or officer, a statement, in such form as theCommissioner may prescribe, of the amount of all equity securities of suchcompany of which he is the beneficial owner, and within 10 days after the closeof each calendar month thereafter if there has been a change in such ownershipduring such month, shall file in the office of the Commissioner a statement, insuch form as the Commissioner may prescribe, indicating his ownership at theclose of the calendar month and such changes in his ownership as have occurredduring such calendar month.

(b)        Profit Made fromSale of Equity Security Held Less than Six Months. – For the purpose ofpreventing the unfair use of information which may have been obtained by suchbeneficial owner, director, or officer by reason of his relationship to suchcompany, any profit realized by him from any purchase and sale, or any sale andpurchase, of any equity security of such company within a period of less thansix months, unless such security was acquired in good faith in connection witha debt previously contracted, shall inure to and be recoverable by the company,irrespective of any intention on the part of such beneficial owner, director orofficer in entering into such transaction of holding the security purchased orof not repurchasing the security sold for a period exceeding six months. Suitto recover such profit may be instituted at law or in equity in any court ofcompetent jurisdiction by the company, or by the owner of any equity securityof the company in the name and in behalf of the company, if the company shallfail or refuse to bring such suit within 60 days after request or shall faildiligently to prosecute the same thereafter; but no such suit shall be broughtmore than two years after the date such profit was realized. This section shallnot be construed to cover any transaction where such beneficial owner was notsuch both at the time of the purchase and sale, or the sale and purchase, ofthe equity security involved, or any transaction or transactions which theCommissioner by rules and regulations may exempt as not comprehended within thepurpose of this section.

(c)        Delivery ofSecurity Sold. – It shall be unlawful for any such beneficial owner, directoror officer, directly or indirectly, to sell any equity security of such companyif the person selling the security or his principal (i) does not own thesecurity sold, or (ii) if owning the security, does not deliver it against suchsale within 20 days thereafter, or does not within five days after such sale depositit in the mails or other usual channels of transportation; but no person shallbe deemed to have violated this section if he proves that notwithstanding theexercise of good faith he was unable to make such delivery or deposit withinsuch time, or that to do so would cause undue inconvenience or expense.

(d)        Sales by Dealers. –The provisions of subsection (b) shall not apply to any purchase and sale, orsale and purchase, and the provisions of subsection (c) shall not apply to anysale, of an equity security of a domestic stock insurance company not then ortheretofore held by him in an investment account, by a dealer in the ordinarycourse of his business and incident to the establishment or maintenance by himof a primary or secondary market (otherwise than on an exchange as defined inthe Securities Exchange Act of 1934) for such security.  The Commissioner may,by such rules and regulations as he deems necessary or appropriate in thepublic interest, define and prescribe terms and conditions with respect tosecurities held in an investment account and transactions made in the ordinarycourse of business and incident to the establishment or maintenance of aprimary or secondary market.

(e)        ArbitrageTransactions. – The provisions of subsections (a), (b) and (c) of this sectionshall not apply to foreign or domestic arbitrage transactions unless made incontravention of such rules and regulations as the Commissioner may adopt inorder to carry out the purposes of this section.

(f)         "EquitySecurity" Defined. – The term "equity security" when used inthis section means any stock or similar security; or any security convertible,with or without consideration, into such a security, or carrying any warrant orright to subscribe to or purchase such a security; or any such warrant orright; or any other security which the Commissioner shall deem to be of similarnature and consider necessary or appropriate, by such rules and regulations ashe may prescribe in the public interest or for the protection of investors, totreat as an equity security.

(g)        Exemptions fromRequirements of Section. – The provisions of subsections (a), (b) and (c)hereof shall not apply to equity securities of a domestic stock insurancecompany if

(1)        Such securitiesshall be registered, or shall be required to be registered, pursuant to section12 of the Securities Exchange Act of 1934, as amended, or if

(2)        Such domestic stockinsurance company shall not have any class of its equity securities held ofrecord by 100 or more persons on the last business day of the year nextpreceding the year in which equity securities of the company would be subjectto the provisions of subsections (a), (b) and (c) hereof except for theprovisions of this subdivision (2).

(h)        Rules andRegulations of Commissioner. – The Commissioner shall have the power to makesuch rules and regulations as may be necessary for the execution of thefunctions vested in him by subsections (a) through (g) hereof, and may for suchpurpose classify domestic stock insurance companies, securities, and otherpersons or matters within his jurisdiction.  No provision of subsections (a),(b) and (c) hereof imposing any liability shall apply to any act done oromitted in good faith in conformity with any rule or regulation of the Commissioner,notwithstanding that such rule or regulation may, after such act or omission,be amended or rescinded or determined by judicial or other authority to beinvalid for any reason.

(i)         Severability. – Ifany part or provision of this section or the application thereof to any personor circumstance be adjudged invalid by any court of competent jurisdiction,such judgment shall be confined in its operation to the part, provision orapplication directly involved in the controversy in which such judgment shallhave been rendered and shall not affect or impair the validity of the remainderof this section or the application thereof to other persons or circumstances. (1965, c. 127, s. 2.)