August 13, 2002
The following notes are from today’s panel regarding Section 16 and Executive Compensation developments at the ABA annual conference :
1. Sara Nelson Bloom from Nasdaq indicated that Nasdaq would eventually have a Web page for their legal department to make their positions more transparent, particularly in light of the inevitable slew of interpretations that will be necessary when their listing standards amendments become effective.
2. Mark Borges from the SEC indicated that, generally, companies with a 3/31 fiscal year end did a good job in providing disclosure regarding equity dilution. He noted that about 15% of the companies appeared to not include the disclosure, but observed that this generally included smaller companies that might not have been aware that the new regulation was in effect. Mark noted that interpretive guidance from the SEC regarding several issues regarding equity dilution disclosure was forthcoming in the near future.
3. Anne Krauskopf from the SEC mentioned what Alan Beller had already noted the day before – that the upcoming rulemaking under Section 403 of the Sarbanes-Oxley Act would likely leave the Section 16(a) reporting exemptions intact. Anne also noted that it was likely that some Form 5 transactions would continue to be reportable on Form 5 – with the exceptions being the ones noted in the SEC’s release last week – such as Rule 16b-3 transactions. These exceptions would now be reportable on Form 4 – such as excess benefit plans that might involve payroll deductions (in those cases, a Form 4 would be filed within 2 business days after each payroll deduction). For the new Form 4 (which will obviously no longer be a monthly form), Anne indicated that the holdings total could be based on the date of the report (after taking into account the transaction which caused the form’s filing); not the date of filing. She also indicated that Item 405 disclosure is only required for untimely filings; not necessarily for forms that might inadvertantly miscalculate the total holdings.
4. Anne also noted that the SEC was exploring solutions for the practical mess of obtaining filing codes for each insider. However, she did not indicate if this could – or would – be done before August 29th. As a result, companies might want to obtain filing codes for each insider as soon as practicable to facilitate electronic filing of these forms after August 29th.