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Employee Plans News - ESOPs - Definition of Readily Tradable Employer Securities

Notice 2011-19 defines when employer securities held by an employee stock ownership plan are “readily tradable on an established securities market” or “readily tradable on an established market.”

ESOPs should use the definition of readily tradable securities found in the final regulations under IRC Section 401(a)(35). Under the regulations, which may be relied upon for periods after March 14, 2011, an employer security is readily tradable on an established securities market and readily tradable on an established market if it is:

  • traded on a registered national securities exchange; or

  • traded on a foreign national securities exchange that is:

    • officially recognized, sanctioned or supervised by a governmental authority, and

    • the security is deemed by the SEC as having a ready market.

Current SEC rules deem a security on the FTSE Group All-World Index to have a ready market.

Notice 2011-19 is effective for plan years beginning on or after January 1, 2012. However, the notice will become effective for plan years beginning on or after January 1, 2013, for any plan that is sponsored by an employer where neither the employer nor any members of its controlled group (under IRC Section 409(l)) have any stock traded on a registered national securities exchange on March 14, 2011, but do have on this date, stock traded on a foreign national securities exchange that is officially recognized, sanctioned or supervised by a governmental authority, and is deemed by the SEC as having a ready market.

Page Last Reviewed or Updated: 31-Oct-2013