On June 3, 2022, the US Securities and Exchange Commission (SEC) adopted amendments to Rule 101 of Regulation S-T that eliminate the option for issuers and filing persons to file a number of forms in paper format. The amendments mandate that issuers and filing persons electronically submit the following forms on EDGAR:
Form 144 for sales of securities of issuers subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act
“Glossy” annual reports to security holders
Notices of exempt solicitations and exempt preliminary roll-up communications
Filings made by multilateral development banks
Certifications made pursuant to Section 12(d) of the Exchange Act and Exchange Act Rule 12d1-3 that a security has been approved by an exchange for listing and registration.
The amendments have important implications for Form 144 filers as the SEC is looking to increase transparency and make these filings more accessible to investors, analysts and other market participants. According to data cited by the SEC, less than 1% of Form 144s submitted are done so electronically. The balance of Form 144s are either submitted in paper format or via email by virtue of the filing relief initially adopted during the COVID-19 pandemic.[2] The paper forms are not digitized by the SEC but are instead kept in its Public Reading Room in Washington, DC. Handwritten and offline, paper Form 144s are difficult for the public to access, track and analyze. Third-party service providers routinely scan the paper filings and make them available to their subscribers. However, the SEC noted that these third-party services are subscription based and not generally accessible to the public without charge. The SEC also noted the lag between the time the filings are made and when they become available via third-party service providers, with several days’ lag being the norm. Form 144 will now be an online fillable document similar to Forms 3, 4 and 5, making all filings machine readable and easily accessible online.
Of particular note to filing persons, in order to submit a Form 144 electronically, they will need to obtain EDGAR access codes, a process that typically requires 48 to 72 hours lead time. Several commentators to the original rule proposal noted this increased compliance burden, much of which will be borne by the brokerage firms that execute trades on their clients’ behalf. However, the SEC concluded that the benefit of greater transparency outweighed the burden on filing persons and their advisors.
Filers often submit Form 144s in tandem with trades executed in 10b5-1 plans. Although these amendments increase transparency for such filers, other proposed amendments relating to 10b5-1 plans, including the anticipated mandatory “cooling off period” and prohibition against overlapping plans, have not yet been adopted.
The newly adopted amendments also mandate issuers to electronically submit their “glossy” annual reports to the SEC. Historically, issuers have been required to submit their “glossy” annual reports in paper format. In 2016, SEC staff adopted interpretive guidance that allowed issuers to satisfy their delivery obligations by posting their “glossy” annual reports on their corporate websites. Contemporaneously with the effectiveness of the new rules, the interpretive guidance will be withdrawn and, while issuers may continue to post their “glossy” annual reports online, doing so will not satisfy their SEC delivery obligations. Going forward, issuers will need to electronically submit a PDF of their “glossy” annual reports on EDGAR.
The SEC is also making technical changes to how issuers submit Form 11-K financial statements and any accompanying notes. The amendments require that Form 11-K financial statements and accompanying notes be filed using Inline XBRL. The change brings Form-11-K financial statements in line with the requirements already in place for financial information in Forms 10-K, 20-F and 40-F.
The amendments will become effective 30 days after being published in the Federal Register. However, the SEC is providing a transition period to allow first-time EDGAR filers to apply for their filing codes and to allow traditionally paper filers to prepare to submit the following documents electronically on EDGAR:
All documents newly required to be submitted electronically: Filers have six months after the amendments’ effective date to submit all documents that are newly mandated to be submitted electronically (except for Form 144).
Form 144: The requirement to file Form 144s electronically will commence six months from the date of publication in the Federal Register of the SEC release that adopts the version of the EDGAR Filer Manual addressing updates to Form 144. (Note: The SEC will consider adoption of the relevant version of the EDGAR Filer Manual that addresses updates to Form 144 in September 2022. Publication in the Federal Register would occur thereafter.)
Form 11-K Financial Statements: Filers have three years after the amendments’ effective date to comply with the use of Inline XBRL for 11-K financial statements and accompanying notes.
For more information, see the Final Rule and the SEC Fact Sheet.
Riley O’Farrell, a summer associate in the Chicago office, also contributed to this article.
[1] The SEC noted that in calendar years 2020 and 2021 combined, there were more than 48,000 Form 6-Ks filed electronically and only two filed in paper format.
[2] In April 2020, in recognition of the logistical difficulties related to the submission of Form 144s in paper format and the health and safety concerns related to the COVID-19 pandemic, SEC staff allowed for filing persons to submit Form 144s via email in PDF format. The staff subsequently extended this relief indefinitely. Forty-six percent of all Form 144 filings in 2021 were submitted in this manner. The SEC will withdraw this relief once the requirements to file Form 144s electronically via EDGAR are effective.
Eric Orsic is a partner in the law firm of McDermott Will & Emery LLP and is based in the Firm’s Chicago office. Eric focuses his practice in the areas of mergers and acquisitions, and securities transactions and compliance. Eric works with both public and privately-held companies to structure and negotiate business acquisitions/dispositions. His public company transactional experience includes public equity and debt offerings, tender offers and going-private transactions. Eric also serves as outside securities counsel to several public companies and advises on SEC compliance...
You are responsible for reading, understanding and agreeing to the National Law Review's (NLR’s) and the National Law Forum LLC's Terms of Use and Privacy Policy before using the National Law Review website. The National Law Review is a free to use, no-log in database of legal and business articles. The content and links on www.NatLawReview.com are intended for general information purposes only. Any legal analysis, legislative updates or other content and links should not be construed as legal or professional advice or a substitute for such advice. No attorney-client or confidential relationship is formed by the transmission of information between you and the National Law Review website or any of the law firms, attorneys or other professionals or organizations who include content on the National Law Review website. If you require legal or professional advice, kindly contact an attorney or other suitable professional advisor.
Some states have laws and ethical rules regarding solicitation and advertisement practices by attorneys and/or other professionals. The National Law Review is not a law firm nor is www.NatLawReview.com intended to be a referral service for attorneys and/or other professionals. The NLR does not wish, nor does it intend, to solicit the business of anyone or to refer anyone to an attorney or other professional. NLR does not answer legal questions nor will we refer you to an attorney or other professional if you request such information from us.
Under certain state laws the following statements may be required on this website and we have included them in order to be in full compliance with these rules. The choice of a lawyer or other professional is an important decision and should not be based solely upon advertisements. Attorney Advertising Notice: Prior results do not guarantee a similar outcome. Statement in compliance with Texas Rules of Professional Conduct. Unless otherwise noted, attorneys are not certified by the Texas Board of Legal Specialization, nor can NLR attest to the accuracy of any notation of Legal Specialization or other Professional Credentials.
The National Law Review - National Law Forum LLC 3 Grant Square #141 Hinsdale, IL 60521 Telephone (708) 357-3317 or toll free (877) 357-3317. If you would ike to contact us via email please click here.