The latest snag delaying the First Security Corp. merger with Zions Bancorp is a Securities and Exchange Commission rule whose interpretation has befuddled executives of both banking companies as well as many analysts.

The SEC contends that Zions violated a government policy limiting to 10% the amount of outstanding shares that could be bought back in a pooling-of-interests merger. The SEC claims that during the last three years Zions bought back more than 10% of its stock while engaging in multiple transactions.

As a result, it ruled that the acquisitions must be restated as purchases, rather than poolings of interests. Restating the deal will add $500 million of goodwill to Zions' balance sheet. Amortization expenses are expected to be $25 million a year for the next 17 years.

Under purchase accounting, acquirers must write off premiums paid above book value over a period of up to 40 years.

"This ruling is quite unusual," said Joseph Morford, an analyst at Dain Rauscher Wessels. "It seems that the SEC is applying new standards that are more strict than we have seen in this industry."

Robert Tortoriello, an attorney at Cleary, Gottlieb, Steen & Hamilton, said: "This further evidences the great aversion that the SEC has to pooling transactions. What was a flashing yellow light a few months ago has now become a flashing red light."

First Security and Zions, both based in Salt Lake City, were planning to complete their merger of equals this week. Now they must delay the closing until February, said Dale Gibbons, chief financial officer of Zions. It will take his company a few weeks to restate its earnings and come up with an amended merger document, he said.

"We conducted a number of pooling transactions in 1997 and 1998 and bought back less than 10% of our shares for each transaction," Mr. Gibbons said. "But the SEC is adding up all the share repurchases that we have done for a dozen of our transactions."

The SEC's interpretation of its rule lacks precedent, Mr. Gibbons said. "We cannot find any accounting literature that supports the SEC approach."

John Heine, an SEC spokesman, said the agency has applied this interpretation of its staff accounting bulletin, No. 96, to other companies, but he declined to name any.

Zions had been alerted to the possibility almost two weeks ago by KPMG LLP, one of the nation's leading accounting firms. KPMG's team working on the merger realized that the SEC rule could be interpreted to include multiple transactions as opposed to one, said George Ledwith, a KPMG spokesman.

"We always believed that Zions' overall approach was reasonable and consistent," he said. "But the First Security and Zions merger is a complex transaction, and the SEC has given no direct guidance when it comes to this particular policy. We thought it was prudent that we seek clarification for this."

Most analysts said the change meant little.

"Business trends are still strong and unaffected," said Lori Appelbaum, an analyst at Goldman, Sachs & Co. "This is an accounting issue, not a business issue. We will be moving toward purchase accounting anyway with the end of pooling accounting at the end of 2000."

But investors were concerned that the company that has been slated to join the Standard & Poor's 500 index on Dec. 31 might now might be kept off because of the development. Mr. Gibbons said he is awaiting an answer from S&P.

Investors, however, were not waiting. They dumped First Security shares, driving its stock down almost 16% during Monday's trading, to $24.75, from $29.375 at Friday's close. It closed Monday at $25.6875, down 12.55%. Zions fell as much as 12%, to $58.50, from $66.75. It closed at $60.3125.

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