From: Scatena, Pat [pat.scatena@intel.com]
Sent: Monday, December 16, 2002 8:36 PM
To: rule-comments@sec.gov
Subject: Comments re File No. S7-44-02; Insider Trades During Pension
Fund Blackout Periods

December 16, 2002

Jonathan G. Katz
Secretary, U.S. Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C.  20549-0609
rule-comments@sec.gov

Re: File No. S7-44-02; Insider Trades During Pension Fund Blackout Periods

Dear Mr. Katz:

Thank you for the opportunity to comment on proposed rules published in 
Exchange Act Release No. 34-46778. On behalf of Intel Corporation, we offer 
the following comments with regard to the rule proposals in that Release.

We are sympathetic to the underlying problem being addressed by Section 306(a)
of the Sarbanes-Oxley Act of 2002 and the Commission's release. However, in 
crafting its final rules, we request the Commission take into account that 
the vast majority of routine, administrative blackouts will occur quietly, 
without the simultaneous occurrence of any dramatic events adversely affecting 
the company's operations. Consequently, we believe it is not appropriate to 
adopt overly draconian measures to address the small minority of situations 
where an unforeseen event, such as a sudden stock price decline, does overlap 
with the administrative blackout.

Consistency with Department of Labor Rules

In some cases, the Commission has requested comments on whether its rules 
should be made more restrictive than the Department of Labor's proposed rules, 
for example possibly defining the term blackout period to be shorter than the 
three consecutive business days specified in the statute and the DOL's interim 
final rule. Without responding to the specifics of each of these comment requests, 
we would encourage the Commission to remain consistent with the DOL rules unless 
the Commission perceives a compelling need, tied directly to the purposes 
underlying the statute, that warrants a deviation. Imposing different rule 
requirements will be confusing to issuers, and create additional compliance 
risks and burdens.

Irrebuttable Presumption as to Shares Sold

Section 306(a) directs the Commission to adopt rules limiting the sale of 
securities acquired in connection with service or employment as a director or 
executive officer during administrative blackouts. The irrebuttable service or 
employment presumption proposed by the Commission has the effect of an absolute 
bar on sales of any shares during an administrative blackout, regardless of how 
they are acquired. Under the proposal, if an executive officer holds 2500 shares 
acquired through employment as an executive officer and 500 shares acquired through 
other means, any attempt to sell the 500 shares during the blackout would be 
presumed to be a sale of part of the block of 2500 shares and therefore subject 
to profit recovery. This approach exceeds the scope of the statutory language, 
and we believe it goes beyond what is necessary to remedy the perceived problems 
addressed by Section 306. Therefore, we believe the Commission should address its 
concern about the perceived difficulty of tracing which shares were sold another 
way. We do not see the difficulty, since directors and executive officers are 
already required to trace shares purchased and sold to establish cost basis and 
gain/loss for tax purposes. We would suggest that the Commission simply incorporate 
into the Form 4 filing rules a requirement to disclose the source of acquiring the 
shares when the shares are being sold during an administrative blackout.

Provisions Regarding Exempted Transactions

Proposed rule 101(c)(2) provides that purchases or sales of equity securities 
pursuant to a Rule 10b5-1(c) trading plan will be exempt from the blackout 
trading restriction provided that "for purposes of this section, awareness of 
an impending blackout period ... will constitute awareness of material, non-public 
information." The Commission's drafting approach raises unnecessary ambiguity 
about whether knowledge of an upcoming administrative blackout is material, 
non-public information that would preclude purchase or sale transactions by 
anyone who has knowledge of the blackout until the blackout is announced. We 
would question a conclusion that knowledge of upcoming administrative retirement 
plan blackouts is per se material; if the Commission is in fact saying this is 
the case, the Commission should be much more clear about it so that the many 
people within the company and external service provider firms who know in advance 
about administrative blackouts will be able to plan accordingly. However, we are 
assuming the Commission did not have that intention and we therefore request the 
Commission modify this provision to state simply that the trading plan has to have 
been entered into prior to the executive officer or director having knowledge of 
the upcoming blackout.

We would suggest the Commission consider some additions to the list of exempted 
transactions. First, the rule should permit companies to grant stock options to 
executive officers and directors or enter into other securities-based compensation 
arrangements during administrative blackouts, if such grants or arrangements 
were part of regularly scheduled activities that happen to coincide with the 
administrative blackout. For example, an administrative blackout could overlap 
with annual options granted to directors to coincide with the annual meeting 
date or options granted to executive officers along with other employees in 
connection with annual performance reviews. These transactions do not trigger 
the concerns being addressed by the statute. In adopting Section 306(a), Congress 
intended to level the playing field between executive officers and rank and file 
employees with respect to transactions in company securities, not treat directors 
and executive officers more harshly than other employees. By imposing an absolute 
ban on grants of equity-based compensation arrangements, even those made pursuant 
to broad-based plans in which all employees participate, the Commission has moved 
beyond the original intent of Section 306(a).

We further suggest that grants of equity securities in connection with hiring 
decisions be excluded. Companies generally do not have the same flexibility with 
respect to the timing of grants in connection with hiring decisions as they do 
with other grants, which can be structured to avoid administrative blackout periods. 
Equity-based compensation arrangements are often viewed as critical components of 
compensation packages to senior management employees. As a result, the inability 
to make immediate grants of stock options or other equity-based awards may adversely 
impact the company's ability to attract the best candidates for a given position. 
We believe it is unreasonable to tie issuers' hands in making hiring decisions and 
we would request that these grants be exempted.

In addition, we believe that gifts of equity securities as well as involuntary 
transactions in which the director or executive officer does not have the ability 
to control the timing of the transaction should be exempted. We believe that these 
transactions do not present the same opportunities for profit and or personal gain 
that were contemplated by Congress. In particular, we believe that transactions 
pursuant to qualified domestic relations orders, which are mandated by the courts, 
should be specifically exempted since they are not discretionary on the part of 
the director or officer and therefore not subject to manipulation.

Notice on Form 8-K

The Commission has proposed issuers be required to file a Form 8-K within two 
business days of knowledge of the administrative blackout. Reiterating the views 
expressed in our comment letter on the proposed revisions to Form 8-K, we simply 
see no need for this type of current disclosure requirement. The Commission appears 
to regard administrative blackouts with a much higher degree of significance than 
anyone other than plan participants will attach to them when they are announced. 
They only become significant to others if an issue regarding the company's 
operations subsequently arises during the blackout period. We believe 8-K disclosure 
of blackouts will be confusing and potentially misleading to the general investing 
public who could attach unnecessary significance to a mundane, routine matter.

On the other hand, requiring notice on Form 8-K at any point prior to when the 
company is prepared to communicate to plan participants the full details about 
the administrative blackout and its consequences will result in significant 
confusion to the plan participants, the very group who will be most interested 
in the subject matter. The trigger proposed by the Commission is ambiguous in 
requiring notice within two business days of "actual knowledge" of the blackout 
period by the person designated to oversee retirement plans for the issuer or its 
director of human resources. It will be unclear when the director of HR "knows" 
of a blackout in the weeks, and sometimes months, of planning to determine whether 
and when a blackout will occur. In addition, at this point, the full communication 
materials for plan participants, which are typically accompanied by detailed 
internal guidance to managers and human resources on how to answer employee 
questions, will not be developed, and the format of an 8-K report is too formal 
and unfamiliar to employees to function as a substitute.

We believe it would be a serious error for the Commission to require notice to 
the investing public earlier than when the company can possibly be prepared to 
give meaningful notice to the plan participants. The only possible significance 
that an administrative blackout has to investors who are not plan participants 
is a narrow interest in knowing when retirement plan administrative blackouts 
have occurred, so that if director or executive officer trading occurred during 
the blackout period, and the company fails to bring an action to recover any 
profits, the stockholder may bring an action to recover such profits on behalf 
of the company under Section 306(a)(2)(B) of the statute. If the Commission 
believes this narrow interest justifies public disclosure, we submit that 
disclosure in the next 10-Q or 10-K filing should be sufficient. Alternatively, 
the Commission could require filing of a newly created Form BTR, either at the 
same time when notice is due to plan participants under the DOL rules or within 
two days after commencement of the blackout period. Such a form would be analogous 
in purpose to reports filed pursuant to Section 16, which are not part of the 
Commission's integrated disclosure reporting system. If the Commission persists 
in believing Form 8-K is the right form on which to disclose this immaterial 
information, then the Commission should make the Form 8-K filing due within two 
days after the due date for notice to plan participants under the DOL rules, or 
within two days after the commencement of the blackout period. 

 * * *

Please contact the undersigned at (408) 765-9771 or Cary Klafter at (408) 765-1215 
if you would like any additional information in connection with the above comments.

Regards,

Patrice Scatena
Assistant Director of Corporate Affairs
Legal Department
Intel Corporation
408-765-9771 (phone)
408-765-7636 (fax)
pat.scatena@intel.com