Problem, Semi-Finalist Answers
A question has arisen regarding clarification of the following sentence that appears in the last paragraph of section II of the 2004-2005 LSTC problem. The sentence reads as follows:
"Further, Mega believes that iTunes should continue to administer the SELP to provide an incentive to the senior executives to retain their Mega or iTunes shares."
In general, the Sarbanes-Oxley legislation of 2002 ("SOX") prospectively puts an end to these types of loans to executives of public companies. This legislation was referenced in the sixth paragraph of section II of the problem. For purposes of your analysis, it should be presumed that any prospective administration of the SELP program by either Mega or iTunes would comport fully with SOX. Further, no new loans would be extended to senior executives of either company to comply with SOX, and the existing loans as set forth in the facts of the problem should be presumed to be "grandfathered" by SOX and continue to be bona fide loans. Thus, the administration of the SELP program would be limited to the administration of existing SELP loans.