Form 144, Form 11-K, Annual Report SEC filings must be electronic
On June 2, 2022, the Securities and Exchange Commission (SEC) adopted changes to its electronic filing requirements for certain forms and reports that were previously filed on paper. Under the final rules, which became effective July 11, 2022, certain documents must now be filed with the SEC electronically through EDGAR. Most notably, the final rules require that the Notice of Proposed Sale of Securities by an “Affiliate” (Insider) on Form 144 and “Glossy” Annual Reports to Shareholders be filed with the SEC via EDGAR. Under the Amendments, the Glossy Annual Report to Securityholders shall not be reformatted, resized or otherwise re-drafted for purposes of submission on EDGAR. With respect to annual employee stock, savings, and similar plan reports on Form 11-K, the final amendments mandate the use of Inline eXtensible Business Reporting Language (Inline XBRL ) for filing financial statements and schedules to financial statements. required by Form 11-K.
Prior to the adoption of the new rules, the SEC permitted a registrant to satisfy the filing requirements for glossy annual reports to securityholders by posting an electronic version on its corporate website prior to the applicable date specified in these rules, or Form 10-K, instead of sending hard copies or submitting them on EDGAR if the report remained accessible for at least one year after its publication. The rule changes supersede the historical guidance from the SEC. Submission via EDGAR is now required for glossy annual reports, whether or not filers choose to publish the reports on their corporate websites. However, the final rules do not affect the Internet availability of proxy materials. Registrants using the notice-only option must always post their proxy materials, including the annual shareholder report, on a publicly accessible website other than EDGAR, in addition to filing the glossy annual report via EDGAR, as required by the new rules.
For your information, Rule 144 creates a safe harbor from the definition of “tariff”. A person who satisfies the applicable requirements of Safe Harbor Rule 144 is deemed not to be engaged in a distribution of the securities and therefore not a purchaser of the securities for the purposes of the Securities Act of 1933, as amended (the Securities Act). Accordingly, such a person is deemed not to be an underwriter in determining whether a sale qualifies for an exemption from registration under the Securities Act. Accordingly, if a sale of securities by an insider of the Company meets all of the applicable conditions of Rule 144, an insider or other person who sells shares of the Company will be deemed not to participate in a distribution and will therefore benefit from an exemption from registration. for such a sale. Under Rule 144, if the amount of securities to be sold by an insider in any three-month period exceeds 5,000 shares or has an aggregate sale price greater than $50,000, three copies of a notice on Form 144 must be filed with the SEC. If such securities are admitted to trading on a national stock exchange, a copy of this notice will also be forwarded to the principal stock exchange on which such securities are admitted. Form 144 must be transmitted for filing with the SEC concurrently with either the placement with a broker of an order to execute a sale of securities in reliance on this rule, or the execution directly from a market maker of such a sale. Note that in the amended final rules, the SEC did not remove the Form 144 filing requirement for the sale of securities of companies that are not subject to SEC reporting requirements (i.e. companies not registered with the SEC). Thus, insiders or affiliates who rely on Rule 144 when the company is not subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, will still be required to file a notice of sale on the Form 144 in paper form in accordance with Rule 144.
In our experience, as a courtesy to the insider, the Form 144 was transmitted on paper to the SEC by the insider’s broker executing the sale for the insider. Thus, the company is generally not involved in the paper filing of Form 144. However, the company would generally file a change in beneficial ownership statement on Form 4 within two business days of the execution of the transaction by the initiated. Because the new rules will require Form 144 to be filed electronically after the six-month transition period ends, we anticipate that the broker executing the trade for the insider will no longer be able to file Form 144 with the SEC. , presumably because the broker does not have access to the EDGAR system nor possess the necessary EDGAR codes. Accordingly, companies should begin preparing now to electronically file Form 144s via EDGAR with the SEC on behalf of their officers and directors who sell more than 5,000 shares or $50,000 worth of company stock.
The SEC has provided the following transition periods to allow filers sufficient time to prepare to submit these documents electronically in accordance with EDGAR requirements, including requesting the necessary filer codes on EDGAR:
Six months after the effective date of the amendments, filers must submit their glossy annual returns to securityholders electronically in accordance with the EDGAR Filer Handbook and, except for Form 144, for paper filers who would be first-time e-filers;
Six months after the SEC adopted updates to the EDGAR Filer Handbook addressing Form 144 filing electronically on EDGAR; and
Three years after the effective date of the Amendments, filers must submit the financial statements and schedules to the financial statements required by Form 11-K in Inline XBRL structured data language.
The June 2, 2022 adoption release is available on the sec.gov website.
Please also see the SEC press release and information sheet.