§ 21.37. Conversion of equity securities.
(a) Acquisition and disposition. For the purpose of this section, an equity security may not be deemed to be acquired or disposed of upon conversion of an equity security if the terms of the equity security converted require the payment or entail the receipt, in connection with such conversion, of cash or other property (other than equity securities involved in the conversion) equal in value at the time of conversion to more than 15% of the value of the equity security issued upon conversion.
(b) Exemption. Any acquisition or disposition of an equity security involved in the conversion of an equity security which by its terms or pursuant to the terms of the insurer’s charter or other governing instruments, is convertible immediately or after a stated period of time into another equity security of the same insurer, shall be exempt from the operation of section 302.1(2) of the act. This exemption, however, shall not apply to the extent that there shall have been either of the following:
(1) A purchase of an equity of the class convertible (including any acquisition of or change in a conversion privilege) and a sale of any equity security of the class issuable upon conversion.
(2) A sale of any equity security of the class convertible and any purchase of any equity security issuable upon conversion (otherwise than in a transaction involved in the conversion or in a transaction exempted by any other provision of the regulations under section 302.1(2) of the act within a period of less than 6 months including the date of conversion.
(c) Convertible securities. For the purpose of this section, an equity security shall be deemed convertible if it is convertible at the option of the holder or of some other person or by operation of the terms of the security or the governing instruments. The period of 6 months in subsection (a) shall include the date of conversion.
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