North Carolina register, July 1998 - present

              NORTH CAROLINA
REGISTER
Volume 18, Issue 10
Pages 743 - 823
November 17, 2003
This issue contains documents officially filed
through October 24, 2003.
Office of Administrative Hearings
Rules Division
424 North Blount Street (27601)
6714 Mail Service Center
Raleigh, NC 27699-6714
(919) 733-2678
FAX (919) 733-3462
Julian Mann III, Director
Camille Winston, Deputy Director
Molly Masich, Director of APA Services
Ruby Creech, Publications Coordinator
Linda Dupree, Editorial Assistant
Dana Sholes, Editorial Assistant
Rhonda Wright, Editorial Assistant
IN THIS ISSUE
I. IN ADDITION
ENR – Notice of Intent to Redevelop a Brownfields
Property – Citiline, LLC............................................743
ENR – Notice of Intent to Redevelop a Brownfields
Property – Salem Recreational Fields, LLC ..........744
ENR – Application for Innovative Approval of a
Wastewater System for On -site Subsurface Use...746
Labor – Order 2002-V-01, Continental General
Tire, Inc., Permanent Variance.................................745
Voting Rights Letters ..................................................747 - 749
II. PROPOSED RULES
Environment and Natural Resources
Wildlife Resources Commission..............................775 - 813
Insurance
Admission Requirements ..........................................774
Consumer Services .....................................................750
Financial Evaluation Division..................................750 - 774
Justice
Private Protective Services .......................................774 - 775
III. RULES REVIEW COMMISSION..........................814 - 819
IV. CONTESTED CASE DECISIONS
Index to ALJ Decisions.................................................820 - 823
For the CUMULATIVE INDEX to the NC Register go to:
http://oahnt.oah.state.nc.us/register/CI.pdf
North Carolina Register is published semi-monthly for $195 per year by the Office of Administrative Hearings, 424 North Blount Street, Raleigh, NC
27601. North Carolina Register (ISSN 15200604) to mail at Periodicals Rates is paid at Raleigh, NC. POSTMASTER: Send Address changes to
the North Carolina Register, 6714 Mail Service Center, Raleigh, NC 27699-6714.
NORTH CAROLINA ADMINISTRATIVE CODE CLASSIFICATION SYSTEM
The North Carolina Administrative Code (NCAC) has four major classifications of rules. Three of these, titles, chapters, and sections are
mandatory. The major classification of the NCAC is the title. Each major department in the North Carolina executive branch of
government has been assigned a title number. Titles are further broken down into chapters which shall be numerical in order.
Subchapters are optional classifications to be used by agencies when appropriate.
NCAC TITLES TITLE 21
LICENSING BOARDS
TITLE 24
INDEPENDENT AGENCIES
1 ADMINISTRATION
2 AGRICULTURE & CONSUMER SERVICES
3 AUDITOR
4 COMMERCE
5 CORRECTION
6 COUNCIL OF STATE
7 CULTURAL RESOURCES
8 ELECTIONS
9 GOVERNOR
10A HEALTH AND HUMAN SERVICES
11 INSURANCE
12 JUSTICE
13 LABOR
14A CRIME CONTROL & PUBLIC SAFETY
15A ENVIRONMENT &NATURAL RESOURCES
16 PUBLIC EDUCATION
17 REVENUE
18 SECRETARY OF STATE
19A TRANSPORTATION
20 TREASURER
21* OCCUPATIONAL LICENSING BOARDS
22 ADMINISTRATIVE PROCEDURES
(REPEALED)
23 COMMUNITY COLLEGES
24* INDEPENDENT AGENCIES
25 STATE PERSONNEL
26 ADMINISTRATIVE HEARINGS
27 NC STATE BAR
28 JUVENILE JUSTICE AND DELINQUENCY
PREVENTION
1 Acupuncture
2 Architecture
3 Athletic Trainer Examiners
4 Auctioneers
6 Barber Examiners
8 Certified Public Accountant Examiners
10 Chiropractic Examiners
11 Employee Assistance Professionals
12 General Contractors
14 Cosmetic Art Examiners
16 Dental Examin ers
17 Dietetics/Nutrition
18 Electrical Contractors
19 Electrolysis
20 Foresters
21 Geologists
22 Hearing Aid Dealers and Fitters
25 Interpreter/Transliterator (Reserved)
26 Landscape Architects
28 Landscape Contractors
29 Locksmith Licensing Board
30 Massage & Bodywork Therapy
31 Marital and Family Therapy
32 Medical Examiners
33 Midwifery Joint Committee
34 Funeral Service, Board of
36 Nursing
37 Nursing Home Administrators
38 Occupational Therapists
40 Opticians
42 Optometry
44 Osteopathic Examination (Repealed)
45 Pastoral Counselors, Fee-Based Practicing
46 Pharmacy
48 Physical Therapy Examiners
50 Plumbing, Heating & Fire Sprinkler
Contractors
52 Podiatry Examiners
53 Professional Counselors
54 Psychology Board
56 Professional Engineers & Land Surveyors
57 Real Estate Appraisal Board
58 Real Estate Commission
60 Refrigeration Examiners
61 Respiratory Care Board
62 Sanitarian Examiners
63 Social Work Certification
64 Speech & Language Pathologists &
Audiologists
65 Therapeutic Recreation Certification
66 Veterinary Medical Board
68 Substance Abuse Professionals
69 Soil Scientists
1 Housing Finance
2 Agricultural Finance Authority
3 Safety & Health Review
Board
4 Reserved
5 State Health Plan Purchasing
Alliance Board (Repealed)
Note: Title 21 contains the chapters of the various occupational licensing boards and Title 24 contains the chapters of independent agencies.
NORTH CAROLINA REGISTER
Publication Schedule for July 2003 – December 2003
FILING DEADLINES NOTICE OF TEXT PERMANENT RULE TEMPORARY
RULES
Volume &
issue
number
Issue date Last day
for filing
Earliest date for
public hearing
End of required
comment
period
Deadline to submit
to RRC
for review at
next meeting
Earliest Eff.
Date of
Permanent Rule
Delayed Eff. Date of
Permanent Rule
(first legislative
day of the next
regular session)
270th day from publication
in the Register
17:13 01/02/03 12/06/02 01/17/03 03/03/03 03/20/03 05/01/03 05/10/04 09/29/03
17:14 01/15/03 12/19/02 01/30/03 03/17/03 03/20/03 05/01/03 05/10/04 10/12/03
17:15 02/03/03 01/10/03 02/18/03 04/04/03 04/21/03 06/01/03 05/10/04 10/31/03
17:16 02/17/03 01/27/03 03/04/03 04/21/03 04/21/03 06/01/03 05/10/04 11/14/03
17:17 03/03/03 02/10/03 03/18/03 05/02/03 05/20/03 07/01/03 05/10/04 11/28/03
17:18 03/17/03 02/24/03 04/01/03 05/16/03 05/20/03 07/01/03 05/10/04 12/12/03
17:19 04/01/03 03/11/03 04/16/03 06/02/03 06/20/03 08/01/03 05/10/04 12/27/03
17:20 04/15/03 03/25/03 04/30/03 06/16/03 06/20/03 08/01/03 05/10/04 01/10/04
17:21 05/01/03 04/09/03 05/16/03 06/30/03 07/21/03 09/01/03 05/10/04 01/26/04
17:22 05/15/03 04/24/03 05/30/03 07/14/03 07/21/03 09/01/03 05/10/04 02/09/04
17:23 06/02/03 05/09/03 06/17/03 08/01/03 08/20/03 10/01/03 05/10/04 02/27/04
17:24 06/16/03 05/23/03 07/01/03 08/15/03 08/20/03 10/01/03 05/10/04 03/12/04
18:01 07/01/03 06/10/03 07/16/03 09/02/03 09/22/03 11/01/03 05/10/04 03/27/04
18:02 07/15/03 06/23/03 07/30/03 09/15/03 09/22/03 11/01/03 05/10/04 04/10/04
18:03 08/01/03 07/11/03 08/16/03 09/30/03 10/20/03 12/01/03 05/10/04 04/27/04
18:04 08/15/03 07/25/03 08/30/03 10/14/03 10/20/03 12/01/03 05/10/04 05/11/04
18:05 09/02/03 08/11/03 09/17/03 11/03/03 11/20/03 01/01/04 05/10/04 05/29/04
18:06 09/15/03 08/22/03 09/30/03 11/14/03 11/20/03 01/01/04 05/10/04 06/11/04
18:07 10/01/03 09/10/03 10/16/03 12/01/03 12/22/03 02/01/04 05/10/04 06/27/04
18:08 10/15/03 09/24/03 10/30/03 12/15/03 12/22/03 02/01/04 05/10/04 07/11/04
18:09 11/03/03 10/13/03 11/18/03 01/02/04 01/20/04 03/01/04 05/10/04 07/30/04
18:10 11/17/03 10/24/03 12/02/03 01/16/04 01/20/04 03/01/04 05/10/04 08/13/04
18:11 12/01/03 11/05/03 12/16/03 01/30/04 02/20/04 04/01/04 05/10/04 08/27/04
18:12 12/15/03 11/20/03 12/30/03 02/13/04 02/20/04 04/01/04 05/10/04 09/10/04
EXPLANATION OF THE PUBLICATION SCHEDULE
This Publication Schedule is prepared by the Office of Administrative Hearings as a public service and the computation of time periods are not to be deemed binding or controlling.
Time is computed according to 26 NCAC 2C .0302 and the Rules of Civil Procedure, Rule 6.
GENERAL
The North Carolina Register shall be published twice
a month and contains the following information
submitted for publication by a state agency:
(1) temporary rules;
(2) notices of rule-making proceedings;
(3) text of proposed rules;
(4) text of permanent rules approved by the Rules
Review Commission;
(5) notices of receipt of a petition for municipal
incorporation, as required by G.S. 120-165;
(6) Executive Orders of the Governor;
(7) final decision letters from the U.S. Attorney
General concerning changes in laws affecting
voting in a jurisdiction subject of Section 5 of
the Voting Rights Act of 1965, as required by
G.S. 120-30.9H;
(8) orders of the Tax Review Board issued under
G.S. 105-241.2; and
(9) other information the Codifier of Rules
determines to be helpful to the public.
COMPUTING TIME: In computing time in the
schedule, the day of publication of the North Carolina
Register is not included. The last day of the period so
computed is included, unless it is a Saturday, Sunday,
or State holiday, in which event the period runs until
the preceding day which is not a Saturday, Sunday, or
State holiday.
FILING DEADLINES
ISSUE DATE: The Register is published on the first
and fifteen of each month if the first or fifteenth of
the month is not a Saturday, Sunday, or State holiday
for employees mandated by the State Personnel
Commission. If the first or fifteenth of any month is
a Saturday, Sunday, or a holiday for State employees,
the North Carolina Register issue for that day will be
published on the day of that month after the first or
fifteenth that is not a Saturday, Sunday, or holiday for
State employees.
LAST DAY FOR FILING: The last day for filing for any
issue is 15 days before the issue date excluding
Saturdays, Sundays, and holidays for State
employees.
NOTICE OF TEXT
EARLIEST DATE FOR PUBLIC HEARING: The hearing
date shall be at least 15 days after the date a notice of
the hearing is published.
END OF REQUIRED COMMENT PERIOD
(1) RULE WITH NON-SUBSTANTIAL
ECONOMIC IMPACT: An agency shall accept
comments on the text of a proposed rule for at least
60 days after the text is published or until the date of
any public hearings held on the proposed rule,
whichever is longer.
(2) RULE WITH SUBSTANTIAL ECONOMIC
IMPACT: An agency shall accept comments on the
text of a proposed rule published in the Register and
that has a substantial economic impact requiring a
fiscal note under G.S. 150B-21.4(b1) for at least 60
days after publication or until the date of any public
hearing held on the rule, whichever is longer.
DEADLINE TO SUBMIT TO THE RULES REVIEW
COMMISSION: The Commission shall review a rule
submitted to it on or before the twentieth of a month
by the last day of the next month.
FIRST LEGISLATIVE DAY OF THE NEXT REGULAR
SESSION OF THE GENERAL ASSEMBLY: This date is
the first legislative day of the next regular session of
the General Assembly following approval of the rule
by the Rules Review Commission. See G.S. 150B-
21.3, Effective date of rules.
IN ADDITION
18:10 NORTH CAROLINA REGISTER November 17, 2003
743
Note from the Codifier: This Section contains public notices that are required to be published in the Register or have been
approved by the Codifier of Rules for publication.
SUMMARY OF NOTICE OF
INTENT TO REDEVELOP A BROWNFIELDS PROPERTY
Citiline, LLC
Pursuant to G.S. 130A-310.34, Citiline, LLC has filed with the North Carolina Department of Environment and Natural Resources
("DENR") a Notice of Intent to Redevelop a Brownfields Property ("Property") in the City of Charlotte, Mecklenburg County, North
Carolina. The Property consists of 2.88 acres and is located at 2028-2040 South Tryon Street. Environmental contamination exists on
the Property in groundwater. Citiline, LLC has committed itself to redevelopment of the Property for no use other than commercial
purposes such as office and showroom condominiums. The Notice of Intent to Redevelop a Brownfields Property includes: (1) a
proposed Brownfields Agreement between DENR and Citiline, LLC, which in turn includes (a) a legal description of the Property, (b)
a map showing the location of the Property, (c) a description of the contaminants involved and their concentrations in the media of the
Property, (d) the above-stated description of the intended future use of the Property, and (e) proposed investigation and remediation;
and (2) a proposed Notice of Brownfields Property prepared in accordance with G.S. 130A-310.35. The full Notice of Intent to
Redevelop a Brownfields Property may be reviewed at 600 East Trade Street, Neighborhood Development Key Business, Charlotte,
NC, 28217 by contacting Carolyn Minnich at that address, at carolyn.minnich@ncmail.net or at (704) 336-3499; or at 401 Oberlin
Rd., Raleigh, NC 27605 by contacting Scott Ross at that address, at scott.ross@ncmail.net, or at (919)733-2801, ext. 328. Written
public comments may be submitted to DENR within 60 days after the date this Notice is published in a newspaper of general
circulation serving the area in which the Brownfields property is located, or in the North Carolina Register, whichever is later.
Written requests for a public meeting may be submitted to DENR within 30 days after the period for written public comments begins.
All such comments and requests should be addressed as follows:
Mr. Bruce Nicholson
Head, Special Remediation Branch
Superfund Section
Division of Waste Management
NC Department of Environment and Natural Resources
401 Oberlin Road, Suite 150
Raleigh, North Carolina 27605
IN ADDITION
18:10 NORTH CAROLINA REGISTER November 17, 2003
744
SUMMARY OF NOTICE OF
INTENT TO REDEVELOP A BROWNFIELDS PROPERTY
Salem Recreational Fields, LLC
Pursuant to G.S. 130A-310.34, Salem Recreational Fields, LLC has filed with the North Carolina Department of Environment and
Natural Resources ("DENR") a Notice of Intent to Redevelop a Brownfields Property ("Property") in Winston-Salem, Forsyth County,
North Carolina. The Property, currently a city park that Salem Recreational Fields, LLC has contracted to purchase, consists of 7.23
acres and is located on South Salem Avenue near its intersection with South Main Street. Environmental contamination exis ts on the
Property in groundwater beneath the former landfill. Salem Recreational Fields, LLC has committed itself to allow no use of the
Property other than for outdoor recreation. When not used by Salem Academy and College, the fields will be available for use by the
City of Winston-Salem and its citizens, subject to reasonable restrictions that may be imposed by Salem Recreational Fields, LLC.
The Notice of Intent to Redevelop a Brownfields Property includes: (1) a proposed Brownfields Agreement between DENR and
Salem Recreational Fields, LLC which in turn includes (a) a map showing the location of the Property, (b) a description of the
contaminants involved and their concentrations in the media of the Property, (c) the above-stated description of the intended future use
of the Property, and (d) proposed investigation and remediation; and (2) a proposed Notice of Brownfields Property prepared in
accordance with G.S. 130A-310.35. The full Notice of Intent to Redevelop a Brownfields Property may be reviewed at the North
Carolina Room of the Forsyth County Central Library, 660 West Fifth Street, Winston-Salem, NC 27101 by contacting Jerry Carroll,
at (336)727-2264, ext. 9; or at 401 Oberlin Rd., Raleigh, NC 27605 by contacting Scott Ross at that address, at scott.ross@ncmail.net,
or at (919)733-2801, ext. 328. Written public comments may be submitted to DENR within 60 days after the date this Notice is
published in a newspaper of general circulation serving the area in which the Brownfields property is located, or in the North Carolina
Register, whichever is later. Written requests for a public meeting may be submitted to DENR within 30 days after the period for
written public comments begins. All such comments and requests should be addressed as follows:
Mr. Bruce Nicholson
Head, Brownfields Program
Division of Waste Management
NC Department of Environment and Natural Resources
401 Oberlin Road, Suite 150
Raleigh, North Carolina 27605
IN ADDITION
18:10 NORTH CAROLINA REGISTER November 17, 2003
745
NORTH CAROLINA DEPARTMENT OF LABOR
DIVIS ION OF OCCUPATIONAL SAFETY AND HEALTH
RALEIGH, NORTH CAROLINA
Order 2002-V-01
Continental General Tire, Inc.
Permanent Variance
Order:
In accordance with G.S. 95-132(b) and 13 NCAC 07A .0700, Continental General Tire, Inc. (" Continental") is granted the permission
to exceed the maximum storage limit requirements for Liquid Petroleum (" LP") gas storage in a single location as specified in 29
C.F.R. 1910.110(f)(4)(i). The standard prohibits the storage of LP in excess of 300 pounds in a single building. This permission is
limited to Continental site located at 1900 Continental Boulevard in Charlotte, North Carolina.
Discussion:
Continental is located in an extremely large facility, which covers approximately 25 acres, with a total of more than two million
square feet. The facility is divided into twelve "sub-buildings" designed for different functions (general office spaces, warehouses, and
manufacturing, etc.).
There are 85 forklifts located in this huge facility which are powered by LP gas. The LP gas used to power these forklifts is stored in
LP gas cylinders containing 33 pounds of gas each, and spare cylinders are also stored at the facility. The combination of the used and
unused LP gas cylinders exceed the 300 pound limit set forth in the standard. However, these LP gas cylinders are dispersed among
multiple sub-locations of the building, with no sub-location containing more than 300 pounds of gas on a given day. The first LP gas
storage area, located in the southwest corner of the building, is at least 300 feet away from the second LP storage area, located in the
northeast corner of a different subsection of the building. In addition, a two-hour fire -rated wall separates these two areas. The third
storage area for LP gas is located in another sub-building, which is more than one-quarter of a mile from the other two locations.
Furthermore, the entire building is protected by sprinkler systems, and is classified as low hazard building.
The permission granted by this Order is contingent upon Continental ensuring that no more than 300 pounds of LP gas are stored in
any one of the three location clusters established at the time of the variance inspection. This limitation equates to a maximum of nine
(9) 33-pound LP gas cylinders in one cluster, including empty cylinders. This arrangement complies with the spirit and intent of the
standard, and is as safe and healthful as strict compliance with the standard. In addition, Continental should also comply with the
requirements of Chapter 5 of NFPA 58 – Liquified Petroleum Gas Code (2001 Edition), which concerns the storage of LP gas
cylinders awaiting use, and which is administered by the NC Department of Agriculture and Consumer Services – Standards Division.
Action:
This order grants Continental's request for a permanent variance. This permanent variance will remain in effect until modified or
revoked pursuant to G.S. 95-132(b) and 13 NCAC 07A.0709.
This the 24th day of November, 2003.
__________________________________________
Allen M. McNeely
Director, North Carolina Department of Labor –
Occupational Safety and Health Division
11/17/2003 Signed on Original
Effective Date Allen M. McNeely
Director, North Carolina Department of Labor –
Occupational Safety and Health Division
IN ADDITION
18:10 NORTH CAROLINA REGISTER November 17, 2003
746
TITLE 15A – DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES
WASTEWATER SECTION, DIVISION OF ENVIRONMENTAL HEALTH
Notice of Application for Innovative Approval of a Wastewater System for On-site Subsurface Use
Pursuant to G.S. 130A-343(g), the North Carolina Department of Environment and Natural Resources (DENR) shall publish a Notice
in the NC Register that a manufacturer has submitted a request for approval of a wastewater system, component, or device for on-site
subsurface use. The following application has been submitted to DENR:
Application by: On-Site Wastewater Section
Division of Environmental Health
1642 Mail Service Center
Raleigh, NC 27699-1642
919-733-2895
Fax 919-715-3227
For: Component Substitution for Four-Inch Corrugated Plastic Tubing in Nitrification Lines
DENR Contact: Steven Berkowitz
1-919-715-3271
FAX 919-715-3227
steven.berkowitz@ncmail.net
The application may be reviewed by contacting the applicant or at 2728 Capital Blvd., Raleigh, NC, On-Site Wastewater Section,
Division of Environmental Health. Draft proposed innovative approvals and proposed final action on the application by DENR can be
viewed on the On-Site Wastewater Section web site: www.deh.enr.state.nc/oww/.
Written public comments may be submitted to DENR within 30 days of the date of the Notice publication in the North Carolina
Register. All written comments should be submitted to Mr. Bill Jeter, Chief, On-site Wastewater Section, 1642 Mail Service Center,
Raleigh, NC 27699-1642, or bill.jeter@ncmail.net, or Fax 919.715.3227. Written comments received by DENR in accordance with
this Notice will be taken into consideration before a final agency decision is made on the innovative subsurface wastewater system
application.
IN ADDITION
18:10 NORTH CAROLINA REGISTER November 17, 2003
747
U.S. Department of Justice
Civil Rights Division
JDR:TCH:AMS:jdh Voting Section – NWB.
DJ 166-012-3 950 Pennsylvania Ave., NW
2003-2769 Washington, D.C. 20530
October 6, 2003
Mr. Gary O. Bartlett
Executive Director
State Board of Elections
P.O. Box 27255
Raleigh, NC 27611-7255
Dear Mr. Bartlett:
This refers to Session Law 2003-12, which establishes a state election fund; Session Law 2003-226, which adopts changes to
implement the Help America Vote Act of 2002, 42 U.S.C. 15301-15545 ("HAVA"), including: providing that the statewide voter
registration list is the official list for all elections; enabling the State Board of Elections to make changes in the statewide list to
conform it to HAVA requirements, to interface the list with other databases, to verify voter identification, and to assign each voter a
unique identifier; providing for electronic voter registration applications and electronically captured signatures; providing for the
posting of certain information at polling places with the State Board of Elections to prescribe the format; providing for modifications
to the state voter registration form; enabling the State Board of Elections to adopt rules to ensure that voting systems comply with
HAVA, including definitions of what constitutes a vote on each voting system; abolishing lever voting systems; providing for
provisional balloting with the State Board of Elections to prescribe certain rules; providing identification procedures for voters who
register to vote for the first time by mail; enabling the State Board of Elections to develop a procedure for resolving HAVA
complaints; providing new procedures for registration and balloting for voters covered by the Uniformed and Overseas Citizens
Absentee Voting Act; and enabling the State Board of Elections to adopt rules and guidelines for implementing HAVA; and State
Board of Elections guidelines regarding processing voter registration forms, accessible polling places, and complaint procedures for
the State of North Carolina, submitted to the Attorney General pursuant to Section 5 of the Voting Rights Act, 42 U.S.C. 1973c. We
received your submission on August 6, 2003; supplemental information was received on September 17, 2003.
The Attorney General does not interpose any objection to the specified changes. However, we note that Section 5 expressly
provides that the failure of the Attorney General to object does not bar subsequent litigation to enjoin the enforcement of the changes.
See the Procedures for the Administration of Section 5 (28 C.F.R. 51.41).
Session Law 2003-226 includes provis ions that are enabling in nature. Therefore, any changes affecting voting that are
adopted pursuant to this legislation require Section 5 review (e.g., procedures adopted by the State Board of Elections concerning
HAVA minimum requirements, voting systems , definition of what constitutes a vote, statewide voter registration database, and
provisional voting). See 28 C.F.R. 51.15.
Sincerely,
Joseph D. Rich
Chief, Voting Section
IN ADDITION
18:10 NORTH CAROLINA REGISTER November 17, 2003
748
U.S. Department of Justice
Civil Rights Div ision
JDR:CMK:TGL:nj Voting Section – NWB.
DJ 166-012-3 950 Pennsylvania Ave., NW
2003-2768 Washington, D.C. 20530
October 6, 2003
Mr. Gary O. Bartlett
Executive Director
State Board of Elections
P.O. Box 27255
Raleigh, NC 27611-7255
Dear Mr. Bartlett:
This refers to Session Law 2003-346, which provides for a boundary definition, candidate qualifying procedures, the conduct
of the elections by Granville County, absentee voting procedures, concurrent terms, and the at-large method of election, for the Butner
Advisory Council Jurisdiction (formerly known as the Camp Butner Reservation) in Durham and Granville Counties, North Carolina,
submitted to the Attorney General pursuant to Section 5 of the Voting Rights Act, 42 U.S.C. 1973c. We received your submission on
August 5, 2003.
We have considered our earlier determination regarding the use of at-large elections based on the adoption of concurrent
rather than staggered terms, information and arguments you have advanced, along with other information and comments received
from interested persons.
Accordingly, pursuant to Section 51.48(b) of the Procedures for the Administration of Section 5 (28 C.F.R.) the objection
interposed to the at-large method of election is hereby withdrawn.
The Attorney General does not interpose any objection to the remaining specified changes. However, we note that Section 5
expressly provides that the failure of the Attorney General to object does not bar subsequent litigation to enjoin the enforcement of the
changes. See the Procedures for the Administration of Section 5 (28 C.F.R. 51.41).
Sincerely,
Joseph D. Rich
Chief, Voting Section
IN ADDITION
18:10 NORTH CAROLINA REGISTER November 17, 2003
749
U.S. Department of Justice
Civil Rights Division
JDR:RSB:CMK:TGL:jdh:par Voting Section
DJ 166-012-3 950 Pennsylvania Ave., NW
1996-3224 Washington, D.C. 20530
2003-2768
October 16, 2003
Mr. Gary O. Bartlett
Executive Director
State Board of Elections
P.O. Box 27255
Raleigh, NC 27611-7255
Dear Mr. Bartlett:
This refers to our October 6, 2003, letter regarding the Butner Advisory Council Jurisdiction. The purpose of that letter was
to inform you that no objection would be interposed to Session Law 2003-346.
However, the letter mistakenly informed you that the Attorney General was withdrawing the February 3, 1997, objection to
Chapter 667 (1996). The State did not ask for reconsideration of that objection, the Attorney General did not give the appropriate
public notice that he was reconsidering it, and the State does not require that the objection be withdrawn in order to implement the
changes contained in Session Law 2003-346. Session Law 2003-346 is a different piece of legislation from chapter 667 (1996) and
implements a different election system than the one to which the 1997 objection was interposed. Accordingly, please accept this letter
as notification that the February 3, 1997, objection to Chapter 667 (1996) remains in effect.
Please accept our apology for any confusion the October 6, 2003, letter may have caused and do not hesitate to contact us
should you have any questions.
Sincerely,
Joseph D. Rich
Chief, Voting Section
PROPOSED RULES
18:10 NORTH CAROLINA REGISTER November 17, 2003
750
Note from the Codifier: The notices published in this Section of the NC Register include the text of proposed rules. The agency
must accept comments on the proposed rule(s) for at least 60 days from the publication date, or until the public hearing, or a
later date if specified in the notice by the agency. If the agency adopts a rule that differs substantially from a prior published
notice, the agency must publish the text of the proposed different rule and accept comment on the proposed different rule for 60
days.
Statutory reference: G.S. 150B-21.2.
TITLE 11 – DEPARTMENT OF INSURANCE
Notice is hereby given in accordance with G.S. 150B-21.2 that
the NC Department of Insurance intends to amend the rule cited
as 11 NCAC 04 .0427.
Proposed Effective Date: March 1, 2004
Public Hearing:
Date: December 2, 2003
Time: 10:00 a.m.
Location: Dobbs Building, 3rd floor Hearing Room, Raleigh,
NC
Reason for Proposed Action: S.L. 2003-395 (HB 986) has
incorporated the language in Paragraph (b) of this Rule into
G.S. 58-36-95(a).
Procedure by which a person can object to the agency on a
proposed rule: The Department of Insurance will accept
written objections to the amendment of this Rule until the
expiration of the comment period (1/16/04). Objections need to
be specific and sent to the attention of the APA Coordinator.
Written comments may be submitted to: Ellen K. Sprenkel,
PO Box 26837, Raleigh, NC 27611, phone (919) 733-4529, fax
(919) 733-6495, and email esprenke@ncdoi.net.
Comment period ends: January 16, 2004
Procedure for Subjecting a Proposed Rule to Legislative
Review: Any person who objects to the adoption of a permanent
rule may submit written comments to the agency. A person may
also submit written objections to the Rules Review Commission.
If the Rules Review Commission receives written and signed
objections in accordance with G.S. 150B-21.3(b2) from 10 or
more persons clearly requesting review by the legislature and the
Rules Review Commission approves the rule, the rule will
become effective as provided in G.S. 150B-21.3(b1). The
Commission will receive written objections until 5:00 p.m. on
the 6th business day preceding the end of the month in which a
rule is approved. The Commission will receive those objections
by mail, delivery service, hand delivery, or facsimile
transmission. If you have any further questions concerning the
submission of objections to the Commission, please call a
Commission staff attorney at 919-733-2721.
Fiscal Impact
State
Local
Substantive (>$3,000,000)
None
CHAPTER 04 - CONSUMER SERVICES DIVISION
SECTION .0400 - PROPERTY AND LIABILITY
11 NCAC 04 .0427 DISCLOSURE REQUIREMENTS
(a) Every insurer that writes motor vehicle insurance in this
state and that intends to require or specify the use of after market
parts must disclose to its policyholders in writing, either in the
policy or on a sticker attached thereto, the following information
in no smaller print than ten point type:
IN THE REPAIR OF YOUR COVERED AUTO UNDER THE
PHYSICAL DAMAGE COVERAGE PROVISIONS OF THIS
POLICY, WE MAY REQUIRE OR SPECIFY THE USE OF
AUTOMOBILE PARTS NOT MADE BY THE ORIGINAL
MANUFACTURER. THESE PARTS ARE REQUIRED TO
BE AT LEAST EQUAL IN TERMS OF FIT, QUALITY,
PERFORMANCE AND WARRANTY TO THE ORIGINAL
MANUFACTURER PARTS THEY REPLACE.
(b) An insurer must disclose to a claimant in writing, either on
the estimate or on a separate document attached to the estimate,
the following information in no smaller print than ten point type:
THIS ESTIMATE HAS BEEN PREPARED BASED ON THE
USE OF AUTOMOBILE PARTS NOT MADE BY THE
ORIGINAL MANUFACTURER. PARTS USED IN THE
REPAIR OF YOUR VEHICLE BY OTHER THAN THE
ORIGINAL MANUFACTURER ARE REQUIRED TO BE AT
LEAST EQUAL IN TERMS OF FIT, QUALITY,
PERFORMANCE AND WARRANTY TO THE ORIGINAL
MANUFACTURER PARTS THEY ARE REPLACING.
All after market parts installed on a motor vehicle shall be
clearly identified on the estimate and invoice for such repair.
Authority G.S. 58-2-40.
* * * * * * * * * * * * * * * * * * * *
Notice is hereby given in accordance with G.S. 150B-21.2 that
the NC Department of Insurance intends to adopt the rules cited
as 11 NCAC 11F .0601-.0605 and repeal the rules cited as 11
NCAC 11B .0104, .0106, .0108-.0111, .0113-.0114, .0119,
.0122-.0131, .0133-.0137, .0139, .0144-.0147, .0149-.0151; 11C
.0110, .0122, .0124-.0126, .0131, .0206, .0309; 11D .0115-
.0167.
PROPOSED RULES
18:10 NORTH CAROLINA REGISTER November 17, 2003
751
Proposed Effective Date: March 1, 2004
Public Hearing:
Date: December 2, 2003
Time: 10:00 a.m.
Location Dobbs Building, 3rd Floor Hearing Room, Raleigh,
NC
Reason for Proposed Action:
11 NCAC 11B .0104, .0106, .0108-.0111, .0113-.0114, .0119,
.0122-.0131, .0133-.0137, .0139, .0144-.0147, .0149-.0151; 11C
.0110, .0122, .0124-.0126, .0131, .0206, .0309; 11D .0115-.0167
– These Rules are being repealed because they are outdated.
11 NCAC 11F .0601-.0605 – The adoption of these Rules is
needed to be in compliance with NAIC Model Laws.
Procedure by which a person can object to the agency on a
proposed rule: The Department of Insurance will accept
written objections to the adoption or repeal of these Rules until
the expiration of the comment period (1/16/04). Objections need
to be specific and sent to the attention of the APA Coordinator.
Written comments may be submitted to: Ellen K. Sprenkel,
PO Box 26837, Raleigh, NC 27611, phone (919) 733-4529, fax
(919) 733-6495, and email esprenke@ncdoi.net.
Comment period ends: January 16, 2004
Procedure for Subjecting a Proposed Rule to Legislative
Review: Any person who objects to the adoption of a permanent
rule may submit written comments to the agency. A person may
also submit written objections to the Rules Review Commission.
If the Rules Review Commission receives written and signed
objections in accordance with G.S. 150B-21.3(b2) from 10 or
more persons clearly requesting review by the legislature and the
Rules Review Commis sion approves the rule, the rule will
become effective as provided in G.S. 150B-21.3(b1). The
Commission will receive written objections until 5:00 p.m. on
the 6th business day preceding the end of the month in which a
rule is approved. The Commission will receive those objections
by mail, delivery service, hand delivery, or facsimile
transmission. If you have any further questions concerning the
submission of objections to the Commission, please call a
Commission staff attorney at 919-733-2721.
Fiscal Impact
State
Local
Substantive (>$3,000,000)
None
CHAPTER 11 - FINANCIAL EVALUATION DIVISION
SUBCHAPTER 11B - SPECIAL PROGRAMS
SECTION .0100 – SECURITIES
11 NCAC 11B .0104 REPLACEMENT UPON
REDUCTION OF MARKET VALUE SECURITIES
When any company licensed in North Carolina is required to
have a deposit of securities in this state in accordance with
Article 5 of G.S. 58 or pursuant to any rule of the Department of
Insurance, the amount of such deposit required shall be at the
market value thereof and shall be increased from time to time as
necessary to maintain the required amount of deposit.
Authority G.S. 58-2-40; 58-5-25.
11 NCAC 11B .0106 DEPOSITS REQUIRED:
REVOCATION/LICENSE: FOREIGN COMPANIES
The Commissioner may require any insurance company licensed
in this state to make and maintain deposits of securities in such
amounts as the Commissioner may deem necessary for the sole
protection of North Carolina policyholders, upon one or mo re of
the following grounds:
(1) The insurer is operating with unsatisfactory
results as determined by the Commissioner
from an annual statement or an interim
financial statement, or a report on
examination; or
(2) The insurer has sustained a substantial loss in
surplus as reflected in an annual statement or
an interim financial statement, or a report on
examination; or
(3) The insurer is found by the commissioner to be
in such an unsound condition that the company
is potentially unable to fulfill policyholder
contracts.
Authority G.S. 58-2-40(1); 58-3-100; 58-5-40; 58-5-45.
11 NCAC 11B .0108 RIGHT OF COMPANY TO
RECEIVE INTEREST
The right of a company to receive earned interest from the
securities on deposit in this state shall be extended to all deposits
made under all rules of the Department and the right of the
Department to withhold interest in accordance with G.S. 58-5-60
shall also extend to all such deposits. Interest checks from
issuing agents or institutions on bonds, notes, debentures or
other securities on deposit shall be forwarded to the master trust
bank. The interest shall be transmitted to the insurance company
in a manner as detailed by the Department and the Master Trust
Bank.
Authority G.S. 58-2-40; 58-5-1; 58-5-60.
11 NCAC 11B .0109 RIGHT OF THE
COMMISSIONER TO RECEIVE AND HOLD INTERES T
The Commissioner may in his discretion receive and retain the
interest on deposits of a company licensed in North Carolina
which is placed in conservatorship, rehabilitation or receivership
by its state of domicile, and where the Commissioner has reason
to believe that such company may potentially be unable to meet
its claims obligation in North Carolina. Such interest will be
placed in an interest-bearing account at the master bank account
and will be held in trust by the Commissioner for policyholders
of the company.
Authority G.S. 58-2-40; 58-5-60; 58-183.
PROPOSED RULES
18:10 NORTH CAROLINA REGISTER November 17, 2003
752
11 NCAC 11B .0110 SALE OF DEPOSIT FOR
PAYMENT OF LIABILITIES
Any company licensed in this state and refusing to pay a claim
of a North Carolina resident, after such claim has been reduced
to a final judgment and no appeals are outstanding, shall be
subject to this Rule. The parties due the claim shall ask the
commissioner to sell such deposit of securities as needed to pay
claims plus all expenses involved in settling such claim. It is
understood that such sale will be done by our master trust bank
as further defined under 11 NCAC 11B .0131. The procedure
for this sale is as follows:
(1) The claimant must inform the company or
its North Carolina agent in writing 20 days
in advance of his intentions to petition the
Commissioner for sale of bonds.
(2) After receiving the petition from the
claimant the Commissioner shall advertise
in a daily paper in Raleigh at least 30 days
before the sale. Such advertising shall
include, as a minimum, the following
information:
(a) securities to be sold,
(b) company having the deposit,
(c) the law under which these securities
are being sold.
The Commissioner will notify the company after the deposit has
been sold, replace the deposit in an amount deemed to be
adequate and reasonable by the Commissioner. The right of the
commissioner to sell at public auction such amount of the
securities on deposit with him as is necessary to pay an
outstanding liability of a company as provided by G.S. 58-5-65
shall extend to all deposits made under all rules of the
Department.
Authority G.S. 58-2-40; 58-5-1; 58-5-65.
11 NCAC 11B .0111 CONVERSION TO CASH
MASTER TRUST
(a) As used in this Rule and elsewhere in this Section:
(1) "DTC" means the electronic transfer of
municipal securities through the Deposit
Trust Corporation.
(2) "Federal Book Entry" means the electronic
transfer of U.S. Treasury obligations and
cash through member banks of the Federal
Reserve System.
(b) The Department shall process and release securities that
have matured only upon receipt of a written request from the
company and where adequate replacement has been made by the
company. Securities eligible for Federal Book Entry or DTC
shall be converted to cash at maturity. Certificates of deposit
shall be redeemed or rolled over at maturity.
Authority G.S. 58-2-40; 58-5-1; 58-5-75.
11 NCAC 11B .0113 DEPOSIT REQUIRED UPON
INITIAL LICENSING
Any company seeking admission to this state which is required
to deposit securities with this state shall deposit such securities
within 30 days after its license is granted.
Authority G.S. 58-2-40; 58-5-5; 58-5-10; 58-5-50.
11 NCAC 11B .0114 DEPOSITS HELD IN TRUST BY
COMMISSIONER OF INSURANCE
The establishment and servicing of deposits shall be done by
authority of the Commissioner of Insurance only. The deposits
shall be in the custody of the Master Trust Bank. The procedure
for replacement of the deposit shall be as follows:
(1) The company desiring to replace bonds or
notes shall make a written request for
replacement to the Commissioner of
Insurance. This request shall be made in
advance of the shipment of any securities.
(2) The replacement deposit shall be of an equal
value to the bond or note being replaced.
(3) The Commissioner shall require additional
securities at the time of replacement if the
citizens and policyholders of this state will
have less protection as a result of the
replacement.
Authority G.S. 58-2-40; 58-5-1; 58-5-40; 58-5-90; 58-5-95.
11 NCAC 11B .0119 CONTINUATION OF DEPOSITS
OF SECURITIES OF MERGING COMPANIES
The deposits of securities of a licensed company which is
merged into another company may be transferred to the account
of the surviving company, thus increasing the original deposit of
the surviving company by the amount of the deposit of the
merged company.
Authority G.S. 58-2-40; 58-5-40; 58-5-55.
11 NCAC 11B .0122 EXCHANGE OF DEPOSIT:
PROCEDURAL HANDLING
It shall be the responsibility of the insurance company to make
arrangements with this department at least five working days
before exchange of deposit is required. There are no forms
required in making an exchange. This department must have the
eligible replacement deposit at the master trust bank before any
deposit can be returned. Such replacement deposit must be on a
market value basis.
Authority G.S. 58-2-40; 58-5-1.
11 NCAC 11B .0123 SALE OF SECURITIES B Y THE
INSURANCE COMPANY PROHIBITED
Insurance companies are prohibited from selling bonds or notes
which are on deposit with this department without the express
written consent of this department prior to sale, and after
arrangements for replacements of equal value have been
finalized.
Authority G.S. 58-2-40.
11 NCAC 11B .0124 MASTER TRUST CREATION
THEREOF
In order to allow insurance companies to use Federal Book Entry
and DTC Systems, the North Carolina Department of Insurance
PROPOSED RULES
18:10 NORTH CAROLINA REGISTER November 17, 2003
753
has entered an agreement with a Master Trust Bank. This bank
has transferred all securities from the vault at the State
Treasurers Office to its safekeeping facility at the Master Trust
Bank or its duly appointed fiduciary. Enactment of statute to
allow the Department of Insurance to create such an agreement
was necessary to insure that insurance companies be allowed to
participate in purchase of Non-Physical Government Securities
in Federal Book Entry and other electronic wire transfers of
assets.
Authority G.S. 58-2-40; 58-5-1.
11 NCAC 11B .0125 MASTER TRUST USE
PROCEDURAL HANDLING STEP 1
Any insurance company making a deposit of securities for the
North Carolina Department of Insurance must have written
approval from the Department of Insurance as to the amount and
type of eligible securities to be used in fulfillment of the deposit
requirements. Such request for approval must be forwarded to
the appropriate named individual in the N.C. Department of
Insurance as soon as is feasible by the insurance company but
not later than 90 days after admission to North Carolina (See
also Rule 11 NCAC 11B .0113).
Authority G.S. 58-2-40; 58-5-1.
11 NCAC 11B .0126 MASTER TRUST USE
PROCEDURAL HANDLING STEP 2
After approval has been granted the insurance company is
required to contact the appropriate named individual for
instructions as to shipment and/or wire transfer of the eligible
securities. The Department of Insurance will notify the Master
Trust Bank when new or increased securities will be
forthcoming.
Authority G.S. 58-2-40; 58-5-1.
11 NCAC 11B .0127 MASTER TRUST USE
PROCEDURAL HANDLING STEP 3
After securities are shipped or wired to the Master Trust Bank,
the Master Trust Bank will provide the Department of Insurance
with a signed receipt indicating securities in question are at the
Master Trust Bank.
Authority G.S. 58-2-40; 58-5-1.
11 NCAC 11B .0128 MASTER TRUST USE
PROCEDURAL HANDLING STEP 4
The Master Trust Bank may place the security in Federal Book
Entry or DTC in any form which in fact perfects the security
interest of this state so long as it is understood that the securities
are held for protection of N.C. policyholders in the cases of
foreign insurance companies and for protection of all
policyholders wheresoever situated in cases of domestic
insurance companies unless otherwise noted. The Master Trust
Bank understands and agrees that all securities held under this
trust arrangement are to be separated at all times from other
assets of the bank and other trust arrangements at the bank.
Authority G.S. 58-2-40; 58-5-1.
11 NCAC 11B .0129 MASTER TRUST USE
PROCEDURAL HANDLING STEP 5
The Master Trust Bank understands and agrees that securities
while held by them can be in a street name or any other
convenient designation so long as such securities can be
determined to be the property of the insurance company and the
State of North Carolina and not the property of the bank.
Authority G.S. 58-2-40; 58-5-1.
11 NCAC 11B .0130 MASTER TRUST SOLVENT
COMPANIES
All interest from securities on deposit will be forwarded to the
insurance company in a manner as detailed by the N.C.
Department of Insurance and the Master Trust Bank.
Authority G.S. 58-2-40; 58-5-1.
11 NCAC 11B .0131 MASTER TRUST INSOLVENT
COMPANIES
All interest from securities on deposit will be deposited in an
interest bearing account at the Master Trust Bank. This action
will occur after receipt of a court order declaring the insurance
company to be insolvent. Also at this time the principal will be
sold by the Master Trust to the best bidder from a field of at least
two bids. It is conclusively presumed that the sale of securities
to the best bidder from a field of two bids will constitute a public
sale.
Authority G.S. 58-2-40; 58-5-1.
11 NCAC 11B .0133 DEPOSIT/AMOUNT FOREIGN
FIRE AND/OR CASUALTY INSURERS
All foreign fire and casualty insurance companies being licensed
in North Carolina must make and maintain a deposit of securities
in accordance with the Department of Insurance Admission Data
Guidelines form 11 NCAC 14 .0143. Such deposit must be
made in accordance with the Master Trust Agreement between
the Department of Insurance and a bank in North Carolina.
Authority G.S. 58-2-40; 58-5-1.
11 NCAC 11B .0134 DEPOSIT REQUIRED AMOUNT
DOMESTIC LIFE INSURERS
All domestic life insurance companies being formed and
licensed in North Carolina must make and maintain a deposit of
securities in accordance with the general regulatory authority of
the Insurance Commission for the State of N. C. Such deposit
must be made in accordance with the Master Trust Agreement
between the Department of Insurance and a bank in North
Carolina.
Authority G.S. 58-2-40; 58-5-1.
11 NCAC 11B .0135 DEPOSIT/AMOUNT DOMES TIC
FIRE AND/OR CASUALTY INSURERS
All domestic fire and/or casualty insurance companies being
licensed in North Carolina must make and maintain a deposit of
securities in accordance with the general regulatory authority of
the Commissioner of Insurance for the State of N. C. Such
deposit must be made in accordance with the Master Trust
PROPOSED RULES
18:10 NORTH CAROLINA REGISTER November 17, 2003
754
Agreement between the Department of Insurance and a bank in
North Carolina.
Authority G.S. 58-2-40; 58-5-1.
11 NCAC 11B .0136 FOREIGN DEPOSIT REQUIRED
AMOUNT FOREIGN MISC INSURERS
All miscellaneous insurance companies being licensed in North
Carolina must make and maintain a deposit of securities in
accordance with the Department of Insurance Admission Data
Guidelines from 11 NCAC 14 .0143. Such deposit must be
made in accordance with the Master Trust Agreement between
the Department of Insurance and a bank in North Carolina.
Authority G.S. 58-2-40; 58-5-1.
11 NCAC 11B .0137 DEPOSIT REQUIRED AMOUNT
DOMESTIC MISCELLANEOUS INSURERS
All domestic miscellaneous fire and/or casualty insurance
companies being formed and licensed in North Carolina must
make and maintain a deposit of securities in accordance with the
general regulatory authority of the Commissioner of Insurance
for the State of N. C. Such deposit must be made in accordance
with the Master Trust Agreement between the Department of
Insurance and a bank in North Carolina.
Authority G.S. 58-2-40; 58-5-1.
11 NCAC 11B .0139 DEPOSIT USE OF MASTER
TRUST ALL NEW COMPANIES
Insurance companies required to deposit securities in fulfillment
of the North Carolina Department Admissions Data Guidelines,
and admission rules shall make such deposits with the Master
Trust Bank selected by the North Carolina Commissioner of
Insurance.
Authority G.S. 58-2-40; 58-5-1.
11 NCAC 11B .0144 MASTER TRUST DK
TRANSACTION
It shall be the responsibility of the insurance company to notify
their custodian bank of items to be wired from the Master Trust
Bank. Prompt and consistent attention to this matter will prevent
delays in the releasing transactions. DK Transactions are
conclusively presumed to mean transactions rejected by the
sending or receiving bank due to a lack of advance notice of the
receipt.
Authority G.S. 58-2-40(1); 58-5-1.
11 NCAC 11B .0145 MASTER TRUST CHARGES
The Master Trust Bank will notify the insurance companies as to
the charges relative to safekeeping the assets held by the Master
Trust Bank. All insurance companies are required to pay these
charges in accordance with the fee structure as provided by the
N.C. Department of Insurance.
Authority G.S. 58-2-40(1); 58-5-1.
11 NCAC 11B .0146 MASTER TRUST BANK
ABILITY TO REGISTER SECURITIES
From time to time registration of securities shall be changed by
the Master Trust Bank to facilitate the redemp tion, sale, or
transfer of securities on deposit. Such changes shall be made
after a written request for approval has been made by the Master
Trust Bank and received and approved by the Commissioner of
Insurance.
Authority G.S. 58-2-40; 58-5-1; 58-5-30; 58-5-63; 58-5-70;
58-5-90; 58-5-95.
11 NCAC 11B .0147 USE OF FEDERAL BOOK
ENTRY/DEPOSITORY TRUST CORP/SHIPPING
Where securities are eligible for Federal Book Entry or
Depository Trust Corp such securities must be placed in these
systems prior to shipment to the Department of Insurance or to
its appointed Master Trust Bank. Securities ineligible for the
above systems will be delivered to the N.C. Department of
Insurance or the Master Trust Bank in accordance with written
instructions to the shipping insurance company from the N.C.
Department of Insurance.
Authority G.S. 58-2-40; 58-5-1.
11 NCAC 11B .0149 MASTER TRUST USE OF DTC
Where securities are eligible for DTC such securities may be
placed in this system unless otherwise directed by the
Commissioner of Insurance.
Authority G.S. 58-2-40; 58-5-1.
11 NCAC 11B .0150 MASTER TRUST-RELEASE OF
SECURITIES
All requests for releasing securities must be delivered in writing
to the Department of Insurance at least five working days prior
to the requested release date. All release requests must be
signed by an officer of the insurance company. Requests from
custodian banks or brokerage firms will not be honored. All
requests for release of items in Federal Book Entry must identify
the servicing Federal Reserve Bank account name, bank ABA
number and other required information. All requests for release
of items in DTC must give the bank name, address and DTC
number. All requests for release of ineligible items must give
sufficient information to make the proper transfer.
Authority G.S. 58-2-40; 58-5-1.
11 NCAC 11B .0151 MASTER TRUST - PAYMENT
OF INTEREST
In order to make the Master Trust Bank fully accountable, all
interest must be forwarded from the paying agent to the Master
Trust Bank. The Master Trust Bank will forward the interest to
the insurance company or its designated receiving bank. Unless
the insurance company notifies the North Carolina Department
of Insurance in writing, all interest will be forwarded to the last
known home office address given the Department of Insurance.
Authority G.S. 58-2-40; 58-5-1.
SUBCHAPTER 11C - ANALYSIS AND EXAMINATIONS
SECTION .0100 - GENERAL PROVISIONS
PROPOSED RULES
18:10 NORTH CAROLINA REGISTER November 17, 2003
755
11 NCAC 11C .0110 INVESTMENT IN GOLD OR
GOLD FUTURES BY INSURANCE COMPANIES
The investment in gold or gold futures by domestic insurance
companies is not permitted by the Department. The investment
in gold or gold futures by a foreign insurer admitted to do
business or seeking admission to North Carolina will be afforded
no value in determining compliance with the statutory
requirements for such type companies in this state, even if such
investment was authorized under the laws of the state of
domicile.
Authority G.S. 58-2-40(1); 58-7-85; 58-7-90.
11 NCAC 11C .0122 SALE OF EXCHANGE: TRADED
CALL OPTIONS
An insurer may sell exchange-traded call options only through
an exchange and only with respect to stock which it owns.
Insurers may not sell any other options. Any insurer selling an
option:
(1) shall enter into an escrow agreement which
provides that its escrowed stock is kept
segregated by the bank from other securities
owned by the company, and from securities
owned by others, which are deposited with the
same bank; and
(2) must obtain and retain in its possession a copy
of an escrow receipt identifying with
particularity the escrowed stock.
Authority G.S. 58-2-40; 58-7-85; 58-7-90.
11 NCAC 11C .0124 ACCOUNTING PROCEDURES
The price received for selling a call option shall not be included
in income at the time of receipt, but shall be carried in a deferred
account until:
(1) The call option expires through the passage of
time. The price for the option shall be treated
as investment income.
(2) The insurer sells the underlying stock pursuant
to an exercise of the call option. The price
received for the option shall be treated as
increasing the amount realized upon the sale of
the stock and shall be included in determining
capital gain or loss.
(3) The insurer engages in a closing purchase
transaction. In this event the difference
between the price received from the sale of the
call option and the price paid in the closing
purchase transaction shall be treated as an
addition to or deduction from investment
income.
Authority G.S. 58-2-40; 58-7-85; 58-7-90.
11 NCAC 11C .0125 VALUATION
The stock on which an option has been sold shall be valued, so
long as the obligation under the option exists, at the lesser of:
(1) the exercise price of the option, or
(2) the current market price of the stock.
Authority G.S. 58-2-40; 58-7-85; 58-7-90.
11 NCAC 11C .0126 PROHIBITION AGAINST
SPECULATING IN OPTIONS
The authority granted to insurers herein to engage in option
transactions shall be used solely in a manner consistent with the
insurer's obligation to exercise prudent judgment in the
conservative management of its assets. Each option transaction
shall reflect such prudent judgment and shall have a rationale
related to such conservative management of assets rather than
speculation. Nothing herein shall be construed to authorize an
insurer to engage in option transactions to an extent or to a
degree which would, under the relevant circumstances, be
inordinate or speculative. The insurer shall establish and
maintain records as to each transaction, demonstrating
compliance with this Section.
Authority G.S. 58-2-40; 58-7-85; 58-7-90.
11 NCAC 11C .0131 VALUATION OF DEBT
SECURITIES
The investments in bonds and other evidences of indebtedness
specified in G.S. 58-7-190 shall be valued in accordance with
the procedures and instructions contained in the Valuations of
Securities Manual of the National Association of Insurance
Commissioners: Provided, however, that the Commissioner may
apply a more conservative valuation method to any insurer for
which any of the standards specified in G.S. 58-30-60(b) are
applicable.
Authority G.S. 58-2-40; 58-7-190.
SECTION .0200 - FIRE AND CASUALTY
11 NCAC 11C .0206 ACCOUNTING FOR PREMIUM
OVER 90 DAYS PAST DUE
Premiums that are not more than 90 days past due are allowable
as admitted assets under G.S. 58-7-162(5). For purposes of this
determination, premiums are considered more than 90 days past
due under any of the following conditions:
(1) Original, deposit, and renewal premiums on
policies and bonds effective more than 90 days
before the date of determination.
(2) Premiums covering endorsements on which
the effective dates were more than 90 days
before the date of determination.
(3) Installment premiums due more than 90 days
before the date of determination. If any
installments are overdue, all of the unpaid
installment premiums on the same policy or
bond shall be classified as overdue.
(4) Audit and additional earned premiums
determined by audits made more than 90 days
before the date of determination, or charged
upon an assured's payroll statements received
more than 90 days before the date of
determination.
(5) Audits and additional earned premiums
determined by audits covering periods
expiring more than 180 days before the date of
determination. The dates when the periods
PROPOSED RULES
18:10 NORTH CAROLINA REGISTER November 17, 2003
756
expire are determined by the provisions of the
insurance contract.
(6) When original, deposit, endorsement, or audit
premiums are overdue, all premiums
subsequently charged on the same policies or
bonds are overdue.
(7) When original, deposit, installment
endorsement, or audit premiums on a policy or
bond are overdue, all premiums charged on
policies or bonds issued as renewals are
overdue.
(8) Premiums resulting from an experience
modification are admitted assets, provided that
not more than 90 days have elapsed since the
modification has been received from a rating
organization; or not more than 90 days have
elapsed since the modification has been
calculated by the insurer. Premiums resulting
from an experience modification are not
admitted assets if premiums on the same or
prior policy are overdue in accordance with
this Rule.
(9) Additional premiums developed through the
application of a retrospective rating formula
and billed to the insured in accordance with
contractual provisions are admitted assets;
provided that not more than 90 days have
elapsed since the billing date and not more
than 180 days have elapsed since the
accounting date set forth in the insurance
contract. Additional retrospective premiums
are not admitted assets if premiums on the
same or prior policy are overdue in accordance
with this Rule.
Authority G.S. 58-2-40; 58-7-162(5).
SECTION .0300 - LIFE: GENERAL NATURE
11 NCAC 11C .0309 ADMITTED ASSETS: HMO
For the purpose of determining the working capital or net worth
of any HMO seeking admission to do business in this State and
of any HMO admitted to do business in this State, admitted
assets for an HMO do not include:
(1) prepaid expenses;
(2) intangible assets;
(3) the depreciated cost of furniture and
equipment, except furniture and equipment
directly used in providing medical services and
electronic data processing equipment;
(4) amounts receivable from affiliates that are
outstanding for over 90 days;
(5) amounts receivable from affiliates that do not
have immediate resources to repay the debts;
nor
(6) any other assets determined by the
Commissioner to be of an illiquid nature, other
than real property.
Authority G.S. 58-2-40; 58-2-40(1); 58-67-20; 58-67-110(b).
SUBCHAPTER 11D - PROXY: LIQUIDATION AND
MERGER
SECTION .0100 - GENERAL PROVISIONS
11 NCAC 11D .0115 PROXIES: ETC DOMESTIC
INSURERS: APPLICATION OF RULES
Pursuant to the provisions of G.S. 58-2-40, rules for proxies,
consents and authorizations of domestic stock insurers are
designated as 11 NCAC 11D .0115 to 11 NCAC 11D .0124.
Relative thereto, 11 NCAC 11D .0125 to 11 NCAC 11D .0139
set forth the information required in proxy statements and 11
NCAC 11D .0140 to 11 NCAC 11D .0144 set forth information
to be included in statements filed by or on behalf of a participant
(other than the insurer) in a proxy solicitation in an election
contest.
These rules are applicable to each domestic stock insurer which
has any class of equity security held of record by one hundred or
more persons; provided, however, that these rules shall not apply
to any insurer if 95 percent or more of its equity securities are
owned or controlled by a parent or an affiliated insurer and the
remaining securities are held of record by less than 500 persons.
A domestic stock insurer which files with the Securities and
Exchange Commission forms of proxies, consents and
authorizations complying with the requirements of the Securities
Exchange Act of 1934, as amended, and the applicable
regulations promulgated thereunder, shall be exempt from the
provisions of this regulation with respect to any class of
securities subject to SEC jurisdiction.
Authority G.S. 58-2-40.
11 NCAC 11D .0116 PROXIES: CONSENTS AND
AUTHORIZATIONS
No domestic stock insurer, or any director, officer or employee
of such insurer subject to 11 NCAC 11D .0115, or any other
person, shall solicit, or permit the use of his name to solicit, by
mail or otherwise, any proxy, consent or authorization in respect
of any class of equity security of such insurer held of record by
100 persons in contravention of these rules.
Authority G.S. 58-2-40(2).
11 NCAC 11D .0117 PROXIES: DISCLOSURE OF
EQUIVALENT INFORMATION
Unless proxies, consents or authorizations in respect of any class
of equity securities of a domestic insurer subject to 11 NCAC
11D .0115 are solicited by or on behalf of the management of
such insurer from the holders of record of such security in
accordance with these rules prior to any annual or other meeting
of such security holders, such insurer shall, in accordance with
these rules and such further rules as the Commissioner may
adopt, file with the Commissioner and transmit to all security
holders of record information substantially equivalent to the
information which would be required to be transmitted if a
solicitation were made. Such insurer shall transmit a written
information statement containing the information specified in 11
NCAC 11D .0119 (d) to every security holder who is entitled to
vote in regard to any matter to be acted upon at the meeting and
from whom a proxy is not solicited on behalf of the management
of the insurer; provided, that in the case of a class of securities in
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757
unregistered or bearer form such statement need be transmitted
only to those security holders whose names and addresses are
known to the insurer.
Authority G.S. 58-2-40(2).
11 NCAC 11D .0118 PROXIES: DEFINITIONS AND
INSTRUCTIONS
(a) The definitions and instructions set out in Schedule SIS, as
promulgated by the NAIC shall be applicable for purposes of
this Section.
(b) The terms "solicit" and "solicitation" for purposes of this
Section includes:
(1) any request for a proxy, whether or not
accompanied by or included in a form of
proxy; or
(2) any request to execute or not to execute, or to
revoke, a proxy; or
(3) the furnishing of a proxy or other
communication to security holders under
circumstances reasonably calculated to result
in the procurement, withholding or revocation
of a proxy.
(c) The terms "solicit" and "solicitation" shall not include:
(1) any solicitation by a person in respect of
equity security of which he is the beneficial
owner;
(2) action by a broker or other person in respect to
equity security carried in his name or in the
name of his nominee in forwarding to the
beneficial owner of such equity security
soliciting material received from the company,
or impartially instructing such beneficial
owner to forward a proxy to the person, if any,
to whom the beneficial owner desires to give a
proxy, or impartially requesting instructions
from the beneficial owner with respect to the
authority to be conferred by the proxy and
stating that a proxy will be given if the
instructions are received by a certain date;
(3) the furnishing of a form of proxy to a security
holder upon the unsolicited request of such
security holder, or the performance by any
person of ministerial acts on behalf of a person
soliciting a proxy.
Authority G.S. 58-2-40.
11 NCAC 11D .0119 PROXIES: INFORMATION TO
BE FURNISHED TO SECURITY HOLDERS
(a) No solicitation subject to these rules shall be made unless
each person solicited is concurrently furnished or has previously
been furnished with a written proxy statement containing the
information specified in 11 NCAC 11D .0125 to 11 NCAC 11D
.0139.
(b) If the solicitation is made on behalf of the management of
the insurer and relates to an annual meeting of security holders at
which directors are to be elected, each proxy statement furnished
pursuant to Paragraph (a) of this Rule shall be accompanied or
preceded by an annual report (in preliminary or final form) to
such security holders containing such financial statements for
the last fiscal year as are referred to in Schedule SIS under the
heading "Financial Reporting to Security Holders." Subject to
the foregoing requirements with respect to financial statements
the annual report to security holders may be in any form deemed
suitable by the management.
(c) Two copies of each report sent to the security holders
pursuant to this Rule shall be mailed to the Commissioner not
later than the date on which such report is first sent or given to
security holders or the date on which preliminary copies of
solicitation material are filed with the Commissioner pursuant to
11 NCAC 11D .0121(a) whichever date is later.
(d) If no solicitation is being made by management of the
insurer with respect to any annual or other meeting, such insurer
shall mail to every security holder of record at least 20 days
prior to the meeting date, an information statement as required
by 11 NCAC 11D .0117, containing the information called for
by 11 NCAC 11D .0125 to 11 NCAC 11D .0139 except 11
NCAC 11D .0125, .0127, and .0128, which would be applicable
to any matter to be acted upon at the meeting if proxies were to
be solicited in connection with the meeting. If such information
statement relates to an annual meeting at which directors are to
be elected, it shall be accompanied by an annual report to such
security holders in the form provided in Paragraph (b) of this
Rule.
Authority G.S. 58-2-40(2).
11 NCAC 11D .0120 PROXIES: REQUIREMENTS AS
TO PROXY
(a) The form of proxy shall indicate in bold-face type whether
or not the proxy is solicited on behalf of the management, shall
provide a specifically designated blank space for dating the
proxy and shall identify clearly and impartially each matter or
group of related matters intended to be acted upon, whether
proposed by the management, or security holders. No reference
need be made to proposals as to which discretionary authority is
conferred pursuant to Paragraph (c) of this Rule.
(b) Means shall be provided in the proxy for the person solicited
to specify by ballot a choice between approval or disapproval of
each matter or group of related matters referred to therein, other
than elections to office. A proxy may confer discretionary
authority with respect to matters as to which a choice is not so
specified if the form of proxy states in bold-face type how it is
intended to vote the shares or authorization represented by the
proxy in each such case. A form of proxy which provides both
for elections to office and for action on other specified matters
shall be prepared so as to clearly provide, by a box or otherwise,
means by which the security holder may withhold authority to
vote for elections to office. Any such form of proxy which is
executed by the security holder in such manner as not to
withhold authority, to vote for elections to office shall be
deemed to grant such authority, provided the form of proxy so
states in bold-face type.
(c) A proxy may confer discretionary authority with respect to
other matters which may come before the meeting, provided the
persons on whose behalf the solicitation is made are not aware a
reasonable time prior to the time the solicitation is made that any
other matters are to be presented for action at the meeting and
provided further that a specific statement to that effect is made in
the proxy statement or in the form of proxy.
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758
(d) No proxy shall confer authority to vote for the election of
any person to any office for which a bona fide nominee is not
named in the proxy statement, or to vote at any annual meeting
other than the next annual meeting (or any adjournment thereof)
to be held after the date on which the proxy statement and form
of proxy are first sent or given to security holders.
(e) The proxy statement or form of proxy shall provide, subject
to reasonable specified conditions, that the proxy will be voted
and that where the person solicited specified by means of ballot
provided pursuant to Paragraph (b) of this Rule a choice with
respect to any matter to be acted upon, the vote will be in
accordance with the specifications so made. The information
included in the proxy statement or information statement shall be
clearly presented and the statements made shall be divided into
groups according to subject matter, with appropriate headings.
All printed proxy statements or information statements shall be
clearly and legibly presented.
Authority G.S. 58-2-40(2).
11 NCAC 11D .0121 PROXIES: MATERIAL
REQUIRED TO BE FILED
(a) Two preliminary copies of the information statement or the
proxy statement and form of proxy and any other soliciting
material to be furnished to security holders concurrently
therewith shall be filed with the Commissioner at least 10 days
prior to the date definitive copies of such material are first sent
or given to security holders, or such shorter period prior to that
date as the Commissioner may authorize upon a showing of
good cause therefor.
(b) Two preliminary copies of any additional soliciting material
relating to the same meeting or subject matter to be furnished to
security holders subsequent to the proxy statements shall be filed
with the Commissioner at least two days (exclusive of
Saturdays, Sundays or holidays) prior to the date copies of this
material are first sent or given to security holders or a shorter
period prior to such date as the Commissioner may authorize
upon a showing of good cause therefor.
(c) Two definitive copies of the information statement or the
proxy statement, form of proxy and all other soliciting material,
in the form in which this material is furnished to security
holders, shall be filed with, or mailed for filing to, the
Commissioner not later than the date such material is first sent or
given to the security holder.
(d) Where any information statement or proxy statement, form
of proxy or other material filed pursuant to these rules is
amended or revised, two of the copies shall be marked to clearly
show such changes. Copies of replies to inquiries from security
holders requesting further information and copies of
communications which do no more than request that forms of
proxy theretofore solicited be signed and returned need not be
filed pursuant to this Rule.
(e) Notwithstanding the provisions of Paragraphs (a) and (b) of
this Rule and 11 NCAC 11D .0124(e), copies of soliciting
material in form of speeches, press releases and radio or
television scripts may, but need not, be filed with the
Commissioner prior to use or publication. Definitive copies,
however, shall be filed with or mailed for filing to the
Commissioner as required by Paragraph (c) of this Rule not later
than the date such material is used or published. The provisions
of Paragraphs (a) and (b) of this Rule and 11 NCAC 11D
.0124(e) shall apply, however, to any reprints or reproductions
of all or any part of such material.
Authority G.S. 58-2-40(2).
11 NCAC 11D .0122 PROXIES: FALSE OR
MISLEADING STATEMENTS
No proxy statement, form of proxy, notice of meeting,
information statement, or other communication, written or oral,
subject to these rules, shall contain any statement which at the
time and in the light of the circumstances under which it is
made, is false or misleading with respect to any material fact, or
which omits to state any material fact necessary in order to make
the statements therein not false or misleading or necessary to
correct any statement in any earlier communication with respect
to the same meeting or subject matter which has become false or
misleading.
Authority G.S. 58-2-40(2).
11 NCAC 11D .0123 PROXIES: PROHIBITION OF
CERTAIN SOLICITATIONS
No person making a solicitation which is subject to these rules
shall solicit any undated or postdated proxy or any proxy which
provides that it shall be deemed to be dated as of any date
subsequent to the date on which it is signed by the security
holder.
Authority G.S. 58-2-40(2).
11 NCAC 11D .0124 PROXIES: SPECIAL
PROVISIONS APPLICABLE TO ELECTION CONTES T
(a) Applicability. This Rule shall apply to any solicitation
subject to these rules by any person or group for the purpose of
opposing a solicitation subject to these rules by any other person
or group with respect to the election or removal of directors at
any annual or special meeting of security holders.
(b) Participant or Participant in a Solicitation
(1) For purposes of this Rule the terms
"participant" and "participant in a solicitation"
include:
(A) insurer;
(B) any director of the insurer and any
nominee for whose election as a
director proxies are solicited;
(C) any other person, acting alone or with
one or more other persons,
committees or groups, in organizing,
directing or financing the solicitation.
(2) For the purposes of this Rule the terms
"participant" and "participant in a solicitation"
do not include:
(A) a bank, broker or dealer who, in the
ordinary course of business, lends
money or executes orders for the
purchase or sale of equity security
and who is not otherwise a
participant;
(B) any person or organization retained or
employed by a participant to solicit
security holders or any person who
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759
merely transmits proxy soliciting
material or performs minis terial or
clerical duties;
(C) any person employed in the capacity
of attorney, accountant, or
advertising, public relations or
financial adviser, and whose activities
are limited to the performance of his
duties in the course of such
employment;
(D) any person regularly employed as an
officer or employee of the insurer or
any of its subsidiaries or affiliates
who is not otherwise a participant; or
(E) any officer or director of, or any
person regularly employed by any
other participant, if such officer,
director, or employee is not otherwise
a participant.
(c) Filing of Information Required by 11 NCAC 11D .0140
(1) No solicitation subject to this Rule shall be
made by any person other than the
management of an insurer unless at least five
business days prior thereto, or such shorter
period as the Commissioner may authorize
upon a showing of good cause therefor, there
has been filed, with the Commissioner by or
on behalf of each participant in such
solicitation, a statement in duplicate containing
the information specified by 11 NCAC 11D
.0140 through 11 NCAC 11D .0144 and a
copy of any material proposed to be
distributed to security holders in furtherance of
such solicitation. Where preliminary copies of
any materials are filed, distribution to security
holders should be deferred until the
Commissioner's comments have been received
and complied with.
(2) Within five business days after a solicitation
subject to this Rule is made by the
management of an insurer, or such longer
period as the Commissioner may authorize
upon a showing of good cause therefor, there
shall be filed with the Commissioner by or on
behalf of each participant in such solicitation,
other than the insurer, and by or on behalf of
each management nominee for director, a
statement in duplicate containing the
information specified by 11 NCAC 11D .0140
to 11 NCAC 11D .0144.
(3) If any solicitation on behalf of management or
any other person has been made, or if proxy
material is ready for distribution, prior to a
solicitation subject to this Rule in opposition
thereto, a statement in duplicate containing the
information specified in 11 NCAC 11D .0140
to 11 NCAC 11D .0144 shall be filed with the
Commissioner by or on behalf of each
participant in such prior solicitation, other than
the insurer, as soon as reasonably practicable
after the commencement of the solicitation in
opposition thereto.
(4) If, subsequent to the filing of the statements
required by Subparagraphs (1), (2) and (3) or
Paragraph (c) of this Rule, additional persons
become partic ipants in a solicitation subject to
this Rule, there shall be filed with the
Commissioner by or on behalf of each such
person, a statement in duplicate containing the
information specified by 11 NCAC 11D .0140
to 11 NCAC 11D .0144 within three business
days after such person becomes a participant,
or such longer period as the Department may
authorize upon a showing of good cause
therefor.
(5) If any material change occurs in the facts
reported in any statement filed by or on behalf
of any participant, an appropriate amendment
to such statement shall be filed promptly with
the Commissioner. Each statement and
amendment thereto filed pursuant to this
Paragraph shall be part of the public files of
the Commissioner.
(d) Solicitations Prior to Furnishing Required Written Proxy
Statement. Notwithstanding the provisions of 11 NCAC 11D
.0119 (a), a solicitation subject to this Section may be made prior
to furnishing security holders a written proxy statement
containing the information specified in 11 NCAC 11D .0125 to
11 NCAC 11D .0139 with respect to such solicitation, provided
that:
(1) The statements required by Paragraph (c) of
this Rule are filed by or on behalf of each
participant in such solicitation.
(2) No form of proxy is furnished to security
holders prior to the time the written proxy
statement required by 11 NCAC 11D .0119(a)
is furnished to such persons: Provided,
however, that this Subparagraph (2) shall not
apply where a proxy statement then meeting
the requirements of 11 NCAC 11D .0125 to 11
NCAC 11D .0139 has been furnished to
security holders.
(3) At least the information specified in
Subparagraphs (2) and (3) of the statements
required by Paragraph (c) of this Rule to be
filed by each participant, or an appropriate
summary thereof, are included in each
communication sent or given to security
holders in connection with the solicitation.
(4) A written proxy statement containing the
information specified in 11 NCAC 11D .0125
to 11 NCAC 11D .0139 with respect to a
solicitation is sent or given security holders at
the earliest practicable date.
(e) Solicitations Prior to Furnishing Required Written Proxy
Statement-Filing Requirements. Two copies of any soliciting
material proposed to be sent or given to security holders prior to
the furnishing of the written proxy statement required by 11
NCAC 11D .0119(a) shall be filed with the Commissioner in
preliminary form at least five business days prior to the date
definitive copies of such material are first sent or given to such
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18:10 NORTH CAROLINA REGISTER November 17, 2003
760
persons, or shorter period as the Commissioner may authorize
upon a showing of good cause therefor.
(f) Application of this Section to Report. Notwithstanding the
provisions of Paragraphs (b) and (c) in 11 NCAC 11D .0119,
two copies of any portion of the report referred to in Paragraph
(b) of 11 NCAC 11D .0119 which comments upon or refers to
any solicitation subject to this Rule, or to any participant in such
solicitation, other than the solicitation by the management, shall
be filed with the Commissioner as proxy material subject to
these rules. Such portion of the report shall be filed with the
Commissioner in preliminary form at least five business days
prior to the date copies of the report are first sent or given to
security holders.
Authority G.S. 58-2-40(2).
11 NCAC 11D .0125 PROXY INFORMATION
REQUIRED: REVOCABILITY OF PROXY
Every proxy statement must state whether or not the person
giving the proxy has the power to revoke it. If the right of
revocation before the proxy is exercised is limited or is subject
to compliance with any formal procedure, the statement must
briefly describe such limitation or procedure.
Authority G.S. 58-2-40(2).
11 NCAC 11D .0126 PROXY INFORMATION
REQUIRED: DISSENTERS' RIGHT OF APPRAISAL
Every proxy statement must outline briefly the rights of
appraisal or similar rights of dissenting security holders with
respect to any matter to be acted upon and indicate any statutory
procedure required to be followed by such security holders in
order to perfect their rights. Where such rights may be exercised
only within a limited time after the date of the adoption of a
proposal, the filing of a charter amendment, or other similar act,
the statement must state whether the person solicited will be
notified of such date.
Authority G.S. 58-2-40(2).
11 NCAC 11D .0127 PROXY INFORMATION
REQUIRED: SUBJECT TO 11 NCAC 11D .0124
Every proxy statement must:
(1) if the solicitation is made by the management
of the insurer, so state; Give the name of any
director of the insurer who has informed the
management in writing that he intends to
oppose any action intended to be taken by the
management and indicate the action which he
intends to oppose;
(2) if the solicitation is made otherwise than by
the management of the insurer, state the names
and addresses of the persons by whom and on
whose behalf it is made and the names and
addresses of the persons by whom the cost of
solicitation has been or will be borne, directly
or indirectly;
(3) if the solicitation is to be made by specially
engaged employees or paid solicitors, state the
material features of any contract or
arrangement for such solicitation and identify
the parties and the cost or anticipated cost
thereof.
Authority G.S. 58-2-40(2).
11 NCAC 11D .0128 PROXY INFO REQUIRED:
INTEREST IN MATTERS TO BE ACTED UPON
Every proxy statement must describe briefly any substantial
interest, direct or indirect, by security holders or otherwise, of
any director, nominee for election for director, officer and, if the
solicitation is made otherwise than on behalf of management,
each person on whose behalf the solicitation is made, in any
matter to be acted upon other than election to office.
Authority G.S. 58-2-40(2).
11 NCAC 11D .0129 PROXY INFORMATION
REQUIRED: VOTING SECURITIES
Every proxy statement must:
(1) state, as to each class of voting equity security
of the insurer entitled to be voted at the
meeting, the number of shares outstanding and
the number of votes to which each class is
entitled;
(2) give the date as of which the record list of
security holders entitled to vote at the meeting
will be determined. If the right to vote is not
limited to security holders of record on that
date, indicate the conditions under which other
security holders may be entitled to vote;
(3) if action is to be taken with respect to the
election of directors and if the persons
solicited have cumulative voting rights, make
a statement that they have such rights and state
briefly and conditions precedent to the
exercise thereof.
Authority G.S. 58-2-40(2).
11 NCAC 11D .0130 PROXY INFORMATION
REQUIRED: NOMINEE AND DIRECTORS
Every proxy statement must, if action is to be taken with respect
to the election of directors, furnish the following information, in
tabular form to the extent practicable with respect to each person
nominated for election as a director and each other person whose
term of office as a director will continue after the meeting:
(1) name each such person, state when his term of
office or the term of office for which he is a
nominee will expire, and all other positions
and offices with the insurer presently held by
him, and indicate which persons are nominees
for election as directors at the meeting;
(2) state his present principal occupation or
employment and give the name and principal
business of any corporation or other
organization in which such employment is
carried on; furnish similar information as to all
of his principal occupations or employments
during the last five years, unless he is now a
director and was elected to his present term of
office by a vote of security holders at a
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761
meeting for which proxies were solicited under
this Regulation;
(3) if he is or has previously been a director of the
insurer, state the period or periods during
which he has served as such;
(4) state, as of the most recent practicable date, the
approximate amount of each class of stock of
the insurer or any of its parents, subsidiaries or
affiliates other than directors qualifying shares,
beneficially owned directly or indirectly by
him; if he is not the beneficial owner of any
such equity securities make a statement to that
effect.
Authority G.S. 58-2-40(2).
11 NCAC 11D .0131 PROXY INFORMATION
REQUIRED: TRANSACTIONS WITH MANAGEMENT
Every proxy statement must furnish the information reported or
required in Item 1 of Schedule SIS under the heading
"Information Regarding Management and Directors" if action is
to be taken with respect to:
(1) the election of directors;
(2) any remuneration plan, contract or
arrangement in which any director, nominee
for election as a director, or officer of the
insurer will participate;
(3) any person or retirement plan in which any
such person will participate; or
(4) the granting extension to any such person of
any options, warrants or rights issued to
security holders, as such, on a pro rata basis.
If the solicitation is made on behalf of persons other than the
management, information shall be furnished only as to Item 1A
of the aforesaid heading of Schedule SIS.
Authority G.S. 58-2-40(2).
11 NCAC 11D .0132 PROXY INFO REQUIRED:
BONUS: PROFIT SHARING: REMUNERATION
Every proxy statement must, if action is to be taken with respect
to any bonus, profit sharing, or other remuneration plan, of the
insurer, furnish the following information:
(1) A brief description of the material features of
the plan, each class of persons who will
participate therein, the approximate number of
persons in each such class, and the basis of
such participation;
(2) The amount which would have been
distributable under the plan during the last
year to:
(a) each person named in 11 NCAC 11D
.0131;
(b) directors and officers as a group; and
(c) to all other employees as a group, if
the plan had been in effect.
(3) If the plan to be acted upon may be amended
(other than by a vote of security holders) in a
manner which would materially increase the
cost thereof to the insurer or materially alter
the allocation of the benefits as between the
groups specified in Paragraph (2) of this Rule,
the nature of such amendments should be
specified.
Authority G.S. 58-2-40(2).
11 NCAC 11D .0133 PROXY INFORMATION
REQUIRED: PENSION AND RETIREMENT PLANS
Every proxy statement must, if action is to be taken with respect
to any pension or retirement plan of the insurer, furnish the
following information:
(1) A brief description of the material features of
the plan, each class of persons who will
participate therein, the approximate number of
persons in each such class, and the basis of
such participation;
(2) State:
(a) the approximate total amount
necessary to fund the plan with
respect to past services, the period
over which such amount is to be paid,
and the estimated annual payments
necessary to pay the total amount
over such period;
(b) the estimated annual payment to be
made with respect to current services;
and
(c) the amount of such annual payments
to be made for the benefit of:
(i) each person named in 11
NCAC 11D .0131,
(ii) directors and officers as a
group, and
(iii) employees as a group.
(3) If the plan to be acted upon may be amended
(other than by a vote of security holders) in a
manner which would materially increase the
cost thereof to the insurer or materially alter
the allocation of the benefits as between the
groups specified in Subparagraph (2)(c) of this
Rule, the nature of such amendment should be
specified.
Authority G.S. 58-2-40(2).
11 NCAC 11D .0134 PROXY INFORMATION
REQUIRED: OPTIONS: WARRANTS OR RIGHTS
Every proxy statement must, if action is to be taken with respect
to the granting or extension of any options, warrants or rights
(all referred to herein as "warrant") to purchase stock of the
insurer or any subsidiary or affiliate, other than warrants issued
to all security holders on a pro rata basis, furnish the following
information:
(1) the title and amount of equity security called
for or to be called for, the prices, expiration
dates and other material conditions upon
which the warrants may be exercised, the
consideration received or to be received by the
insurer, subsidiary or affiliate for the granting
or extension of the warrants and the market
value of the equity security called for or to be
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762
called for by the warrants, as of the latest
practicable date;
(2) if known, state separately the amount of equity
security called for or to be called for by
warrants received or to be received by the
following persons, naming each such person:
(a) named in 11 NCAC 11D .0131, and
(b) who will be entitled to acquire five
percent or more of the equity security
called for or to be called for by such
warrants;
(3) if known, state also the total amount of equity
security called for or to be called for by such
warrants, received or to be received by all
directors and officers of the company as a
group and all employees, without naming
them.
Authority G.S. 58-2-40(2).
11 NCAC 11D .0135 PROXY INFO REQUIRED:
AUTHORIZATION OR ISSUANCE OF STOCK
Every proxy statement must:
(1) If action is to be taken with respect to the
authorization of issuance of any equity
security of the insurer, furnish the title, amount
and description of the equity security to be
authorized or issued;
(2) If the shares of equity security are other than
additional shares or common equity security of
a class outstanding, furnish a brief summary of
the following, if applicable: dividend, voting,
liquidation, preemptive and conversion rights,
redemption and sinking fund provisions,
interest rate and date of maturity;
(3) If the shares of equity security to be authorized
or issued are other than additional shares of
common equity security of a class outstanding,
the Commissioner may require financial
statements comparable to those contained in
the annual report.
Authority G.S. 58-2-40(2).
11 NCAC 11D .0136 PROXY INFO REQUIRED:
MERGER: CONSOLIDATION: ACQUISITION
Every proxy statement must:
(1) if action is to be taken with respect to merger,
consolidation, acquisition, or similar matter,
furnish in brief outline the following
information:
(a) the rights of appraisal or similar
rights of dissenters with respect to
any matters to be acted upon; indicate
any procedure required to be followed
by dissenting security holders in
order to perfect such rights;
(b) the material features of the plan or
agreement;
(c) the business done by the company to
be acquired or whose assets are being
acquired;
(d) if available, the high and low sales
prices for each quarterly period
within two years;
(e) the percentage of outstanding shares
which must approve the transaction
before it is consummated.
(2) for each company involved in a merger,
consolidation or acquisition, furnish the
following financial statements:
(a) a comparative balance sheet as of the
close of the last two fiscal years;
(b) a comparative statement of operating
income and expenses for each of the
last two fiscal years and, as a
continuation of each statement, a
statement of earnings per share after
related taxes and cash dividends paid
per share;
(c) a pro forma combined balance sheet
and income and expenses statement
for the last fiscal year giving effect to
the necessary adjustments with
respect to the resulting company.
Authority G.S. 58-2-40(2).
11 NCAC 11D .0137 PROXY INFORMATION
REQUIRED: RESTATEMENT OF ACCOUNTS
Every proxy statement must, if action is to be taken with respect
to the restatement of any asset, capital, or surplus of the insurer,
furnish the following information:
(1) state the nature of the restatement and the date
as of which it is to be effective,
(2) outline briefly the reasons for the restatement
and for the selection of the particular effective
date,
(3) state the name and amount of each account
affected by the restatement and the effect of
the restatement thereon.
Authority G.S. 58-2-40(2).
11 NCAC 11D .0138 PROXY INFO REQUIRED:
MATTERS NOT REQUIRED TO BE SUBMITTED
Every proxy statement must, if action is to be taken with respect
to any matter which is not required to be submitted to a vote of
security holders, state the nature of such matter, the reason for
submitting it to a vote of security holders and what action is
intended to be taken by the management in the event of a
negative vote on the matter by the security holders.
Authority G.S. 58-2-40(2).
11 NCAC 11D .0139 PROXY INFORMATION
REQUIRED: AMENDMENT OF CHARTER: BY-LAWS
Every proxy statement must, if action is to be taken with respect
to any amendment of the insurer's charter, by-laws or other
documents as to which information is not required above, state
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763
briefly the reasons for and general effect of such amendment and
the vote needed for its approval.
Authority G.S. 58-2-40(2).
11 NCAC 11D .0140 PROXY INFORMATION
REQUIRED: IN ELECTION CONTEST
The rules set forth herein and designated as 11 NCAC 11D
.0140 to 11 NCAC 11D .0144 reflect the information required to
be included in proxy statements filed by or on behalf of a
participant (other than the insurer) in a proxy solicitation in an
election contest and as more specifically required by 11 NCAC
11D .0124.
Authority G.S. 58-2-40(2).
11 NCAC 11D .0141 PROXY STATEMENT IN ELEC:
INSURER: IDENTITY AND BACKGROUND
(a) Every proxy statement must contain the name and business
address of the insurer.
(b) Every proxy statement must contain the following
information about the identity and background of the participant:
(1) name and business address;
(2) present principal occupation or employment
and the name, principal business and address
of any corporation or other organization in
which such employment is carried on;
(3) residence address;
(4) information as to all material occupations,
positions, offices or employments during the
last 10 years, giving starting and ending dates
of each and the name, principal business and
address of any business corporation or other
business organization in which each such
occupation, position, office or employment
was carried on;
(5) state whether or not you are or have been a
participant in any other proxy contest
involving this company or other companies
within the past 10 years; if so, identify the
principals, the subject matter and your
relationship to the parties and the outcome;
(6) state whether or not, during the past 10 years,
you have been convicted in a criminal
proceeding (excluding traffic violations or
similar misdemeanors) and, if so, give date,
nature of conviction, name and location of
court, and penalty imposed or other disposition
of the case; A negative answer to this Sub-item
need not be included in the proxy statement or
other proxy soliciting material.
Authority G.S. 58-2-40(2).
11 NCAC 11D .0142 PROXY STATEMENT IN
ELECTION: INTEREST IN EQUITY SECURITY
Every proxy statement must contain the following information:
(1) The amount of each class of equity security of
the insurer which you own beneficially,
directly or indirectly; state the amount of each
class of equity security of the insurer which
you own of record but not beneficially; and
state with respect to the equity security
specified herein, the amount acquired within
the past two years, the dates of acquisition and
the amounts acquired on each date;
(2) If any part of the purchase price or market
value of any of the equity security specified in
Paragraph (1) is represented by funds
borrowed or otherwise obtained for the
purpose of acquiring or holding such equity
security, so state and indicate the amount of
the indebtedness as of the latest practicable
date. If such funds were borrowed or obtained
otherwise than pursuant to a margin account or
bank loan in the regular course of business of a
bank, broker or dealer, briefly describe the
transaction and state the names of the parties;
(3) Whether or not you are a party to any
contracts, arrangements or understandings
with any person with respect to any equity
security of the insurer, including but not
limited to joint ventures, loan or option
arrangements, puts or calls guarantees against
loss or guarantees of profits, division of losses
or profits, or the giving or withholding of
proxies. If so name the persons with whom
such contracts, arrangements, or understanding
exist and give the details thereof;
(4) The amount of equity security of the insurer
owned beneficially, directly or indirectly, by
each of your associates and the name and
address of each such associate;
(5) The amount of each class of equity security of
any parent, subsidiary or affiliate of the insurer
which you own beneficially, directly, or
indirectly.
Authority G.S. 58-2-40(2).
11 NCAC 11D .0143 PROXY STATEMENT IN
ELECTION CONTEST: FURTHER MATTERS
Every proxy statement shall:
(1) describe the time and circumstances under
which you became a participant in the
solicitation and state the nature and extent of
your activities or proposed activities as a
participant;
(2) describe briefly, and where practicable state
the approximate amount of, any material
interest, direct or indirect, of yourself and of
each of your associates in any material
transactions since the beginning of the
company's last fiscal year, or in any material
proposed transactions, to which the company
of any of its subsidiaries or affiliates was or is
to be a party;
(3) state whether or not you or any of your
associates have any arrangement or
understanding with any person:
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764
(a) with respect to any future
employment by the insurer or its
subsidiaries or affiliates, or
(b) with respect to any future transactions
to which the insurer or any of its
subsidiaries or affiliates will or may
be a party.
If so, describe such arrangement or understanding and state the
names of the parties thereto.
Authority G.S. 58-2-40(2).
11 NCAC 11D .0144 PROXY STATEMENT IN
ELECTION CONTEST: SIGNATURE
The statement shall be dated and signed in the following
manner:
I certify that the statements made in this statement are
true, complete, and correct, to the best of my
knowledge and belief. This certification shall be dated
and signed by the participant or authorized
representative.
Authority G.S. 58-2-40(2).
11 NCAC 11D .0145 INSIDER TRADING OF STOCK:
DEFINITIONS
(a) The following definitions contained in this Rule are
applicable to insider trading of equity securities of a domestic
stock insurance company as contained in 11 NCAC 11D .0145
to 11 NCAC 11D .0167.
(b) Insurer. "Insurer" means any domestic stock insurance
company with an equity security subject to the provisions of
G.S. 58-7-145 and not exempt thereunder.
(c) Act. "Act" means G.S. 58-7-145.
(d) Officer. "Officer" means a president, vice president,
treasurer, actuary, secretary, controller and any other person who
performs for the insurer functions corresponding to those
performed by the foregoing officer.
(e) Equity Security. "Equity Security" means any stock or
similar security; or any voting trust certificate or certificate of
deposit for such a security; or any security convertible, with or
without consideration, into such a security, or carrying any
warrant or right to subscribe to or purchase such a security; or
any such warrant or right.
(f) Securities Held of Record. "Securities held of record" shall
mean:
(1) For the purpose of determining whether the
equity securities of an insurer are held of
record by 100 or more persons, securities shall
be deemed to be held of record by each person
who is identified as the owner of such
securities on records of security holders
maintained by or on behalf of the insurer,
subject to the following:
(A) In any case where the records of
security holders have not been
maintained in accordance with
accepted practice, any additional
person who would be identified as
such an owner on such records if they
had been maintained in accordance
with accepted practice shall be
included as a holder of record.
(B) Securities identified as held of record
by a corporation, a partnership, a trust
whether or not the trustees are named,
or other organization shall be
included as so held by one person.
(C) Securities identified as held of record
by one or more persons as trustees,
executors, guardians, custodians or in
other fiduciary capacities with respect
to a single trust, estate or account
shall be included as held of record by
one person.
(D) Securities held by two or more
persons as co-owners shall be
included as held by one person.
(E) Each outstanding unregistered or
bearer certificate shall be included as
held of record by a separate person,
except to the extent that the insurer
can establish that, if such securities
were registered, they would be held
of record, under the provisions of this
Rule, by a lesser number of persons.
(F) Securities registered in substantially
similar names where the insurer has
reason to believe because of the
address or other indications that such
names represent the same person,
may be included as held of record by
one person.
(2) Notwithstanding the provisions of Paragraph
(f) (1) of this Rule:
(A) Securities held, to the knowledge of
the insurer, subject to a voting trust,
deposit agreement or similar
arrangement shall be included as held
of record by the record holders of the
voting trust certificates, certificates of
deposit, receipts or similar evidences
of interest in such securities; provided
however, that the insurer may rely in
good faith on such information as is
received in response to its request
from a nonaffiliated insurer of the
certificates or evidences of interest.
(B) If the insurer knows or have reason to
know that the form of holding
securities of record is used primarily
to circumvent the provisions of the
act, the beneficial owners of such
securities shall be deemed to be the
record owners thereof.
(g) Class. "Class" means all securities of an insurer which are
of substantially similar character and the holders of which enjoy
substantially similar rights and privileges.
Authority G.S. 58-2-40; 58-7-145.
11 NCAC 11D .0146 WHO MUST FILE UNDER
PROPOSED RULES
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765
INSIDER TRADING OF STOCK
Every person who is directly or indirectly the beneficial owner
of more than 10 percent of any class of any equity security of a
domestic stock insurance company or who is a director or an
officer of such company, shall file in the office of the
Commissioner within 10 days after he becomes such beneficial
owner, director or officer, a statement in such form as prescribed
by the Commissioner.
Authority G.S. 58-2-40; 58-7-145.
11 NCAC 11D .0147 WHAT MUST BE FILED UNDER
INSIDER TRADING OF STOCK
(a) The initial statements of beneficial ownership of equity
securities required by 11 NCAC 11D .0147 shall be filed on a
form as prescribed by the Commissioner. Statements of changes
in such beneficial ownership as required by G.S. 58-7-145 shall
be filed on a form as prescribed by the Commissioner. All such
statements shall be prepared and filed in accordance with the
requirements of the applicable form.
(b) Any director or officer who is required to file a statement
with respect to any change in his beneficial ownership of equity
securities which occurs within six months after he became a
director or officer of the issuer of such securities, or within six
months after equity securities of such issuer first became subject
to the provisions of the act, shall include in the first such
statement the information called for with respect to all changes
in his beneficial ownership of equity securities of such issuer
which occurred within six months prior to the date of the
changes which requires the filing of such statement.
(c) Any person who has ceased to be a director or officer of an
issuer which has equity securities subject to the provisions of the
act, shall file a statement with respect to any change in his
beneficial ownership of equity securities of such issuer which
shall occur on or after the date on which he ceased to be such
director or officer, or the date on which the issuer ceased to have
any equity securities subject to the provisions of the act, as the
case may be, if such change shall occur within six months after
any change in his beneficial ownership of such securities prior to
such date. The statement shall be filed within 10 days after the
end of the month in which the reported change in beneficial
ownership occurs.
Authority G.S. 58-2-40; 58-7-145.
11 NCAC 11D .0148 DETERMINING BENEFICIAL
OWNERSHIP: INSIDER TRADING OF STOCK
(a) In determining, for the purpose of the act, whether a person
is the beneficial owner, directly or indirectly, of more than 10
percent of any class of any equity security, such class shall be
deemed to consist of the total amount of such class outstanding,
exclusive of any securities of such class held by or for the
account of the insurer or a subsidiary of the insurer; except that
for the purpose of determining percentage ownership of voting
trust certificates or certificates of deposit for equity securities,
the class of voting trust certificates or certificates of deposit shall
be deemed to consist of the amount of voting trust certificates or
certificates of deposit issuable with respect to the total amount of
outstanding equity securities of the class which may be
deposited under the voting trust agreement or deposit agreement
in question, whether or not all of such outstanding securities
have been so deposited. For the purpose of this Rule a person
acting in good faith may rely on the information contained in the
latest convention form statement filed with the Commissioner
with respect to the amount of securities of a class outstanding or
in the case of voting trust certificates or certificates of deposit
the amount thereof issuable.
(b) In determin ing for the purpose of the act whether a person is
the beneficial owner, directly or indirectly, of more than 10
percent of any class of equity securities, such person shall be
deemed to be the beneficial owner of securities of such class
which such person has the right to acquire through the exercise
of presently exercisable options, warrants or rights or through
the conversion of presently convertible securities. The securities
subject to such options, warrants, rights or conversion privileges
held by a person shall be deemed to be outstanding for the
purpose of computing, in accordance with the first paragraph of
this Rule, the percentage of outstanding securities of the class
owned by such person but shall not be deemed outstanding for
the purpose of computing the percentage of the class owned by
any other person. The first paragraph of this Rule shall not be
construed to relieve any person of any duty to comply with the
act with respect to any equity securities consisting of options,
warrants, rights or convertible securities which are otherwise
subject as a class to the act.
Authority G.S. 58-2-40; 58-7-145.
11 NCAC 11D .0149 DISCLAIMER OF BENEFICIAL
OWNERSHIP: INSIDER TRADING
Any person filing a statement may expressly declare therein that
the filing of such statement shall not be construed as an
admission that such person is, for the purpose of the act, the
beneficial owner of any equity securities covered by the
statement.
Authority G.S. 58-2-40; 58-7-145.
11 NCAC 11D .0150 EXEMPTIONS FROM
SUBSECTIONS (A) AND (B) OF THE ACT
(a) During the period of 12 months following their appointment
and qualification, securities held by the following persons shall
be exempt from subsections (a) and (b) of the act:
(1) executors or administrators of the estate of a
decedent;
(2) guardians or committees for an incompetent;
and
(3) receivers, trustees in bankruptcy, assigners for
the benefit of creditors, conservators,
liquidating agents, and other similar persons
duly authorized by law to administer the estate
or assets of other persons.
(b) After the 12 month period following their appointment or
qualification the foregoing persons shall be required to file
reports with respect to the securities held by the estates which
they administer under subsection (a) of the act and shall be liable
for profits realized from trading in such securities pursuant to
subsection (b) of the act only when the estate being administered
is a beneficial owner of more than 10 percent of any class of
equity security of an insurer subject to the act.
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766
(c) Securities reacquired by or for the account of an insurer and
held by it for its account shall be exempt from subsections (a)
and (b) during the time they are held by the insurer.
Authority G.S. 58-2-40; 58-7-145.
11 NCAC 11D .0151 SECURITIES BOUGHT OR
SOLD BY ODD-LOT DEALERS: EXEMPTION
Securities purchased or sold by an odd-lot dealer:
(1) in odd lots so far as reasonably necessary to
carry on odd-lot transactions or
(2) in round lots to offset odd-lot transactions
previously or simultaneously executed or
reasonably anticipated in the usual course of
business, shall be exempt from the provisions
of the act with respect to participation by such
odd-lot dealer in such transactions.
Authority G.S. 58-2-40; 58-7-145.
11 NCAC 11D .0152 CERTAIN TRANSACTIONS
SUBJECT TO SUBSECTIO N (A) OF THE ACT
The acquisition or disposition of any transferable option, put,
call, spread or straddle shall be deemed such a change in the
beneficial ownership of the security to which such privilege
relates as to require the filing of a statement reflecting the
acquisition or disposition of such privilege. Nothing in this
Rule, however, shall exempt any person from filing the
statements required upon the exercise of such option, put, call,
spread or straddle.
Authority G.S. 58-2-40; 58-7-145.
11 NCAC 11D .0153 OWNERSHIP OF SECURITIES
HELD IN TRUST: INSIDER TRADING
(a) Beneficial ownership of a security for the purposes of this
Rule shall include:
(1) the ownership of securities as a trustee where
either the trustee or members of his immediate
family have a vested interest in the income or
corpus of the trust,
(2) the ownership of a vested beneficial interest in
a trust, and
(3) the ownership of securities as a settlor of a
trust in which the settlor has the power to
revoke the trust without obtaining the consent
of all the beneficiaries.
(b) Except as provided in the next Paragraph (c) of this Rule,
beneficial ownership of securities solely as a settlor or
beneficiary of a trust shall be exempt from the provisions of
Subsection (a) of G.S. 58-7-145 where less than 20 percent in
market value of the securities having a readily ascertainable
market value held by such trust, determined as of the end of the
preceding fiscal year of the trust, consists of equity securities
with respect to which reports would otherwise be required.
Exemption is likewise accorded from Subsection (a) of G.S.
58-7-145 with respect to any obligation which would otherwise
be imposed solely by reason of ownership as settlor or
beneficiary of securities held in trust, where the ownership,
acquisition, or disposition of such securities by the trust is made
without prior approval by the settlor or beneficiary. No
exemption pursuant to this Subsection shall, however, be
acquired or lost solely as a result of changes in the value of the
trust assets during any fiscal year or during any time when there
is no transaction by the trust in the securities otherwise subject to
the reporting requirements of Subsection (a) of G.S. 58-7-145.
(c) In the event that 10 percent of any class of any equity
security of an insurer is held in trust, that trust and the trustees
thereof as such shall be deemed a person required to file the
reports specified in subsection (a) of the act.
(d) Not more than one report need to filed to report any holdings
or with respect to any transaction in securities held by a trust,
regardless of the number of officers, directors or 10 percent
stockholders who are either trustees, settlors, or beneficiaries of
a trust, provided that the report filed shall disclose the names of
all trustees, settlors, and beneficiaries who are officers, directors
or 10 percent stockholders. A person having an interest only as
a beneficiary of a trust shall not be required to file any such
report so long as he relies in good faith upon an understanding
that the trustee of such trust will file whatever reports might
otherwise be required of such beneficiary. As used in this Rule
the "immediate family" of a trustee means:
(1) a son or daughter of the trustee, or a
descendant of either;
(2) a stepson or stepdaughter of the trustee;
(3) the father or mother of the trustee, or an
ancestor of either;
(4) a stepfather or stepmother of the trustee; or
(5) a spouse of the trustee.
For the purpose of determining whether any of the foregoing
relations exists, a legally adopted child of a person shall be
considered a child of such person by blood.
(e) In determining, for the purposes of subsection (a) of the act,
whether a person is the beneficial owner, directly or indirectly,
of more than 10 percent of any class of any equity security, the
interest of such person in the remainder of a trust shall be
excluded from the computation. No report shall be required by
any person, whether or not otherwise subject to the requirement
of filing reports under subsection (a) with respect to his indirect
interest in portfolio securities held by:
(1) a pension or retirement plan holding securities
of an insurer whose employees generally are
the beneficiary of the plan,
(2) a business trust with over 25 beneficiaries.
Nothing in this Rule shall be deemed to impose any duties or
liabilities with respect to reporting any transaction or holding
prior to its effective date.
Authority G.S. 58-2-40; 58-7-145.
11 NCAC 11D .0154 EXEMPTION FOR SMALL
TRANSACTIONS: INSIDER TRADING OF STOCK
(a) Any acquisition of securities shall be exempt from
subsection (a) of the act where:
(1) The person effecting the acquisition does not
within six months thereafter effect any
disposition, other than by way of gift of
securities of the same class; and
(2) The person effecting such acquisition does not
participate in acquisitions or in dispositions of
securities of the same class having a total
market value in excess of three thousand
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767
dollars ($3,000) for any six month period
during which the acquisition occurs.
(b) Any acquisition or disposition of securities by way of gift,
where the total amount of such gifts does not exceed three
thousand dollars ($3,000) in market value for any six month
period, shall be exempt from subsection (a) of the act and may
be excluded from the computations prescribed in Paragraph (a)
(2) of this Rule.
(c) Any person exempted by Paragraph (a) or (b) of this Rule
shall include in the first report filed by him after a transaction
within the exemption a statement showing his acquisitions and
dispositions for each six month period or portion thereof which
has elapsed since his last filing.
Authority G.S. 58-2-40; 58-7-145.
11 NCAC 11D .0155 EXEMPTIONS IN GENERAL:
INSIDER TRADING OF STOCK
If an exemption is granted from subsection (b) of the act then
such an exemption need not be reported under subsection (a) of
the act. Any transaction which has been or shall be exempted
from the requirements of subsection (a) of the act shall, insofar
as it is otherwise subject to the provisions of subsection (b), be
likewise exempted from subsection (b) of the act.
Authority G.S. 58-2-40; 58-7-145.
11 NCAC 11D .0156 EXEMPTION EFFECTED IN
CONNECTION WITH A DISTRIBUTION
(a) Any transaction of purchase and sale, or sale and purchase,
of a security which is effected in connection with the distribution
of a substantial block of securities shall be exempt from the
provisions of subsection (b) of the act, to the extent specified in
this section as not comprehended within the purpose of said
subsection of the act, upon the following conditions:
(1) The person effecting the transaction is engaged
in the business of distributing securities and is
participating in good faith, in the ordinary
course of such business, in the distribution of
such block of securities;
(2) The security involved in the transaction is:
(A) a part of such block of securities and
is acquired by the person effecting the
transaction, with a view to the
distribution thereof, from the insurer
or other person on whose behalf such
securities are being distributed or
from a person who is participating in
good faith in the distribution of such
block of securities or
(B) a security purchase in good faith by
or for the account of the person
effecting the transaction for the
purpose of stabilizing the market
price of securities of the class being
distributed or to cover an
over-allotment or other short position
created in connection with such
distribution; and
(3) Other persons not within the purview of
subsection (b) of the act are participating in the
distribution of such block of securities on
terms at least as favorable as those on which
such person is participating and to an extent at
least equal to the aggregate participation of all
persons exempted from the provisions of
subsection (b) of the act by this Rule.
However, the performance of the functions of
manager of a distributing group and the receipt
of a bona fide payment for performing such
functions shall not preclude an exemption
which would otherwise be available under this
Rule.
(b) The exemption of a transaction pursuant to this Rule with
respect to the participation therein of one party thereto shall not
render such transaction exempt with respect to participation of
any other party therein unless such other party also meets the
conditions of this Rule.
Authority G.S. 58-2-40; 58-7-145.
11 NCAC 11D .0157 EXEMPTION STOCK OPTIONS:
STOCK BONUS OR SIMILAR PLANS
Any acquisition of shares of stock (other than stock acquired
upon the exercise of an option, warrant or right) pursuant to a
stock bonus profit sharing, retirement, incentive, thrift, savings
or similar plan, or any acquisition of a qualified or a restricted
stock option pursuant to a qualified or a restricted stock option
plan, or a stock option pursuant to an employee stock purchase
plan, by a director or officer of an insurer issuing such stock or
stock option shall be exempt from the operation of subsection
(b) of the act if the plan meets the following conditions:
(1) The plan has been approved, directly or
indirectly:
(a) by the affirmative votes of the holders
of a majority of the securities of such
insurer present, or represented, and
entitled to vote at a meeting duly held
in accordance with the applicable
laws of the State of North Carolina;
or
(b) the written consent of the holders of a
majority of the securities of such
insurer entitled to vote: provided,
however, that if such vote of written
consent was not solicited
substantially in accordance with the
proxy rules and regulations
prescribed by the National
Association of Insurance
Commissioners, if any, in effect at the
time of such vote or written consent,
the insurer shall furnish in writing to
the holders of record of the securities
entitled to vote for the plan
substantially the same information
concerning the plan which would be
required by any such rules and
regulations so prescribed and in effect
at the time such information is
furnished, if proxies to be voted with
respect to the approval or disapproval
PROPOSED RULES
18:10 NORTH CAROLINA REGISTER November 17, 2003
768
of the plan were then being solicited,
on or prior to the date of the first
annual meeting of security holders
held subsequent to the later of:
(i) the date the act first applies
to such insurer, or
(ii) the acquisition of such
equity security for which
exemption is claimed.
Such written information may be furnished by mail to the last
known address of the security holders of record within 30 days
prior to the date of mailing. Four copies of such written
information shall be filed with, or mailed for filing to, the
Commissioner not later than the date on which it is first sent or
given to security holders of the insurer. For the purposes of this
Paragraph the term "insurer" includes a predecessor corporation
if the plan or obligations to participate thereunder were assumed
by the insurer in connection with the succession.
(2) If the selection of any director or officer of the
insurer to whom stock may be allocated or to
whom qualified, restricted or employee stock
purchase plan stock options may be granted
pursuant to the plan, or the determination of
the number or maximum number of shares of
stock which may be allocated to any such
director or officer or which may be covered by
qualified, restricted or employee stock
purchase plan stock options granted to any
such director or officer, is subject to the
discretion of any person, then such discretion
shall be exercised only as follows:
(a) With respect to the participation of
directors:
(i) by the board of directors of
the insurer, a majority of
which board and majority of
the directors acting in the
matter are disinterested
persons;
(ii) by, or only in accordance
with the recommendations
of, a committee of three or
more persons having full
authority to act in the matter,
all of the members of which
committee are disinterested
persons; or
(iii) otherwise in accordance with
the plan, if the plan:
(A) specifies the
number or
maximum number
of shares of stock
which directors
may acquire or
which may be
subject to qualified,
restricted or
employee stock
purchas e plan stock
options granted to
directors and the
terms upon which,
and the times at
which, or the
periods within
which, such stock
may be acquired or
such options may
be acquired and
exercised; or
(B) sets forth, by
formula or
otherwise, effective
and determinable
limitations with
respect to the
foregoing based
upon earnings of
the insurer,
dividends paid,
compensation
received by
participants, option
prices, market value
of shares,
outstanding shares
or percentages
thereof outstanding
from time to time
or similar factors.
(b) With respect to the participation of
officers who are not directors:
(i) by the board of directors of
the insurer or a committee of
three or more directors; or
(ii) by, or only in accordance
with the recommendations
of, a committee of three or
more persons having full
authority to act in the matter,
all of the members of which
committee are disinterested
persons.
For the purpose of this Paragraph, a director or committee
member shall be deemed to be a disinterested person only if such
person is not at the time such discretion is exercised eligible and
has not at any time within one year prior thereto been eligible for
selection as a person to whom stock may be allocated or to
whom qualified, restricted or employee stock purchase plan
stock options may be granted pursuant to the plan or any other
plan of the insurer or any of its affiliates entitling the participants
therein to acquire stock or qualified, restricted or employee stock
purchase plan stock options of the insurer or any of its affiliates.
(c) The provisions of this Paragraph shall
not apply with respect to any option
granted, or other equity security
acquired, prior to the date that
subsections (a), (b), and (c) of the act
first become applicable with respect
to any class of equity securities of
any insurer.
PROPOSED RULES
18:10 NORTH CAROLINA REGISTER November 17, 2003
769
(3) As to each participant or as to all participants
the plan effectively limits the aggregate dollar
amount or the aggregate number of shares of
stock which may be allocated, or which may
be subject to qualified, restricted, or employee
stock purchase plan stock options
granted,pursuant to the plan. The limitations
may be established on an annual basis, or for
the duration of the plan, whether or not the
plan has a fixed termination date; and may be
determined either by fixed or maximum dollar
amounts or fixed or maximum numbers of
shares or by formulas based upon earnings of
the insurer, dividends paid, compensation
received by participants, option prices, market
value of shares, outstanding shares or
percentages thereof outstanding from time to
time, or similar factors which will result in an
effective and determinable limitation. Such
limitations may be subject to any provisions
for adjustment of the plan or of stock allocable
or options outstanding thereunder to prevent
dilution or enlargement of rights.
(4) Unless the context otherwise requires, all
terms used in this Rule shall have the same
meaning as in the act and in these rules. In
addition, the following definitions apply:
(a) The