August 1, 2003
I’ve had a number of
I’ve had a number of requests for what Alan Dye said about the Section 16 changes on the “50 Nuggests” webcast – the following summarizes his comments:
Version 8.6 of the EDGAR Filer Manual became final on July 28, 2003. The new version reflects the filing procedures applicable to Section 16 reports filed on or after July 28.
As reflected in the new Manual, the reprogrammed electronic filing system addresses all but one of the seven “glitches” that existed in the version of the electronic filing system that was in use from May 5 until July 28. Of the six glitches that were addressed, only four were “fixed” in a way that allows insiders to report transactions the same way they were reported in paper filings. Specifically:
1. When an insider reports a transaction on Form 4 or Form 5, the insider may now report his or her total holdings of securities of the class involved in the reported transaction in the appropriate table (i.e., Table I or Table II), leaving blank the columns that call for transactional information. It is no longer necessary to report “holdings” in a footnote to a line on which a transaction is reported.
2. When reporting a gift, grant, award, or other transaction for which the insider neither pays nor receives consideration, the insider may insert in the price column (Column 4 of Table I or Column 8 of Table II) a footnote or, instead, a “0.” In paper filings, insiders typically left the price column blank in this context. The electronic filing system will not accept a report, however, if the price column is left blank.
3. When reporting a transaction in a derivative security that does not have a dollar-denominated conversion or exercise price (e.g., phantom stock that is convertible into common stock on a “1-for-1” basis), the insider may insert a footnote in Column 2 of Table II, and explain the conversion terms in the footnote (e.g., explaining that the security converts on a “1-for-1” basis). It is no longer necessary to insert a “0” in the conversion price column. In paper filings, insiders typically inserted “1-for-1” or similar words in Column 2. The electronic filing system will not accept a report, however, that does not include in Table II either a dollar amount or a footnote.
4. When reporting a derivative security for which the vesting date and/or expiration date is not known (i.e., phantom stock that pays out upon the insider’s retirement), the insider may insert (in Column 2 of Table II of Form 3 or Column 6 of Table II of Form 4 or Form 5) a footnote in the appropriate sub-column and explain the terms of the security in the footnote. It is no longer necessary to use a “dummy date” (i.e., “08/08/1988”).
5. When reporting a derivative security that has multiple fixed vesting dates, the insider may insert a footnote in the “date exercisable” column (Column 2 of Table II of Form 3 or Column 6 of Table II of Form 4 or Form 5) and explain the vesting terms in the footnote. It is no longer necessary to insert the first vesting date, accompanied by a footnote (although an insider may choose to do so).
6. Insiders may now insert an address in Box 1 of Form 3, Form 4, or Form 5, and need not leave the address box blank. If, however, the insider leaves the box blank, the electronic filing system will complete the box automatically, using the insider’s address as it appears in his or her Form ID.
The glitch that the SEC chose not to fix is the requirement that, when reporting multiple transactions, the total holdings column (Column 5 of Table I or Column 9 of Table II) reflect a running tally of the insider’s holdings. In paper filings, insiders typically left the total holdings column blank until the last line on which a transaction was reported.
The most important upshot of the reprogrammed e-filing system is that some third-party “filers” reportedly have not yet been updated – so that attempts to make filings with these filers get rejected by the SEC’s system. Be careful to check the SEC’s Edgar database after you make a filing to ensure it is successful! The Romeo & Dye Section 16 Filer is upgraded and compatible with the SEC’s latest changes – and its still free through 9/30 (and then still has the lowest price – yet one of the best – filers available) – check it out at http://www.section16.net/Filer/index.htm.