September 27, 2022

Volume XII, Number 270


September 26, 2022

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SEC Amends Electronic Filing Requirements for Form 144, Form 11-K, and Annual Reports

On June 2, 2022, the Securities and Exchange Commission (SEC) adopted amendments to its electronic filing requirements for certain forms and reports that were previously filed as paper copies. Pursuant to the final rules, which became effective on July 11, 2022, certain documents are now required to be filed with the SEC electronically via EDGAR. Most notably, the final rules require that Notice of Proposed Sale of Securities by an “affiliate” (insider) on Form 144 and “glossy” annual reports to stockholders are to be filed with the SEC via EDGAR. Under the amendments, the glossy annual report to security holders should not be reformatted, resized, or otherwise redesigned for purposes of the submission on EDGAR. With respect to Annual Reports of Employee Stock Purchase, Savings and Similar Plans on Form 11-K, the final amendments mandate the use of Inline eXtensible Business Reporting Language (Inline XBRL) for the filing of the financial statements and accompanying schedules to the 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 regarding glossy annual reports to security holders by posting an electronic version to its corporate website by the applicable date specified in such rules, or Form 10-K, in lieu of mailing paper copies or submitting it on EDGAR if the report remained accessible for at least one year after posting. The rule amendments supersede the SEC’s historical guidance. Submission via EDGAR is now required for glossy annual reports, whether or not registrants decide to post the reports on their corporate websites. However, the final rules do not impact the internet availability of proxy materials. Registrants that utilize the notice-only option must still post their proxy materials, including the annual report to stockholders, on a publicly available website other than EDGAR in addition to filing the glossy annual report via EDGAR as required by the new rules.

By way of background, Rule 144 creates a safe harbor from the definition of “underwriter.” A person satisfying the applicable conditions of the Rule 144 safe harbor is deemed not to be engaged in a distribution of the securities and therefore not an underwriter of the securities for purposes of the Securities Act of 1933, as amended (the Securities Act). Therefore, such a person is deemed not to be an underwriter when determining whether a sale is eligible for exemption from registration under the Securities Act. Accordingly, if a sale of securities by an insider of the company complies with all the applicable conditions of Rule 144, an insider or other person who sells company stock will be deemed not to be engaged in a distribution and therefore qualify for an exemption from registration for such sale. Under Rule 144, if the amount of securities to be sold by an insider during any period of three months exceeds 5,000 shares or has an aggregate sale price in excess of $50,000, three copies of a notice on Form 144 must be filed with the SEC. If such securities are admitted to trading on any national securities exchange, one copy of such notice also shall be transmitted to the principal exchange on which such securities are admitted. Form 144 is required to be transmitted for filing with the SEC concurrently with either the placing with a broker of an order to execute a sale of securities in reliance upon this rule or the execution directly with a market maker of such a sale. Note that in the amended final rules, the SEC did not eliminate the Form 144 filing requirement for the sale of securities of companies that are not subject to the SEC reporting requirements (i.e., companies not registered with the SEC). As such, insiders or affiliates relying 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 Form 144 in paper form pursuant to Rule 144.

In our experience, as a courtesy to the insider, Form 144 has been transmitted in paper filing to the SEC by the insider’s broker who executes the sale for the insider. Thus, the company is typically not involved in the paper filing of Form 144. The company would, however, typically file a Statement of Change in Beneficial Ownership on Form 4 within two business days following the execution of the trade by the insider. Because the new rules will require Form 144 to be filed electronically once 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 possesses the necessary EDGAR codes. Accordingly, companies should begin preparing now for filing Form 144s electronically via EDGAR with the SEC on behalf of their officers and directors who sell in excess of 5,000 shares or $50,000 of company stock.

The SEC provided the following transition periods to give filers adequate time to prepare to submit these documents electronically in accordance with the EDGAR requirements, including applying for the necessary filer codes on EDGAR:

  • Six months after the effective date of the amendments for filers to submit their glossy annual reports to security holders electronically in accordance with the EDGAR Filer Manual and, other than for Form 144, for paper filers that would be first-time electronic filers;

  • Six months after the SEC adopts updates to the EDGAR Filer Manual addressing filing Form 144 electronically on EDGAR; and

  • Three years after the effective date of the amendments for filers to submit the financial statements and accompanying schedules to the financial statements required by Form 11-K in the Inline XBRL structured data language.

The June 2, 2022 adopting release can be found on the website.

Please also see the SEC’s press release and fact sheet.

© 2022 Jones Walker LLPNational Law Review, Volume XII, Number 209

About this Author

John J. Spidi, Jones Walker, corporate finance attorney, bank regulatory matters lawyer

John J. Spidi is a partner in the firm’s Banking & Financial Services Practice Group in the Washington, D.C. office. He concentrates in corporate, securities, and bank regulatory matters for financial institutions and their holding companies. Mr. Spidi's particular emphasis is in the area of securities offerings, annual securities reporting requirements, mergers and acquisitions, mutual-to-stock conversions, corporate governance requirements, and all aspects of corporate and bank regulatory matters involving financial institutions.