The SEC Division of Corporation Finance determined that, for the purposes of applying Exchange Act Rules related to "Collar Contracts," an insider will be deemed to own the Corporation Shares underlying the operating partnership units.
Currently, the "insider" of a U.S. public company is not permitted to take a short position in the common stock issued by an insider's employing company. The SEC has generally treated this prohibition broadly, prohibiting even short derivative positions that are economically offset by a long derivative on the company's common stock. The SEC's no-action letter permits corporate insiders to enter into short option positions in their employer's common stock where those short options are economically offset by the insiders' long position in a partnership unit convertible into the employer's common stock.
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