News & Resources

Mandated Electronic Filing and Website Posting for Forms 3, 4, and 5

May 29, 2003

MEMORANDUM

To:   Our Clients and Friends
From:   Olshan Grundman Frome Rosenzweig & Wolosky LLP
Date:   May 29, 2003
Re:   Mandated Electronic Filing and Website Posting for Forms 3, 4 and 5

Introduction

On May 7, 2003, the Securities and Exchange Commission (the "SEC") issued final rules relating to electronic filing and website posting of Forms 3, 4 and 5 pursuant to Section 403 of the Sarbanes-Oxley Act of 2002.[1]  The new rules require that Forms 3, 4 and 5 be (1) filed electronically, and (2) posted on or hyperlinked to the company website (if the company maintains a corporate website). Reporting persons and companies maintaining a corporate website must comply with the new rules for reports filed on or after June 30, 2003. 

Section 16(a) Reporting Obligations

Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act") applies to every person or entity who is the beneficial owner of more than 10% of any class of equity securities registered under Section 12 of the Exchange Act, or who is a director or an officer of the issuer.  Section 16(a) requires such reporting persons to file an initial report with the SEC disclosing the amount of their beneficial ownership of all equity securities of the issuer, and thereafter report changes in beneficial ownership.[2]

Electronic Filing of Forms 3, 4 and 5

The new rules amend Regulation S-T to require all reporting persons to file Forms 3, 4 and 5 with the SEC electronically via EDGAR.  Prior to the effective date of these final rules, reporting persons may continue to file paper copies of such forms or file electronically via EDGAR.  After June 30, 2003, the SEC will accept Forms 3, 4 and 5 in paper form only where it is willing to grant a continuing hardship exception to the reporting person.  The SEC has further stated that given the information contained in such forms and the expected ease of electronic filing, it is not likely to grant continuing exemptions.  The SEC did add, however, that it may be willing to grant a filing adjustment date under the appropriate circumstances.

Timing of Filings

The new rules amend Rule 13(a) of Regulation S-T to provide that Forms 3, 4 and 5 submitted by direct transmission on or before 10:00 p.m. Eastern Time will be deemed filed on the same business day. [3]  Currently, Section 16(a) reports filed after 5:30 p.m. Eastern Time are deemed filed on the following business day.  The SEC expects to complete reprogramming of the EDGAR system by late July 2003. Until then, EDGAR will continue to assign the next business day to these filings as their filing date.  The SEC will, however, consider a form timely filed based on the time of receipt displayed on its website.

The new rules grant temporary limited relief under Item 405 of Regulations S-K and S-B, which require disclosure of Section 16(a) reporting delinquencies in the issuer's proxy or information statement for the annual meeting at which directors are elected.  Such disclosures will not be required under Item 405 of Regulations S-K or S-B with regard to a Form 4 that is (1) filed during the first 12 months following the effective date of mandated electronic filing, and (2) filed no later than one business day following the regular due date.

Revisions to Forms

The SEC adopted minor revisions to Forms 3, 4 and 5 and their instructions to facilitate electronic filing.  Three of the more notable changes are:

  • deletion of the field on Forms 3, 4 and 5 that requests the filer's IRS identification number;
  • clarifications to the General Instructions on Forms 3, 4 and 5; and
  • the amendment of Item 4 of Forms 3, 4 and 5 to clarify that it requires disclosure of the earliest transaction date required to be reported.

Website Posting

The new rules amend Rule 16a-3 of the Exchange Act to require an issuer that maintains a corporate website to post on its website all Form 3, 4 and 5 filings by the end of the business day after filing.  An issuer may satisfy this requirement by providing direct access to the reports, or by hyperlinking to the reports via a third party service, provided the following conditions are met:

the forms are made available in the required time frame; [4]

  • access to the reports is free of charge;
  • 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 issuer's website address that the issuer normally uses for disseminating information to investors; and
  • any hyperlink is directly to the Section 16 forms (or to a list of the Section 16 forms) relating to the issuer (rather than to the home page or general search page of any third party service). [5]

Electronic Filing

To file electronically, reporting persons are to use the same access codes that they are required to use to file via EDGAR under the older system.  Reporting persons who previously have not obtained access codes can obtain them by submitting a Form ID application to the SEC. [6]  When a joint filing is made on behalf of multiple reporting persons, each person's access code must be used to validate the filing. 

We can assist you in obtaining access codes from the SEC.  Also, we are currently in the process of installing software that will allow us to file Forms 3, 4 and 5 electronically on your behalf.

____________________

These are only brief descriptions of the SEC's new rules.  This memorandum provides general information only and does not constitute legal advice that may be applied to any particular situation.  Please contact the Partners in our Corporate Department for further advice and assistance.


[1] See the SEC's website at http://www.sec.gov/rules/final/33-8230.htm.

[2] Section 403 of the Act amended Section 16(a) by requiring that most transactions be reported within two business days.  Amended Section 16(a) allows the following transactions to be reported within up to five business days: (1) a transaction involving a Rule 10b5-1 trading plan where the reporting person does not select the date of execution, and (2) a discretionary transaction involving an employee benefit plan where the reporting person does not select the date of execution.

[3] Filer support, however, will only remain available until 7:00 p.m. Eastern Time.

[4] Each report must remain on the issuer's website for at least 12 months.

[5] The hyperlink caption must clearly indicate that the link leads to the issuer's Section 16(a) reports.

[6] The Form ID is available at http://www.sec.gov/divisions/corpfin/forms/id.htm.

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