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U.S. Securities and Exchange Commission

RELEASE 33-8170 - ("Proposing Release")

Prepared by Anne Krauskopf
Special Counsel
Division of Corporation Finance

April 3, 2003


Associations: American Corporate Counsel Association ("ACCA")

American Society of Corporate Secretaries ("ASCS")

Council of Institutional Investors ("CII")

Investment Counsel Association of America ("ICAA")

Investment Company Institute ("ICI")


Broker-Dealers: Charles Schwab & Co. ("Schwab")
Disseminators and
Software Developers:


Consortium of Filing Agents and Software Developers ("Consortium")2

R.R. Donnelley Financial ("Donnelley")

E*Trade Financial ("E*Trade")

Global Securities Information ("GSI")

R&W Software ("R&W Software")

Real Technology ("Real Technology")

Individuals: Pete Ward ("Ward")
Issuers: Emerson Electric Co. ("Emerson")

Jefferson-Pilot Corp. ("Jefferson-Pilot")

Patapsco Bank ("Patapsco")

Law Firms and
Bar Associations:

Committee on Federal Regulation of Securities of the

American Bar Association's Section of Business Law ("ABA")

Corporations Committee of Business Law Section of California State Bar ("California Bar")

Kruse, Landa & Maycock L.L.C. ("Kruse")

New York State Bar Association ("NY Bar")

Sullivan & Cromwell ("S&C")

Table of Contents

  1. General

  2. Electronic Filing

    1. New On-Line Filing System

      1. General

      2. EDGAR Access Codes

      3. Timeouts

      4. Reduced Content Filings

      5. Tagging and Computer Codes

      6. Other Technical Format Issues

      7. Aids for Inputting Information

    2. Extended Filing Deadline

    3. Temporary Hardship Exemptions

    4. Rule 16a-3(h)

    5. Item 405 Disclosure Relief

    6. Test/Transition Period

    7. Elimination of Electronic Cartridge Filing Method

    8. Electronic Filing of Form 144

  3. Website Posting

    1. Issuers' Obligation to Post/Rule 16a-3(k)

    2. Investment Company Issuers

    3. Website Navigation and Explanatory Content

    4. Hyperlinks

    5. Form 3

    6. SEC's Website Posting of Section 16 Forms

    7. Duration of Website Posting

I. General

Seven commenters3 expressed general support for the proposals, which would implement the requirements of electronic filing and website posting by issuers that maintain corporate websites, as Section 16(a)(4)4 requires no later than July 30, 2003. For example, commenters stated:

"We commend the Commission for its thoughtful and considered approach to the electronic filing and website posting directives of Section 403. If implemented as outlined in the Release, we believe this approach would achieve the objectives of earlier notification to the public of reports of insider transactions and wider public availability of the information reported about these transactions."5

"We are very happy that the Commission is moving to include forms 3, 4 and 5 on its EDGAR system and believe that this will result in a better-informed investing public."6

The sole individual commenter said, "We want more visibility into company reporting and transactions and this proposed rule is a great step in that direction."7

In contrast, another commenter8 expressed "a major fear and distrust of the EDGAR system," noting that any item that needs to be filed on EDGAR requires retention of a third party to transmit, and expressing concern that a Form 4 consequently could not be filed timely.

II. Electronic Filing

A. New On-line Filing System

As described in the Proposing Release, a new on-line filing system will be in effect by the time mandated electronic filing of Forms 3, 4 and 5 becomes effective. The new system will permit insiders and their agents to access the Commission's filer website to fill out and submit forms. As with the current system, the filer first will need to have valid EDGAR access codes. The filer will need to have all necessary information available before going on-line, so that data entry can be performed quickly enough to avoid timeouts that end the session. The system will not be able to save an incomplete form from session to session. Before implementation, the Commission will announce mandatory fields and other technical requirements so that filers can create customized forms and file them as reduced content filings, enabling issuers and insiders to continue to use third-party service providers for these filings.9

1. General

Relatively few commenters addressed on-line filing generally, focusing instead on specific aspects of the proposal. Those who did expressed support that was sometimes cautious, and urged the Commission to develop a system that is both low-cost and easy to use.

One commenter expressed general support for an on-line filing system for Section 16(a) reports, noting that "it will enable greater accuracy in the filing process and permit filers to download and print filings and add attachments before submission to the Commission." 10

A different commenter expressed uncertainty, stating "While we support this idea, it is not possible to determine whether it will be workable without considerably more information about the system."11

Another admonished the Commission to "bear in mind that many users of the system are likely to be persons who will have little experience with electronic filing methods or with the Commission's reporting requirements. Moreover, many of them will be insiders associated with small companies that are unable or unwilling to assist their insiders in completing and filing their Section 16(a) reports."12

A different commenter13 noted that current costs of using agents to file electronically [on the EDGARLink system] were relatively high (up to $100 per Form 4) compared to paper filing. This commenter suggested that these high costs currently impeded companies from voluntarily filing electronically, and remarked "if [there is] no new web-based, user friendly SEC template [the Commission] should not underestimate costs [to mandate electronic filing]."

2. EDGAR Access Codes

Three commenters14 suggested that the Commission should adjust its procedures for assigning insiders' identification codes to reduce the potential for late filings for persons who become insiders with more than one issuer. The problem typically arises when the new issuer's request for a CCC number results in issuance of a new CCC number and cancellation of the insider's previous CCC number. The Proposing Release states that failure to obtain timely an identification number or access codes will not justify a temporary hardship exemption.

Commenters addressing this question shared the view that the Commission should fix this problem. Two commenters suggested that the Commission should give out the insider's existing codes to a person making a new code request for that insider.15 In the alternative, one of these commenters16 suggested that the Commission should respond to a new request for codes by returning it with a notice that the insider already has codes.

A different commenter17 suggested three other possible solutions for the Commission to implement:

  • Creating a Commission website listing all Section 16 filers, so the new issuer could readily discover if the insider already had codes;

  • Responding to a request for new codes by generating new codes that "would be unique to that combination of insider and issuer and would not affect the codes used by other issuers for the insider"; and

  • Granting a temporary hardship exemption where a good faith new request for codes results in termination of valid codes.

A fourth commenter18 noted that mandated electronic filing will lead to an increase in the number of requests for codes, and asked "How does the SEC intend to both expedite an increased number of requests for SEC Access codes and eliminate generation of duplicate sets of codes?"

3. Timeouts

Four commenters19 expressed concern regarding timeouts and the inability to save data from session to session. One suggested providing a process allowing a filer to work offline and then submit the completed form. This commenter explained that "[p]roviding for the Form to be created offline also would permit filers to use copies of filed Forms 4 as a master form without the need to re-enter all of the information . . . each time a new filing is made."20

Another expressed concern whether filings submitted on-line could be properly reviewed and proofread. "In my experience, before a Form 4 is filed, the attorneys involved, the insider and any other interested person proofread a completed form. Under the new system, [...] to complete an adequate proofread, all interested persons virtually would need to be physically present over the data entry person's shoulder. [...] The proposed new on-line filing system should allow a final submission-ready version to be created and filed with a sufficient amount of time for proofreading, which facilitates more accurate and timely Section 16 filings."21

A different commenter said: "We suggest that the Commission look for ways to improve the technology of the system so that incomplete forms can be saved from session to session or filers can complete the form offline before submitting it online. Even if these technological improvements are made, we doubt that insiders will find it easy to use this system by themselves."22

The fourth commenter concurred regarding a save feature: "We think it is essential that the Commission build into the system a "SAVE" feature of the type that is a staple of software programs offered by commercial vendors for preparing and filing Section 16(a) reports. This feature should (a) permit the user to elect to save on the system a partially completed form until his or her next log-on session, and (b) prompt the user (as does the LEXIS on-line legal research service) at a prescribed interval (perhaps two minutes) before the end of the session either to save the information within the remaining period or allow it to be deleted."23

4. Reduced Content Filings

Four commenters24 supported making the new system available to reduced content filers. One noted that "A significant number of filers do not use the SEC's software to submit filings to the SEC, using off-the-shelf and proprietary applications instead to take advantage of the SEC's `reduced content' specifications."25

Another26 offered very specific recommendations:

"The new online system should provide functionality that allows third party software providers (as well as in-house IT groups) to directly upload the reduced content filings. Specifically, the new system should provide an interface or web service that allows third party software to automate the logon process as well as any subsequent data entry screens, in a secure environment. If this is not possible, the system should allow reduced content filings generated by third-party software to be submitted easily, with all required data contained within the file itself and with little or no duplicative data entry during the submission process. We expect that many corporations that currently file on behalf of their corporate insiders will continue to do so and will want to use the existing programs to create the filings, rather than the Commission's new online filing system. The existing programs offer a number of advantages to corporate filers, including integration with the corporations' existing stock plans records and minimization of data entry, storage of historical filings for reference purposes and to streamline amendments, storage of footnotes for future use, and the ability to save a form before it is complete for additional editing at a later time. To some extent, the Commission's own regulations encourage corporations to assume filing responsibility on behalf of their insiders and, in our experience, this greatly increases the timeliness and accuracy of filings. Therefore, we believe it is beneficial to investors for corporations to continue to file on behalf of their insiders and we encourage the Commission to make this process as easy as possible."

A different commenter27 also offered specific recommendations:

"[T]he System should allow third-party software to bypass any data entry screens and upload the Forms directly, using a version of the Reduced Content XFDL Specification currently accepted by EDGAR. The System should incorporate state-of-the-art technologies such as web services and SOAP to allow third-party systems to directly transmit submissions, bypassing the need for a user to open his or her browser, navigate to the correct location on the SEC's website, and choose the correct file to submit. By providing third-party software a method of direct transmission, you will make the process of submission easier for filers and less prone to errors."

Another commenter,28 noting that its software product is not a filing service but instead assists users in filing, wants its system to continue to be the single data entry point both for filing and maintaining historical automated records of transactions and holdings. This commenter remarked that the "reduced content filing" would be the appropriate interface between its system and EDGAR, proposing that the user create an EDGAR interface file (using ASCII XML) containing the form content on its system. The user then would log on to the new EDGAR site providing necessary header information to identify the insider, the issuer and the form to be filed. The user next would add the EDGAR interface file as an attachment, edit and submit. The commenter notes that "[i]f every box and column is tagged and can contain a tagged comment reference the online system could process the information the same way whether it is entered manually or in an attached file."

5. Tagging and Computer Codes

Five commenters29 specifically addressed these issues.

Noting that the current system permits a variety of formats, resulting in data that cannot easily be converted into databases or analyzed by software, one commenter30 strongly suggested "that the Commission revise the Reduced Content XFDL Specification to specify an XML data format for each form. [...] The format for each form should be standard XML that encompasses all of the data elements to be collected. The Commission should also develop a separate XSL style sheet that will be used to format and display the corresponding XML data. In this way, by separating the data from the formatting, the data can be consistently displayed on the SEC's website and also be easily imported into databases, spreadsheets and other computer systems. XML and XSL is currently supported by most popular browsers and the XML and XSL specifications are an Internet standard."

A different commenter,31 who concluded that the Commission proposed to receive and disseminate only a data set tagged in XFDL, expressed concern that "[t]hird-party disseminators as well as the SEC's own public web site will be required to perform a translation or transformation of the tagged data in order to produce a user-friendly document for display and print purposes." This commenter strongly recommended that instead the Commission should receive both the tagged data set and a properly formatted version of each form, or that the Commission add the application of creating a user-friendly format when the filer hits the "submit" button.

Another commenter32 similarly recommended that "the SEC's system `translate' tagged data into user-friendly, displayable, printable formats prior to dissemination rather than relying on third-party disseminators to perform the translation."

As to codes, this commenter recommended that the SEC allow the option to submit XBRL- tagged information for Forms 3, 4 and 5 and other filings.

A different commenter33 also "strongly recommend[ed] that the SEC allow public companies the option to submit information tagged in XBRL for Forms 3, 4 and 5 and add XBRL to its list of allowable information formats." This commenter noted that "XBRL leverages all the benefits of XML" and "streamlines the information gathering and dissemination processes by enabling companies to tag their financial information once and use it for multiple purposes, [...] thus easing the retrieval, and facilitating consumption, of that information by analytical software applications." The commenter further noted that "[b]ecause information is only entered once, risk of manual data entry errors is greatly reduced."

Two other commenters34 suggested that the SEC consider XML rather than XFDL to accomplish style sheet translations. One noted that "[u]sing XML . . . for the input schema would permit the SEC and disseminators to apply the more widely available XSLT (Extensible Stylesheet Language Transformation) technology to produce user-friendly displays."35

The other36 stated that "[XML] will allow the Commission to disseminate the information to investors in a standard format; data can be easily exported to data bases, spreadsheets, and other computer systems; and it will enable advanced sorting and searching capabilities."

6. Other Technical Format Issues

One commenter37 stated that "As a disseminator, the simplest and most cost effective way . . . is to accept the filings as they are currently filed and add the additional fields that you intend to collect to the header file. This would cause minimum changes in our existing systems as we could choose to ignore the additional filing fields and accept filings as they have been filed in the past. This would . . . not put an over burdensome cost on the disseminator. (You did not mention additional costs assumed by the disseminator in your Cost benefit analysis.)"

Another commenter38 opposed elimination of the EDGARLink system for these filings. Noting that the on-line system would limit the text in footnotes and require information that otherwise would be in a footnote to be included in an exhibit, this commenter worried about the impact on group filers:

"We are especially concerned about filings made by groups and affiliated ten percent stockholders who currently use elaborate footnotes explaining the relationship between the members of the group, sometimes cross-referencing documents filed on Schedule 13D. It may take many hours to properly fill out and check a Form 4 prepared on word processing equipment and currently filed in paper format. Such documents can be converted to traditional EDGAR format and filed through the EDGARLink system. We are concerned about the prospective elimination of this filing method for these complex forms, since it appears from the discussion in the release that it will be difficult to complete these forms online."

This commenter also set forth several reasons why the Commission also should allow Section 16 filers to make electronic submissions in PDF:

"Under the shortened reporting scheme for Form 4, there is limited time for reporting persons to involve third parties in the preparation of their forms, therefore making it increasingly important that these forms be able to be completed by reporting persons themselves. Second, filling out a form in .pdf format would allow filers as much time as they need to complete and review the form, as well as the ability to save a partially completed form. Finally, .pdf format will enable filers to comply with the form instructions by easily attaching or including exhibits when line item or footnote space is insufficient."

A different commenter39 strongly suggested "that any required electronic filing be done in a user friendly way (such as an email with an attachment) in a format that is readily available and widely used (IE MS Word). Currently the EDGAR system would not come close to meeting this request."

7. Aids for Inputting Information

One commenter40 suggested that the data entry portion of the System should allow for an unlimited number of rows in each of the transaction tables.

Another commenter41 suggested that the on-line filing system include the following specific features to facilitate its use:

  • Pull-Down Menus - from which the filer could select transactions codes, dates, type of security (e.g., common stock, convertible preferred stock, nonconvertible preferred stock), and descriptions of various options (e.g., option to buy, obligation to buy, option to sell, obligation to sell).

  • Instructional Keys - so that the applicable instruction from the General Instruction would appear automatically on the screen when the user reaches the portion of the form to which that instruction applies.

  • Automatic Population of Known Fields - to fill in identifying information based on data already on file with the Commission (such as information in the most recent previous report), with the ability to override to make updates and corrections.

  • Attachments - providing specific instructions that would avoid the need to separately EDGARize attachments. The commenter recommends eliminating the obligation to attach the power of attorney, instead allowing the insider to furnish a copy to the issuer that would be available to the Commission upon request, and creating a new box on the form where the insider would be required to identify the names of persons authorized to sign Section 16(a) reports on behalf of the insider.

  • Transaction Codes - adding more transaction codes to reduce reliance on "J" - "Other," which requires an explanation; and revising the names of some Rule 16b-3 codes to make them more intuitive and user-friendly.

  • Footnotes - including the most commonplace footnotes in a pull-down menu.

  • Multi-Entry Transactions - including a pull-down menu to guide the insider in reporting transactions that require multiple entry, such as a same-day option exercise and sale.

B. Extended Filing Deadline

The Proposing Release requested comment whether Rule 13(a)(3) of Regulation S-T should be amended so that a Form 3, 4 or 5 would be deemed filed on the same business day as long as it is received before 10 p.m. Eastern time. Rule 13(a)(3) currently provides this treatment for a registration statement or post-effective amendment filed pursuant to Securities Act Rule 462(a).

Twelve commenters42 supported extending the deadline for electronic filing, so that the form would be considered filed on the same day even if filed later than 5:30 p.m. Eastern time. As one noted, "Insiders, as a class, generally do not have the same resources available for electronic filing as issuers. If anything, they should be treated more, rather than less, kindly by the Commission insofar as filing Section 16(a) reports is concerned."43

Seven commenters44 endorsed applying the 10 p.m. Eastern time deadline of Rule 13(a)(3). These filers noted that:

  • Extending the deadline is "reasonable and appropriate given the accelerated filing deadline requirements applicable to Section 16 reports."45

  • A significant number of filers are substantially disadvantaged by the fact that 5:30 p.m. Eastern time is only 2:30 p.m. Pacific time and 3:30 p.m. Mountain time, especially with respect to the accelerated two-business day filing deadline for Form 4.46

  • Since the current 5:30 deadline falls after the close of traditional trading markets, filings made between 5:30 and 10:00 p.m. will have no different impact on the markets than filings between the market close and 5:30 p.m.47

  • Allowing a few extra hours would ease the administrative burden and relieve the potential for error.48

  • No technological obstacle prevents the Commission from so extending the deadline.49

  • Individuals comprise such a significant portion of Section 16 filers.50

Citing the same general reasons, four of the commenters51 supported further extending the filing deadline to 12:00 midnight Eastern time. One commenter claimed that although extending the deadline to 10:00 p.m. would provide some relief, it would not eliminate serious difficulties, particularly for West Coast filers.52

In a broader context, three commenters suggested that the Commission should make EDGAR filing available 24 hours per day.53 Two noted that although the Commission does not operate during all of these times, the technology exists to place the submissions in a queue pending the actual filing and dissemination during the next available window.54

The other commenter "would propose treating all filings for which an EDGAR acceptance message is received before midnight on any day as being filed on that day for purposes of the filing deadlines. We are aware that in the past the Commission has opposed making the system available 24-hours-a-day because time is required for system maintenance and backup and budgetary constraints limit the availability of filer support staff. However, these positions were adopted long before Congress decided to require Section 16 forms to be filed within two business days of a transaction. We believe that technology has advanced to the point where the Commission should be able to perform maintenance and backup without disrupting acceptance of filings."55

C. Temporary Hardship Exemptions

As proposed, the temporary hardship exemption provisions of Regulation S-T Rule 201 and Form TH would continue to apply. However, citing the expected ease of electronic filing and the limited utility to investors of paper filings, the Proposing Release requested comment whether the ability to use the temporary hardship exemption should be eliminated for Section 16 filers, such as through a sunset provision. Alternatively, the Proposing Release solicited comment as to whether a person who files in paper under a temporary hardship exemption should have fewer than six business days to submit an electronic format copy of the filed paper document. The Proposing Release asked whether two or three business days would be appropriate, and if so, whether the shorter period should apply to all required filings or solely to Forms 3, 4 and 5.

Only three commenters56 addressed the temporary hardship exemption, in each case requesting that the Commission maintain the temporary hardship exemption as proposed. One stated that:

"Technological developments and the ease of use cited in the release as reasons to possibly shorten the timeframe to file electronically or to eliminate the exemption altogether are likely not available to filers seeking a hardship exemption. Filers who have made good faith efforts to make timely filings electronically and experience system or operator failures should not be unreasonably penalized."57

Another suggested that, given the greater likelihood that insiders are individuals and have fewer resources than five percent beneficial owners who infrequently have been granted hardship exemptions, "the Commission should adopt a more tolerant attitude regarding the availability to insiders of the hardship exemptions, at least during the first 12 months that insiders are transitioning to a strange and complex system that places heavy demands on them within a short time frame."58

This commenter further suggested that the Commission:

  • adopt for insiders an approach similar to a Rule 12b-25 automatic extension of time for filing if certain representations are made; and

  • clarify that Note 1 to Rule 201 will not result in an issuer losing its ability to use Forms S-2, S-3, S-8, F-2 and F-3 because its insider failed under the temporary hardship exemption to file an electronic copy of the form within six days as required by Rule 201(b).

D. Rule 16a-3(h)

As proposed, the timely-filed provision of Rule 16a-3(h) would be rescinded.

One commenter59 encouraged the Commission to retain it, stating:

"We expect that some filers will rely on third-party service providers to electronically submit filings on their behalf. Where this is true, we feel that if the filer has obtained a guarantee from the third-party that the form will be filed on time, the filer should not be penalized with a delinquency if the third-party service provider fails to fulfill that guarantee."

E. Item 405 Disclosure Relief

One commenter60 suggested that, if the filing deadline is not extended past 5:30 p.m. or hardship exemptions granted more liberally, the Commission should provide some limited relief from Item 405 disclosure. The commenter recommended "a Commission statement that a report during the first 12 months after the new system is in effect that is filed within one business day after the deadline will not be considered delinquent for purposes of disclosure under Item 405. This type of relief would be temporary, and given in recognition of the difficulties which insiders are likely to experience during the initial period of becoming accustomed to the new system."

F. Test/Transition Period

The Proposing Release noted that when the new on-line system is implemented, EDGARLink filing no longer will be available for Forms 3, 4 and 5.

Seven commenters61 expressed support for a test period/transition period during which both systems would be available.

Two of these commenters62 encouraged the Commission to permit testing of the new system before eliminating EDGARLink. One commenter stated that providing specification changes and making the new system available for testing purposes before "rollout" would permit programming changes to be made and tested before implementation.63 Another commenter explained:

"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."64

However, three commenters suggested a specific transition period during which EDGARLink would remain available, with two commenters recommending six months,65 and one commenter recommending 12 months.66 As one commenter explained:

"The software development cycle can be several months; implementation of the new requirements outside of the normal development cycle could place a considerable strain on the resources of third-party software providers in this industry. [...] We do not see any reason why filing the forms in the format currently accepted by EDGAR would prevent a company from posting them to its web site.... We feel that continuing to accept forms in the current format would enable a smoother transition to the new system, increase filer confidence by providing additional time to learn and adjust to the new system, offer third-party software providers valuable time to comply with the new requirements, and still provide investors with the information they need in an easily accessible format."67

Without addressing EDGARLink, a different commenter68 stated its belief that "the Commission should not make electronic filing mandatory under Section 16 until the last possible date." The commenter said that a substantial transition period would particularly benefit insiders of small issuers, who will likely need more time to prepare, and would benefit third party vendors by allowing more time to develop products to assist insiders.

G. Elimination of Electronic Cartridge Filing Method

Noting that use of this filing method is de minimis, the Proposing Release proposed to eliminate this transmission medium and Form ET, the related transmission form.

The only commenter to address this issue supported eliminating this transmission medium.69

H. Electronic Filing of Form 144

The Proposing Release mentioned that, in the future, the Commission may propose to require electronic filing of Form 144.

One commenter70 suggested instead that "the Commission should consider eliminating the requirement for affiliates to file Form 144 where they already will be reporting the same transaction within two business days on Form 4."

III. Website Posting

The statutory website posting requirements apply to both the Commission and the issuer (if the issuer maintains a corporate website), and require each to provide website access to an insider's change of ownership report not later than the end of the business day following the filing.

New Rule 16a-3(k) would be added to require any issuer that maintains a corporate website to post on that website, by the end of the business day after filing, any Form 3, 4 or 5 filed under Section 16(a) as to the equity securities of that issuer. The Proposing Release solicited comment whether an issuer that does not have a corporate website should be required to disclose in its Form 10-K why it is not subject to the website posting requirement. The website posting requirement would become effective at the same time as the electronic filing requirement. The Proposing Release explains that the issuer could satisfy the posting requirement either by providing access directly or by hyperlinking to the forms through a third-party service, if certain conditions permitting full, easy and on-going access are satisfied.

A. Issuers' Obligation to Post/Rule 16a-3(k)

Two commenters71 expressed concern regarding issuers' ability to timely satisfy the website posting requirement for filings by insiders (such as ten percent owners) who typically will not rely on the issuer's assistance to file. These commenters cited the possibility that the issuer would receive a copy of the filing too late to post it directly.

Expanding on the Proposing Release's suggestion that issuers may want to designate a manner of receiving filings electronically under Rule 16a-3(e), one commenter72 recommended amending Rule 16a-3(e)73 to require insiders whose filings are not arranged by the issuer to send the copy to the issuer electronically. In the alternative, this commenter suggested limiting proposed Rule 16a-3(k) so that it would require the issuer to post on its website only Section 16(a) forms filed on behalf of directors and officers.

Alternatively, the other commenter74 suggested that the Commission design the EDGAR system so the person making the filing could direct EDGAR to send a copy to the issuer.

A different commenter75 suggested defining "corporate websites" to establish a differentiation between public and private websites, often referred to as Internet and intranet infrastructures.

Finally, one commenter76 requests that the deadline for issuers to satisfy their website posting requirement be extended to 10:00 p.m. Eastern time of the following business day.

B. Investment Company Issuers

One commenter77 pointed out that investment companies typically do not maintain their own websites:

"[T]o tailor the rule appropriately for investment companies, we recommend that the requirement to post Forms 3, 4 or 5 with respect to a fund's equity securities apply to any affiliate that maintains a website that contains descriptive information about the fund (e.g., performance information or other descriptive attributes). If no affiliate maintains a website that includes such information about a closed-end fund, or if the affiliate's website merely identifies the fund by providing, for example, the fund's name and current net asset value, then that fund would not have its forms posted. Also, if more than one affiliate's website included such information, only one of them should be required to post the forms. (The website could be identified in the fund's Form N-CSR.)"

As to whether Form 10-K disclosure should be required to explain the absence of a corporate website, this commenter recommends that an investment company provide such explanation in its annual shareholder report on Form N-CSR.

C. Website Navigation and Explanatory Content

One commenter78 surveyed the websites of approximately 20 issuers who already are voluntarily posting Section 16 information. At most of these websites, the Section 16 information was accessed in approximately three clicks from the homepage. The commenter recommended that the Commission require all posting issuers to use a location on the website that the issuer "reasonably believes will facilitate user access to the forms." This is the standard the Proposing Release applied only to an issuer that has a corporate website through which it does not normally disseminate information to investors.

Based on this survey, the commenter also noted that some companies provide additional information, such as charts that synthesize transaction information. The commenter suggested that "[t]he final rules should make it clear that the practice of voluntarily providing explanatory information . . . is permissible so long as the actual forms may also be accessed. It should also be permissible to provide a guide to the Commission's transaction codes used in the forms."

D. Hyperlinks

Three commenters79 supported hyperlinks as a way to satisfy the website posting requirement. However, these commenters and others had the following suggestions:

  • The language of proposed Rule 16a-3(k) should be expanded to provide specifically that an issuer can satisfy its website posting requirement by hyperlinking to a third-party website, include EDGAR. 80

  • The conditions for hyperlinking should make clear that the issuer should display the link clearly on its website and the link should allow the user direct access to the reports.81

  • The Commission should make clear whether the link requires a separate caption such as "Section 16 Reports" and should be to a site that contains only Section 16 reports, or alternatively whether a caption "SEC filings" linking to all SEC reports would suffice.82

  • An issuer should be able to satisfy its posting requirement by a single hyperlink directly to the EDGAR portion of the Commission website where the Forms 3, 4 and 5 are made available, thereby reducing the burden on businesses to constantly update their websites.83

  • The issuer should not be required to hyperlink to each individual report that is filed, particularly because the issuer may not be aware that a third party beneficial owner has filed a report.84

E. Form 3

Although the statutory mandates apply specifically to Section 16 change of ownership reports, the Proposing Release also would mandate electronic filing and website posting of Form 3.

One commenter85 expressly supported requiring website posting of Form 3, stating "Web access to information on Form 3 is important to investors because it provides timely and complete disclosure regarding initial ownership positions, which is useful in assessing changes in equity holdings."

F. SEC's Website Posting of Section 16 Forms

Two commenters86 suggested that "placement of the Forms 3, 4 and 5 in a separate location [on the SEC's website] will ease retrieval and analysis of the contents of these forms by interested investors."

The sole individual commenter87 said, "Perhaps the SEC could redesign the Public Company Filings format to be easier to understand. Not just the organization of the forms, but also the layout of the actual filings."

G. Duration of Website Posting

One commenter88 addressing this issue recommended that the issuer post Section 16 reports for a minimum period of 12 months, and the Commission post them longer so that investors have the opportunity to study ownership trends and transaction history.

A different commenter89 suggested that the one-year period contemplated by the Proposing Release for satisfying the issuer's obligation through hyperlinking "is an appropriate period for all website posting methods."

1 A non-profit consortium hosted by the American Institute of Certified Public Accountants ("AICPA") representing over 45 U.S. accounting, technology, government, regulatory and financial services bodies.
2 Members are American Financial Printing, Bowne & Co., Inc., Capital Printing, CCH/D Tech, Color Art, Command Financial, Davis Polk & Wardwell, Merrill Corporation, Pacific Financial Printing, R.R. Donnelley and St. Ives/Burrups.
3 ABA, CII, GSI, ICAA, ICI, New York Bar, Ward.
4 As amended by Section 403 of the Sarbanes-Oxley Act of 2002.
5 ABA.
6 GSI.
7 Ward.
8 Patapsco.
9 The test website for reduced content filings became available on March 3, 2003.
10 ICI.
11 S&C.
12 ABA.
13 Jefferson Pilot.
14 ACCA, ASCS, Emerson.
16 ASCS.
17 Emerson.
18 Donnelley.
19 ABA, Emerson, NY Bar, S&C.
20 NY Bar.
21 Emerson.
22 S&C.
23 ABA.
24 ASCS (requesting single data entry for reduced content filers), Donnelley, E*Trade, Real Technology.
25 Donnelley.
26 E*Trade.
27 Real Technology.
28 R&W Software.
29 Consortium, Donnelley, E*Trade, Real Technology, XBRL.
30 Real Technology.
31 Consortium. As a further alternative, this commenter suggested that the SEC require data tags embedded inside a single, displayable HTML version of the filing.
32 Donnelley.
33 XBRL.
34 Consortium, E*Trade.
35 Consortium.
36 E*Trade.
37 GSI. The specific data fields that this commenter recommends the SEC collect are those included in the Official Summary: "Nature of ownership, relationship, date of transaction, character amendment or original, transactions, bought or otherwise acquired and sold or otherwise disposed of, month end holdings, and option." This commenter also suggested retaining existing transaction codes.
38 S&C.
39 Patapsco.
40 Real Technology.
41 ABA.
42 ABA, ACCA, ASCS, California Bar, Emerson, E*Trade, ICI, Kruse, New York Bar, Real Technology, S&C, Schwab.
43 ABA.
44 ABA, California Bar, Emerson, E*Trade, ICI, Kruse, Schwab.
45 ICI.
46 ABA, California Bar (noting that approximately 16% of all publicly traded corporations are headquartered in California), Kruse (noting that many smaller issuers with fewer resources are located in the Mountain time zone), Schwab.
47 ABA, Emerson, E*Trade, Kruse, Schwab.
48 Emerson.
49 ABA.
50 ABA, S&C.
51 ACCA, ASCS, NY Bar, S&C (noting that the two-business day deadline "will also be difficult for the Commission, which will need to accommodate large numbers of individuals with filing responsibilities.").
52 NY Bar.
53 ACCA and Real Technology (both suggesting availability 24 hours per day, 7 days per week and 365 days per year), S&C.
54 ACCA, Real Technology.
55 S&C (supporting a 10:00 p.m. Eastern time deadline in the alternative if round-the-clock is not possible).
57 ASCS.
58 ABA.
59 E*Trade.
60 ABA.
61 ASCS, Donnelley, Emerson, E*Trade, ICI, NY Bar, S&C.
62 Donnelley, NY Bar.
63 Donnelley.
64 NY Bar.
65 E*Trade, ICI.
66 ASCS.
67 E*Trade.
68 ABA.
69 ABA.
70 ABA.
71 Schwab, S&C.
72 Schwab.
73 Rule 16a-3(e) provides: "Any person required to file a statement under Section 16(a) of the Act shall, not later than the time the statement is transmitted for filing with the Commission, send or deliver a duplicate to the person designated by the issuer to receive such statements, or, in the absence of such a designation, to the issuer's corporate secretary or person performing equivalent functions."
74 S&C.
75 R&W Software.
76 ICI.
77 ICI.
78 ABA.
79 ABA, ICAA, Schwab.
80 S&C.
81 ICAA.
82 Emerson, noting that a link to all SEC reports would be easier to establish because limiting the link to Section 16 reports would require adding a filter into the link.
83 ASCS.
84 Schwab.
85 ICAA.
87 Ward.
88 ICAA.
89 ABA.



Modified: 04/15/2003