On June 3, 2022, the U.S. Securities and Exchange Commission (SEC) announced that it had adopted amendments to its rules that will require electronic filing or submission of a variety of documents that SEC rules currently permit to be filed or submitted in paper. These documents include the following, among others:
- “Glossy” annual reports to securityholders;
- Form 144 notices of proposed sales of securities issued by companies that are subject to reporting requirements under the Securities Exchange Act of 1934;
- Form 11-K annual reports filed by employee stock purchase, savings and similar plans; and
- Form 6-K reports submitted by foreign private issuers.
Other affected documents include notices of exempt solicitations and exempt preliminary roll-up communications, reports with respect to distributions of primary obligations filed by certain development banks, certain foreign language documents in Adobe Acrobat (pdf) format, and certifications by national stock exchanges that the exchange has approved the listing and registration of a security.
The amendments also will require the use of Inline XBRL for the filing of the financial statements and accompanying notes to the financial statements required by Form 11-K when filed electronically. The SEC has published a fact sheet that summarizes the amendments.
Effective Date and Compliance Date Transition Periods
The amendments will be effective 30 days after publication in the Federal Register. The amendments include the following compliance date transition periods:
- Documents other than Form 144 and Form 11-K: Six months after the effective date of the amendments, most notably including glossy annual reports and Form 6-K reports;
- Form 144: Six months after the date of publication in the Federal Register of the release in which the SEC adopts the changes in the EDGAR Filer Manual — which the SEC states in the adopting release that it expects to consider in September 2022, with Federal Register publication to follow afterwards — that are necessary to update Form 144 for electronic filing; and
- Form 11-K: Six months after the effective date of the amendments for electronic filing of the report, and three years after the effective date of the amendments for submission of the financial statements and accompanying schedules to the financial statements in Inline XBRL structured data language format.
What Companies Should Do Now
For most companies, the amendments are likely to have modest impact on either filing or submitting the documents that are subject to the amendments. The Form 144 amendments are likely to require significant changes for broker-dealers that currently file Form 144 notices on behalf of clients, which is the reason for the extended transition period for compliance with the Form 144 amendments.
- Glossy Annual Reports. The amendments will require companies to submit glossy annual reports electronically in pdf format. The impact of this requirement on a company will depend to a large extent on whether the company currently prepares a version of its glossy annual report in pdf format for web posting or other purposes. Although the adopting release does not cite numbers, it is believed that many companies already do so. Companies that do not currently prepare a version of their glossy annual report in pdf format will need to add this step to their proxy solicitation/annual meeting process, which is not expected to require significant time or expense.
When reviewing their current procedures for compliance with SEC rules related to glossy annual reports, companies should note the following:
- The amendments will eliminate the option for companies to furnish paper copies of their glossy annual reports to the SEC;
- The only electronic format that EDGAR supports at this time is pdf format;
- The amendments will require companies to submit copies of their glossy annual reports to the SEC in electronic format whether or not the annual report is posted on the company’s corporate website;
- SEC proxy rules will continue to require companies that use the “notice and access” model for proxy solicitation under SEC rules to publish their glossy annual report on a website other than the SEC’s EDGAR website; and
- The electronic version of a company’s glossy annual report should not be reformatted, re-sized, or otherwise redesigned for purposes of electronic submission on the SEC’s EDGAR system.
- Form 11-K and Form 6-K Reports. According to the adopting release, nearly all Form 11-K and Form 6-K reports were filed electronically during 2020 and 2021. As a result, the electronic filing requirement should not have a significant impact on most filers. In contrast, the requirement that the financial statements and schedules filed as part of Form 11-K reports be filed in Inline XBRL is likely to require a change in preparation of Form 11-K reports by all or nearly all filers, although companies and others involved in the filing process are very familiar with Inline XBRL at this point, and the amendments include a three-year transition period to minimize the impact of this change.
- Form 144. The impact of the Form 144 amendments will depend in part on the number of filings and whether the reporting person already has EDGAR codes. Companies subject to SEC reporting requirements that already file Form 144 notices for directors and executive officers and routinely obtain EDGAR codes for these persons are not likely to experience a significant impact, although the amendments will require procedural changes in preparation and filing of Form 144 notices when the SEC has implemented the changes in the EDGAR system required to support the Form 144 amendments.
As part of the Form 144 amendments, the SEC will provide a fillable online form, similar to the fillable online forms available for Form D notices and Form 3, 4 and 5 reports. This will facilitate compliance without requiring the purchase or maintenance of software or other technology.
For broker-dealers and other parties that have been filing Form 144 notices on behalf of persons who are not affiliates of a reporting company that issued the securities, the changes may be substantial. The filing agent will likely need to establish systems and procedures to obtain EDGAR codes for clients who do not already have them and to make electronic filings on their behalf and to file the Form 144 notices on a timely basis.
Filers will not be required to comply with the Form 144 electronic filing requirements until six months after the SEC publishes in the Federal Register the revised version of the EDGAR Filing Manual that updates Form 144 to implement the Form 144 amendments. As noted above, the SEC states in the adopting release that it expects to consider these revisions in September 2022, with publication in the Federal Register to follow thereafter.
Companies and filing agents should be considering how they would implement mandatory electronic filing, including obtaining EDGAR codes for persons who will be required to file Form 144 notices electronically who have not already obtained EDGAR codes. Companies and filing agents should also ensure that they will be aware of the SEC’s adoption and publication of the revised EDGAR filing manual that will trigger the start of the six-month phase-in period for the Form 144 amendments.
The Form 144 amendments are limited to requiring electronic filing of Form 144 for sales of securities of companies that are subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934 (Exchange Act). The Form 144 amendments do not include any of the other amendments that were included in the SEC’s December 2020 proposed amendments to Rule 144. These included, among others, proposed amendments to the Rule 144 holding period and elimination of the Form 144 filing requirement for sales of securities of companies that are not subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act. As a result, Rule 144(h) and Rule 101(c)(6) of Regulation S-T will continue to require affiliates who rely on Rule 144 to file a paper notice of sale on Form 144 when the issuer of the securities is not subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act.