On April 24, 2003, the SEC voted to approve mandatory electronic filing of beneficial ownership reports under Section 16(a) of the Securities Exchange Act of 1934, which was recently amended by Section 403 of the Sarbanes-Oxley Act of 2002. The new filing requirements affect officers, directors and principal security holders of a reporting company who are required to file Forms 3, 4 and 5 in order to report transactions in the company's securities. Effective June 30, 2003, new SEC rules and amendments will require the following:
- Forms 3, 4 and 5 must be filed electronically. The SEC has created a new online filing system to facilitate electronic filing of these reports.
- If the company has a corporate website, Forms 3, 4 and 5 must be posted on the website by the end of the business day after filing.
The purposes behind the electronic filing and website posting requirements are earlier notification and wider availability of Section 16 reports. Section 16 requires that the following persons file an initial report with the SEC on Form 3:
- Every person who is the beneficial owner of more than 10 percent of any class of equity security registered under Section 12 of the Exchange Act, and
Each officer and director of an issuer of such a security.
This initial report must disclose the reporting person's beneficial ownership of all equity securities of the company. To keep this information current, the SEC rules under Section 16 also require reporting persons to report changes in such ownership on Form 4 and to file an annual report of such ownership on Form 5.
The electronic filing and website posting requirements supplement an SEC rule change adopted on August 27, 2002 which implemented an accelerated filing deadline to report changes in beneficial ownership on Form 4 (see http://www.sec.gov/rules/final/34-46421.htm). As a reminder, Form 4 must now be filed by the end of the second business day following a change in beneficial ownership. Under the new electronic filing rules and amendments, reports submitted by electronic transmission before 10 p.m. Eastern time will be deemed filed on the same business day.
In addition to the new Section 16 electronic filing and website posting requirements, the SEC also adopted amendments to Regulation 13B-2 that implement Section 303 of the Sarbanes-Oxley Act. These new rules prohibit officers and directors, and persons acting under their direction, from coercing, manipulating, misleading, or fraudulently influencing the auditor of a company's financial statements if that person knew or should have known that such action could render the financial statements materially misleading. These amendments will be effective thirty days after their publication in the Federal Register.
The text of the SEC announcement is available on the SEC's website at http://www.sec.gov/news/press/2003-51.htm. The SEC will post the full text of the rules and amendments described in the announcement on its website (http://www.sec.gov/rules/final.shtml) as soon as possible. If you have questions regarding these rules or their implications for your company, please contact your Davis Wright Tremaine corporate finance attorney or email us at corporatefinanceadvisory@dwt.com.
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