June 27, 2022

Rule 144 Amendments: Will Form 144 Become the General Counsel’s Problem?

Preparing & filing the Form 144 for insider transactions has traditionally been a job that’s fallen to the brokerage firm involved in the trade.  But with the recent amendments imposing a mandatory electronic filing requirement for Form 144, this Bryan Cave blog suggests that responsibility for those filings may end up on the General Counsel’s plate:

The SEC estimated in the adopting release that only approximately 25 percent of Form 144 filers have already prepared a Form ID and obtained a CIK number for EDGAR filings. As a result, approximately 75 percent of Form 144 filers will need to file a Form ID for the first time to obtain a CIK code and gain access to file on EDGAR. In practice, the burden of helping prepare Form IDs and obtain CIK numbers often falls to company counsel rather than the company insider, and the process in recent years has taken several days, due in part to COVID-19 slowdowns and challenges.

Although in the past, broker-dealers executing sales for affiliates generally handled the preparation and submission of paper Form 144 filings, it is unclear whether Form 144 filers and/or company counsel will be comfortable sharing CIK codes and sensitive Form ID information with broker-dealers, who may not have developed processes to collect, securely store, and properly update all of the EDGAR access credentials for each client required to file a Form 144

Fortunately, there’s an extended transition period for the portion of the amendments that imposes the electronic filing requirement for Form 144, which should provide some time to sort this out. In the adopting release, the SEC said that this new requirement will kick in six months from the date of publication in the Federal Register of the SEC’s adoption of an updated version of the EDGAR Filer Manual addressing the Form 144 changes. That’s expected to happen on September 22, 2022, so assuming those changes hit the Federal Register promptly, the electronic filing requirement shouldn’t go into effect until March 2023 at the earliest. Given that new procedures may be needed and that the requirement is going to hit all Rule 144 filers at once, now is the time to start coordinating with brokers.

John Jenkins