A. Each person who is directly or indirectly the beneficial owner of more than ten percent of a class of any equity security of a domestic insurer, or who is a director or an officer of a domestic stock insurer, shall file a statement with the Commission within ten days after becoming a beneficial owner, director or officer. This statement shall be in a form prescribed by the Commission and shall show the amount of all the domestic insurer's equity securities of which he is the beneficial owner. Within ten days after the close of each calendar month, if there has been a change in his ownership during such month, the person shall file with the Commission a statement prescribed by the Commission indicating his ownership at the close of the calendar month and such changes in his ownership as have occurred during such calendar month.

B. To prevent the unfair use of information obtained by any beneficial owner, director or officer, any profit realized by such person within six months from the purchase and sale, or any sale and purchase, of any of the insurer's equity securities shall inure to and be recoverable by the insurer. This provision shall apply regardless of any intention of the beneficial owner, director or officer to hold the equity security purchased or not to repurchase any sold equity security for a period exceeding six months. However, this provision shall not apply if the security was acquired in good faith in connection with a debt previously contracted. The insurer may sue at law or in equity to recover the profit in any court of competent jurisdiction. The owner of any equity security of the insurer may sue in the name and in behalf of the insurer if the insurer fails or refuses to bring suit within sixty days after request or if the insurer fails to diligently prosecute after bringing suit. No suit under this subsection shall be brought more than two years after the date the profit was realized. This subsection shall not be construed to cover any transaction where the person was not the beneficial owner at the time of either the purchase or sale of the equity security involved. The Commission may by rules and regulations exempt from the provisions of this subsection any transaction that is not comprehended within the purpose of this subsection.

C. No beneficial owner, director or officer shall directly or indirectly sell any equity security of the insurer if the person selling the security or his principal (i) does not own the security sold, or (ii) owns the equity security but does not deliver it within twenty days after the sale or does not mail it within five days after the sale. No person shall be deemed to have violated this subsection if he proves that, notwithstanding the exercise of good faith, he was unable to deliver or mail the security within the required time, or that to do so would cause undue inconvenience or expense. Any person violating this subsection shall be guilty upon conviction of a Class 1 misdemeanor.

D. Subsections B and C of this section shall not apply to the transactions of a dealer in an investment account that are conducted in the ordinary course of a dealer's business and incident to the establishment or maintenance of an equity security's primary or secondary market, other than on an exchange defined in the Securities Exchange Act of 1934. The Commission may, by rules and regulations, define and prescribe terms and conditions with respect to equity securities held in an investment account and transactions made in the ordinary course of business and incident to the establishment or maintenance of a primary or secondary market.

E. Subsections A, B, and C of this section shall not apply to foreign or domestic arbitrage transactions unless made in contravention of rules and regulations adopted by the Commission to carry out the purposes of this section.

F. The term "equity security" when used in this section means (i) any stock or similar security, (ii) any security that is convertible, with or without consideration, into another security, (iii) any security that carries any warrant or right to subscribe to or purchase a security, or (iv) any warrant, right or other security that the Commission, by rules and regulations, deems to be similar in nature to an equity security and considers the classification necessary or appropriate for protecting the public or an investor's interest.

G. Subsections A, B, and C of this section shall not apply to equity securities of a domestic stock insurer if (i) those equity securities are registered or are required to be registered pursuant to § 12 of the Securities Exchange Act of 1934, as amended; or (ii) the domestic stock insurer does not have any class of its equity securities held of record by 100 or more persons on the last business day of the year immediately preceding the year in which equity securities of the insurer would be subject to subsections A, B, and C of this section.

H. The Commission may adopt rules and regulations pursuant to § 38.2-223 for the execution of the functions vested in it by subsections A through G of this section. The Commission may classify for that purpose any domestic stock insurers, equity securities, and other persons or matters within its jurisdiction. The Commission may exempt from the provisions of this section any officer, director or beneficial owner of equity securities of any domestic stock insurer under the terms and conditions, and for the period of time the Commission considers necessary or appropriate if the Commission finds that the action is consistent with the public interest or the protection of investors. Any such exemption may be accomplished by (i) rules and regulations issued pursuant to § 38.2-223 or (ii) by order, upon application of any interested person, after due notice and an opportunity for hearing has been given. No provision of subsections A, B, and C of this section imposing any liability shall apply to any act done or omitted in good faith in conformity with any rule or regulation of the Commission. Notwithstanding the provisions of this subsection, such rule or regulation may be amended, rescinded or determined by judicial or other authority to be invalid for any reason after the act or omission has occurred.

1966, c. 265, § 38.1-36.1; 1986, c. 562.