05.28.2003
|
Updates
In early May, the Securities and Exchange Commission adopted final rules that require, no later than June 30, 2003:
-
electronic filing of beneficial ownership reports on Forms 3, 4 and 5 by public company officers, directors and more than 10% beneficial owners; and
- posting of these beneficial ownership reports on public companies' corporate websites.
The new rules are generally required by Section 403 of the Sarbanes-Oxley Act of 2002.
Required Electronic Filing of Forms 3, 4, and 5
Paper Filing Eliminated
Beginning June 30, 2003, Section 16 reporting persons must electronically file beneficial ownership reports on Forms 3, 4 and 5 under Section 16(a) of the Securities Exchange Act of 1934. They may no longer make paper filings of these reports. The new rules include minor changes to Forms 3, 4 and 5 to facilitate the electronic filing requirement.
New On-Line EDGAR Filing System
In addition to filing electronically through third-party service providers, insiders or companies acting on their behalf may submit reports directly using a new on-line EDGAR filing system that became operational on May 5, 2003. The previous EDGARLink filing system is no longer available for these reports.
Extension of Electronic Filing Hours
The SEC has extended its filing hours so that any Form 3, 4 or 5 submitted by direct transmission on or before 7:00 p.m. Pacific time/10:00 p.m. Eastern time will be deemed filed on the same business day (the current deadline is 2:30 p.m. Pacific time/5:30 p.m. Eastern time). By the end of July, the SEC expects to complete the programming necessary to assign a same business day filing date to forms submitted between 5:30 p.m. and 10 p.m. Eastern time. In the meantime, the SEC will consider a Form 3, 4 or 5 to be timely filed based on the time of receipt displayed on the SEC's website. (This extended filing deadline is not available for other SEC filings, such as periodic reports or registration statements. Although those reports can be filed electronically between 5:30 p.m. and 10:00 p.m. Eastern time, they are not deemed filed until the next business day.)
Temporary Relief From Disclosure of Delinquent Forms 4
Each public company must include disclosure of delinquent Forms 3, 4 and 5 filings in its proxy statement for its annual shareholders' meeting and in its annual report on Form 10-K pursuant to Item 405 of Regulation S-K. During the first 12 months following the effective date of the new rules (June 30, 2003 through June 29, 2004), however, companies will not need to include this disclosure for Forms 4 if they are filed within one business day after the deadline. Of course, this temporary relief from public company disclosure obligations does not change the fact that any Form 3, 4 or 5 filed later than the applicable due date violates an insider's reporting obligations under Section 16.
Adjustments of Filing Dates; Elimination of Hardship Exemption
The temporary hardship exemption from electronic filing requirements, which permits filers who experience unexpected technical difficulties to make a paper filing within one day provided an electronic filing is made within six business days, will be unavailable for Forms 3, 4 and 5 once the new rules are effective. The SEC notes that requests for filing date adjustments, for circumstances where an electronic filer attempts in good faith to file a document in a timely manner but the filing is delayed due to technical problems beyond the filer's control, will continue to be granted, but only infrequently. The SEC also notes that continuing hardship exemptions, which are available only by submitting a written application to the SEC, are unlikely to be granted for Forms 3, 4 and 5.
|
Practical Suggestions
Apply for EDGAR filing codes for each of your Section 16 reporting persons now. The SEC can take up to a week to issue a filing code. Failure to obtain an EDGAR filing code in a timely manner will not justify a filing date adjustment.
|
Required Website Posting of Reports on Forms 3, 4, and 5
Next Business Day Posting of Reports on Forms 3, 4 and 5
Beginning on June 30, 2003, each public company must post on its corporate website all reports on Forms 3, 4 and 5 filed with respect to its equity securities by the end of the business day after the filing is made. "Corporate website " means a company's public Internet site--not its private (Intranet) site. Each report must remain posted for 12 months.
Post Either Directly or by Hyperlinking
A company can satisfy this requirement by providing access to the reports directly or by hyperlinking to the websites of third-party service providers, including the SEC, so long as all the following conditions are met:
-
The forms are made available in the required time frame;
- Access to the forms is free of charge to the user;
- The display format allows retrieval of all information in the forms;
- The medium to access the forms is not so burdensome that the intended users cannot effectively access the information provided;
- The access includes any exhibits or attachments;
- Access to the forms is through the company website address that the company normally uses for disseminating information to investors;
- Any hyperlink is directly to the forms (or to a list of the forms) and not just to the home page or general search page of the third-party service; and
- The link caption on the company's website indicates clearly that the link leads to the Section 16 forms of the company's insiders.
Further SEC Guidance
The SEC notes that a company may satisfy its website posting requirement by hyperlinking to the Section 16 forms relating to the company in the EDGAR database on the SEC's website, and that the EDGAR link will not require an update each time a new Section 16 form is filed.
The SEC encourages companies to post Section 16 reports on their corporate websites before the June 30 effective date.
|
Practical Suggestions
The current version of the "EDGAR Company Search" permits creation of a page to which a company can link that will display only Forms 3, 4 and 5 filed for that company. To create this link, visit the SEC's website at www.sec.gov/edgar/searchedgar/companysearch.html.
|
Text of the Rules
This Update is only a summary of the SEC's final rules. You can find the full text of the final rules at www.sec.gov/rules/final/33-8230.htm. You can find further discussion of other recent laws and regulations of interest to public companies on our website.
