New York State Bar Association
One Elk Street
Albany, NY 12207
Business Law Section
Committee on Securities Regulation
February 10, 2003
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
E-mail address: firstname.lastname@example.org
Attention: Jonathan G. Katz, Secretary
Re: File No. S7-52-02
Mandated Electronic Filing and Website
Posting for Forms 3, 4 and 5
Release Nos. 33-8170; 34-47069; 35-27627;
Ladies and Gentlemen:
The Committee on Securities Regulation (the "Committee") of the Business Law Section of the New York State Bar Association appreciates the invitation in Release No. 33-8170 (the "Release") to comment on proposed amendments to Section 16 and related forms under the Exchange Act to mandate electronic filing and website posting (if the issuer has a corporate website) of Forms 3, 4 and 5.
The Committee is composed of members of the New York Bar, a principal part of whose practice is in securities regulation. The Committee includes lawyers in private practice and in corporation law departments. A draft of this letter was reviewed by certain members of the Committee, and the views expressed in this letter are generally consistent with those of the majority of members who reviewed and commented on the letter in draft form. The views set forth in this letter, however, are those of the Committee and do not necessarily reflect the views of the organizations with which its members are associated, the New York State Bar Association, or its Business Law Section.
The Committee generally supports the proposed rule amendments, which are required by Section 16(a)(4) of the Exchange Act as amended by Section 403 of the Sarbanes-Oxley Act of 2002. We also support the Commission's goals to facilitate the rapid dissemination of relevant information while making the transmission and the Commission's processing of filings more efficient. However, we recommend that the Commission make certain changes proposed in this letter, which we believe would further those goals.
A. Electronically Filed Forms 3, 4 and 5 Should Be Deemed Filed On the Date Received By The Commission Regardless Of The Time Of Day
As proposed, Forms 3, 4, and 5 would be deemed filed on the day received by the Commission if the electronic transmission of the Form begins before 5:30 p.m. Washington, DC time. Filings that begin after 5:30 p.m. would be deemed filed the next business day. This is the same treatment that applies to other EDGAR filings, except for Rule 462(b) filings (increasing the amount of securities registered under certain conditions) which are deemed filed on the same day if received by the Commission before 10 p.m. Presently, electronic filings can be made between 8 a.m. and 10 p.m. Washington, DC time on weekdays that are not federal holidays.
We believe that the Section 16 reports should have the same treatment as Rule 462(b) filings -- deemed filed on the same business day if received by the Commission before 10 p.m. That treatment is particularly justified by the difficulties involved in making timely Section 16 filings in light of the two-business day deadline, system issues and large numbers of individuals with filing responsibilities. The comments in the prior rulemaking proposing Form 8-K reporting of insider transactions1discussed the difficulties with a two-business day filing requirement, and the Release recognizes these concerns in asking for comments on whether to afford Forms 3, 4 and 5 the same treatment as Rule 462(b) filings.
Allowing the Forms 3, 4 and 5 to be filed before 10 p.m. will give some relief, although it will not eliminate the serious difficulties involved in the new filing requirements. This is especially critical for filers on the West Coast who have three fewer hours than East Coast filers. We can think of no valid reason not to allow filers the full time EDGAR is available in order to make a timely filing.
On a more general note, we urge the Commission to consider, in a separate proceeding, treating all filings as being filed on the day received for purposes of meeting filing deadlines. This would be appropriate in light of the real time availability of EDGAR filings. Furthermore, the 5:30 p.m. cut-off appears more related to the historic paper filing regiment, and does not take full advantage of electronic filing capabilities, both for filers and investors. In addition, we believe that the Commission is aware of the desire of issuers to be able to make EDGAR filings 24 hours a day, 7 days a week, which also would facilitate more rapid dissemination of information to investors. We ask that the Commission consider additional means to permit anytime EDGAR filing.
B. Improvement Of Electronic Filing Procedures
The Release solicits comments on ways to help introduce new electronic filers to the system. Currently, test filings of Forms 3, 4, and 5 can be made electronically in a manner which enables the filer to become familiar with the procedures and the process before a "live" filing is made. It would be very helpful if the Commission could make the new online filing process available for testing prior to the effective date of the new requirements so that users could become familiar with the process and eliminate potential problems. Similarly, we recommend that, prior to the effective date, the Commission make available on its website downloadable templates for the Forms, compatible with EDGAR.
We note that the new online filing system is not yet complete or available for review. In addition, the customized form for a reduced content filing is not ready or available for review. The system and the forms for providing input to the system should be made available for review and testing by filers for a sufficient period prior to the effective date of the new requirements to help insure error-free implementation.
Finally, the Release indicates that a time limitation for input while on-line will be imposed. This would result in the loss of data being entered if not entered quickly enough. To avoid this, a process should be provided that allows a filer to work offline, and then submit the completed form when the filer is satisfied with the form. Providing for the Form to be created offline also would permit filers to use copies of filed Form 4s as a master form without the need to re-enter all of the information on the form each time a new filing is made. For example, this would be of particular value to some filers who voluntarily provide complete option information in Table II for each Form 4 filed, in addition to information on the specific transaction required to be reported.
We hope the Commission finds these comments helpful. We would be happy to meet with the Staff to discuss these comments further.
COMMITTEE ON SECURITIES REGULATION
By___Gerald S. Backman
GERALD S. BACKMAN
CHAIRMAN OF THE COMMITTEE
Michael J. Holliday
Richard E. Gutman
The Honorable Harvey L. Pitt, Chairman
The Honorable Paul S. Atkins, Commissioner
The Honorable Roel C. Campos, Commissioner
The Honorable Cynthia A. Glassman, Commissioner
The Honorable Harvey J. Goldschmid, Commissioner
Alan L. Beller, Esq., Director of Division of Corporation Finance
|1 || Form 8-K Disclosure of Certain Management Transactions, Release Nos. 33-8090; 34-45742 (April 12, 2002).