From: Falis, Neil [NFalis@KilpatrickStockton.com]
Sent: Friday, November 22, 2002 5:21 PM
To: 'rule-comments@sec.gov'
Cc: Eaddy, Randy
Subject: Comments to File S7-44-02

November 22, 2002

Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549

	Re:	Comments to File S7-44-02

Dear Sir/Madam:

	We are writing in response to the Commission's request for comments
on its proposed rules concerning insider trades during pension fund blackout
periods.  Under proposed Exchange Act Rule 101(b), any sale of equity
securities of the issuer during a blackout period by a director or executive
officer (a covered insider) would be deemed to be a transaction involving
equity securities acquired in connection with service or employment as a
director or executive officer (covered securities), to the extent that the
covered insider holds any covered securities at the time, without regard to
the actual source of the securities disposed -- that is, without regard to
the possibility that the actual securities sold were not part of the covered
securities.

	We understand the Commission's attempt to create a bright line test
with comprehensive coverage of situations that may be abusive.  So, if a
covered insider holds both covered securities and other equity securities of
the issuer of the same type that are not covered (e.g., shares of common
stock issued to the covered insider for his or her services as such, on the
one hand, and shares of common stock purchased in the open market before
becoming an insider and not as an inducement to service, on the other), then
treating all those shares as fungible (and making the first shares traded
subject to the prohibition as a result of the presumption) is appropriate,
given the difficulties in tracking specific shares.  However, we believe
that the presumption in proposed Regulation BTR should be rebuttable in
certain circumstances where it can be clearly established that the
securities sold are not (and could not be) part of the covered securities
subject to the prohibition.  

	For example, consider the situation where the only covered
securities held by a covered insider are options to acquire the issuer's
stock, none of which have vested (and thus can not be exercised), but the
covered insider also holds non-inducement shares of the issuer's stock
acquired in the open market before the person became a covered insider (and
thus the latter shares are uncovered).  In that scenario, the presumption in
the proposed rules would prohibit the sale of the otherwise uncovered shares
even though the covered options are not yet vested and their underlying
covered shares could not be sold.  No fungibility rationale is present to
justify the prohibition in that scenario, and we question whether the
prohibition is otherwise intended and warranted in that context.

	An analogous scenario appears to be present where covered securities
are subject to bona fide and effective resale restrictions (or events of
forfeiture) at the time of the blackout period.

	It appears to us, therefore, that unless the intended and
permissible scope of the rules is the prevention of sales by covered
insiders that have any interest in covered securities, then the
irrebuttability of the presumption may cast its net too far.  Since the
proposed rules would allow covered insiders to sell equity securities during
blackout periods to the extent the covered insiders do not own any covered
securities at all, we do not believe that the Commission intends for that
ability to be limited in the situations described above.

	Please feel free to call us if you would like additional thoughts on
this issue.

							Very truly yours,

							W. Randy Eaddy
							Neil D. Falis
							Kilpatrick Stockton
LLP
							1100 Peachtree
Street
							Suite 2800
							Atlanta, Georgia
30309
							Tel. 404.815.6500
							Fax. 404.815.6555