Section of Business Law
750 North Lake Short Drive
Chicago, IL 60611

August 15, 2002

By Hand Delivery and E-Mail

Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D. C. 20549-0609
Attention: Jonathan G. Katz, Secretary

Re: File No. S7-31-02

Ladies and Gentlemen:

This letter is submitted in response to the SEC's request for comments in Release No. 34-46313, dated August 6, 2002, regarding proposed revisions to the rules and forms adopted under Section 16(a) of the Securities Exchange Act of 1934 ("Exchange Act").

The comments included in this letter have been prepared by the Subcommittee on Employee Benefits, Executive Compensation and Section 16 (the "Subcommittee") of the Committee on Federal Regulation of Securities (the "Committee"), Section of Business Law (the "Section") of the American Bar Association. Due to the time constraints occasioned by the short period provided for comment on the proposals, this letter has been circulated for comment, with only a brief time to respond, among other members of the Subcommittee, the Chairs and Vice-Chairs of Subcommittees and Task Forces of the Committee, the Officers of the Committee and the Advisory Committee of the Committee and the Officers of the Section. Nevertheless, a substantial majority of those who reviewed the letter in draft form have indicated their general agreement with the views expressed. However, this letter does not represent the official position of the American Bar Association, the Section, its officers, the Committee or the Subcommittee, nor does it necessarily reflect the view of all who reviewed it.


Section 403 of the Sarbanes-Oxley Act of 2002 (Pub. L. No. 107-204, 116 Stat. 745) amended and restated Section 16(a) of the Exchange Act in its entirety, with the amendments to become effective August 29, 2002. As amended, Section 16(a) will require insiders subject to that provision to (i) report all changes in beneficial ownership by the end of the second business day following "the day on which the subject transaction has been executed," except where the Commission determines by rule that the two-day period is "not feasible"; and (ii) indicate in each report "ownership by the filing person at the date of filing." In addition, the amended Section 16(a) provides that, beginning no later than July 30, 2003, all Section 16(a) reports are to be filed electronically, and are to be posted by the Commission and by the insider's company (if it has a corporate website) on their respective websites by the end of the next business day following the filing of the report.

The Commission has proposed in Release No. 34-46313 (the "Proposing Release"), without offering specific language, to amend its rules and forms relating to Section 16(a) in three areas:

We support the Commission's general approach described above. We suggest, however, that the Commission augment it by extending the reporting deadline for market transactions and transactions pursuant to Rule 10b5-1 trading plans and, temporarily, for elective transactions under issuer plans. Also, as more fully explained below, we believe that the Commission should provide guidance in the adopting release for the final rules regarding: (i) the disclosure of Rule 10b5-1 plan events and transactions under Section 16, which we believe can eliminate the need for issuer reports of such matters on Form 8-K, (ii) filing mechanics and procedures, and (iii) transition concerns.


Rule 16b-3 Transactions

We concur with the Commission's view that all reportable transactions by officers and directors that are exempt under Rule 16b-31 should be reported on Form 4. Based on the high level of investor and media interest during the past year in many Rule 16b-3 transactions by insiders of troubled companies, it is evident that the existing reporting system is inadequate to meet the needs of these parties for more timely information regarding these types of transactions. Accordingly, we endorse the Commission's proposal to amend Rule 16b-3 to require more current reporting of these transactions.

Transactions Whose Timing is Outside the Insider's Control

In the Proposing Release, the Commission indicated that it was considering the adoption of extended deadlines for the reporting of "narrowly specified types of transactions where objective criteria prevent the insider from controlling (and in many cases from knowing) the timing of transaction execution)." We concur that relief in the form of deferred deadlines for reporting these types of transactions is appropriate. We suggest, however that instead of attempting to develop an exclusive list of such transactions, the Commission consider adopting a simple exemption for "transactions the timing of which is determined by a third party." But if the Commission wishes to follow the route of developing a list, we agree that the following transactions mentioned in the Proposing Release should be included: (i) transactions pursuant to a single market order executed over more than one day, (ii) transactions involving a pre-existing arrangement (such as a Rule 10b5-1 plan) under which the timing of transactions is outside the knowledge of the insider prior to receipt of a confirmation or other notice, and (iii) a Discretionary Transaction involving an employee benefit plan where delay in receiving notice occurs. We recommend adding to the list (i) contributions to exchange funds, because the insider typically does not know the date that his or her securities will be "priced" for purposes of valuation in such transactions, and (ii) transactions in which the insider has an indirect pecuniary interest that are effected by third parties, because the information regarding such transactions ordinarily is not readily available from the third parties. We will discuss below each of the three categories of transactions described by the Commission in the Proposing Release.

Market Orders and Rule 10b5-1 Trading Plans

The Sarbanes-Oxley Act limits the Commission's ability to authorize a delayed Section 16(a) filing deadline to those situations in which the Commission determines that reporting on a two-day basis is not "feasible." In the Proposing Release, the Commission indicated that it would consider a non-feasibility delay only where "objective criteria prevent the insider from controlling (and in some cases from knowing) the timing of the transaction execution." We agree with the Commission's view that it will not be feasible to report transactions with respect to which the insider cannot control (or know) the timing. In our view, and given the number of parties involved in insider transactions, reporting such transactions on a two-business-day basis is feasible if and only if the persons responsible for preparing and filing the reports have notice that a transaction will occur prior to its actual execution.

The Commission, in the Proposing Release, specifically identified the following types of transactions as potentially meriting a variation from the standard two-day reporting deadline on this non-feasibility basis:

It appears to us that the common characteristic of these transactions is that they should qualify for the affirmative defense of Rule 10b5-1(c) (assuming all conditions of that rule were met).2 A Pre-Arranged Transaction would include transactions taking place under a periodic trading program (a "Trading Program") whereby an insider enters into an arrangement with a broker pursuant to which the broker engages in multiple transactions in issuer securities ("Trading Program Transactions") on the insider's behalf over a specified period of time.3 We agree that these transactions pose unique issues and merit special Section 16(a) reporting considerations. These transactions and the reporting principles to which they are subject also raise significant policy issues.

We anticipate that in response to the Sarbanes-Oxley Act issuers will adopt procedures to require insiders to inform them of proposed transactions in advance of execution of the transaction. Single Market Orders and Pre-Arranged Transactions pose a difficult choice for filers: (1) require the broker to notify the filer in advance of the trade (thereby undermining the availability of the Rule 105b-1 affirmative defense), or (2) risk not being able to comply with a two-day reporting deadline if notice is not received until after the transaction is executed. In light of the tight filing deadline, we anticipate that issuers may adopt policies whereby they will refuse to pre-clear transactions (or pre-arranged transactions) where an insider does not or cannot give sufficient advance notice to allow for Section 16(a) compliance. We are concerned that a two-day Section 16(a) reporting deadline with respect to these transactions will discourage these types of transactions.

We believe this would be a step in the wrong direction. Insiders should be encouraged to engage in transactions that satisfy the conditions of Rule 105b-1(c)'s affirmative defense. The rule promotes exactly the sort of trading in issuer stock by insiders that is best for all parties involved (issuer, insider, public shareholders and the market): measured (typically small) amounts of stock sold gradually in the market over a period of time with minimal market disruption. Sales in this manner offer the least amount of potential that insiders will use their position to profit on issuer stock to the detriment of public shareholders. In our view, this is particularly true with Trading Programs involving frequent periodic sales of small amounts of stock. The Commission's evaluation of the feasibility of achieving two-day reporting of these transactions should include the goal of encouraging those transactions that pose the least risk of market disruption (or at least not discouraging them). We do not believe that shareholders, issuers, insiders or the market as a whole would be benefited if a consequence of the new rules is having issuers discourage trading programs in favor of arguably more risky structures. We therefore recommend that the Commission conclude that it is not feasible to require two-day reporting of these transactions.

We recommend that the reporting deadline for such transactions be the end of the second business day of the week following the calendar week in which the transaction settlement date occurs (for such time as transactions settle on a "T+3" settlement basis). We recommend this timing for the following reasons:

To the extent that "T+3" settlement timing changes in the future, the reporting rules described above should be amended to accomplish the same timing result in terms of the absolute number of days that filers will be given to prepare and file Forms 4.

We believe that the above reporting structure is appropriate for all transactions executed pursuant to Single Market Orders or Pre-Arranged Transactions. In the event that the Commission determines that it will not issue rules permitting insiders to report all such transactions in this manner, we would respectfully request that the Commission permit reporting in this manner at least with respect to Trading Program Transactions.

We believe that most filers will describe the fact that a transaction is made pursuant to a Single Market Order or a Pre-Arranged Transaction (including a Trading Program) by footnote on the Form 4 in order to better support their ability to rely on the Rule 10b5-1 defense. To facilitate the market's understanding of transactions that fit in these categories and qualify for delayed reporting, we recommend that the Commission adopt one or more transaction codes that would be used to identify such transactions.

Elective Transactions Pursuant to Issuer Plans

The Commission indicated in the Proposing Release that it is considering whether the two-day deadline for Form 4 should be extended or calculated differently for certain types of transactions, the timing or terms of which are beyond the control of the insider.4 We believe that the Commission should apply a different deadline, or delay the application of the two-day deadline, to certain types of transactions effected pursuant to issuer-sponsored plans. These types of transactions satisfy "objective criteria" that generally prevent the insider from controlling the timing of execution of these transactions, and from knowing the terms of reportable transactions in time to report them within two business days. Examples of transactions of this type include:

All of these types of transactions occur pursuant to plans that generally have a large number of participants, and are effected (often on an aggregated basis) along with plan transactions resulting from similar elections made by other plan participants. As a result, plan administrators must calculate, in accordance with the terms of the plan, the number of issuer securities acquired or disposed of by each participant and the price per share attributable to each transaction.6 Frequently, these administrators do not complete the requisite calculations for several days. If this were to continue after the new two-day deadline is in effect, insider participants would be unable to report their plan transactions on Form 4 in a timely fashion. Even where, for example, the number of shares acquired or disposed of by an insider in a Discretionary Transaction under a 401(k) plan is based on the net asset value of the company stock fund on the effective date of the insider's election (resulting in a change in beneficial ownership on that date), the plan administrator's internal processes for calculating these amounts and generating a transaction report could require several days.

Although it may be possible for some plan administrators to produce, on August 29 and thereafter, information on insiders' transactions in sufficient time to permit the insiders to report their plan transactions within two business days, many plan administrators are not currently in such a position. Further, many issuers and insiders are not in a position to compel the plan administrator to provide the information on such a prompt basis. Most issuers contract with third-party vendors to provide plan administration services, including the consummation of securities transactions in accordance with participant elections and the generation of transaction reports for plan participants. The contract between the issuer and the plan administrator typically specifies the amount of time the administrator has to prepare and distribute transaction reports. The specified time period for this service affects both the price the issuer pays for the administrator's services and the nature of the software system and service team employed to administer the plan. For those issuers whose contracts with third-party administrators do not currently provide for immediate generation of transaction reports, it may be necessary, before insider participants in the plan may obtain transaction information in time to report their plan transactions within two business days, for the issuer to renegotiate its contract with the plan administrator, employ a new software system, or shift its plan administration to another vendor.

Because issuers cannot realistically restructure their plan administration before August 29, it is not feasible for insiders to report transactions pursuant to these plans within two business days. We believe that the Commission should address this situation by delaying for one year the effective date of the two-day reporting deadline for plan transactions of the types described above. The one-year delay would give issuers time to renegotiate existing contracts with third-party administrators or to shift their plan administration to new vendors, with a view toward implementing cost-effective systems for generating prompt (i.e., same-day or next-day) reports of transactions by insider participants. During the interim one-year period, insiders could be required to report plan transactions (on Form 4) by a deadline that should be reasonably achievable under existing arrangements with virtually all major third-party plan administrators. We believe that a deadline of ten calendar days after the reportable change in beneficial ownership would be sufficient for this purpose. After expiration of the one-year phase-in period, plan transactions would be subject to the reporting deadline applicable to other transactions reportable on Form 4 (two business days after the transaction is effected or, where the timing of the transaction is determined by a third person, within the deadline that the Commission establishes for such transactions in general).

If the Commission decides, for whatever reason, that a phase-in period is not appropriate for reporting elective plan transactions, we recommend that the Commission adopt an extended deadline for such transactions, to take into account the time necessary for insiders to obtain transaction information from the plan administrator. The extended deadline should, we believe, be ten calendar days after a reportable change in beneficial ownership occurs.


As described in the Proposing Release, Section 403 of the Sarbanes-Oxley Act negated the need to implement certain of the Commission's proposals contained in Release No. 34-45742 ("Form 8-K Disclosure of Certain Management Transactions"), issued April 12, 2002 (the "Insider 8-K Release"). One of the issues discussed in the Insider 8-K Release that remains following the Act's effectiveness relates to disclosure of directors' and executive officers' arrangements intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) - that is, disclosure of insiders' entering into, modifying or terminating these arrangements. This issue primarily affects Trading Programs. In our view, disclosure of Trading Program terms7 is a distinct issue from the Section 16(a) reporting requirements applicable to Trading Program Transactions.

We believe that the Act's accelerated filing deadline applicable to insider transactions eliminates the need to have a separate reporting obligation (imposed on either the issuer or the insider) that applies to the commencement, modification or termination of the Trading Program itself. Once the new Section 16(a) filing deadline becomes applicable, the first Trading Program Transaction will be reported on a Form 4 filed within several days of execution of the transaction. Use of a special transaction code on the Form 4 to identify Trading Program Transactions will make it easier for the public to understand these transactions. We believe that filers will want to describe the general terms of the Trading Program through a footnote on each Form 4 reporting a Trading Program Transaction. This will allow full public disclosure of Trading Programs and Trading Program Transactions at the time of the first Trading Program Transaction.

We note that some companies may choose to voluntarily report their insiders' entering into trading programs prior to the time of the Trading Program Transaction - e.g., through a press release, on Form 8-K or through disclosure in their Forms 10-K or 10-Q. While we think this disclosure should be encouraged, we do not believe it should be required.

If the Commission determines that the terms of the Trading Program itself should be disclosed separately from and in addition to the actual Trading Program Transactions, then we recommend that the Form 4 be adapted to permit disclosure of such arrangements by insiders thereon. The Commission could then specify by regulation that the insider's disclosure of such arrangements on a properly and timely filed Form 4 would be deemed to satisfy any other or additional such disclosure requirements that apply to the arrangement. So, for example, if the Commission adopts the portion of the Insider 8-K Release that applies to 10b5-1-type programs, it could provide in the instructions to Form 8-K that the issuer's disclosure obligation on Form 8-K would be deemed satisfied if the insider disclosed the arrangements on a Form 4 filed with the Commission on or prior to the applicable Form 8-K filing deadline.

We do not believe the Commission could require disclosure of the commencement, modification or termination of Trading Programs under Section 16(a), other than in connection with a reported change in beneficial ownership. Disclosure on Form 4 by insiders would have to be voluntary. To encourage such voluntary reporting, the Commission might consider extending the deferred reporting deadline described above only to those insiders who voluntarily disclose the terms of their Trading Program on Form 4 according to such rules as the Commission may provide.


The single biggest obstacle insiders will face in complying with the accelerated filing deadlines is the difficulty of working within the existing system for filing Forms 4 with the Commission. We recognize that the Commission is seeking ways to overcome this obstacle, and we appreciate the Commission's willingness to provide relief by permitting variances to the formatting of Forms 4 filed on EDGAR, as described in the Proposing Release. While these measures are helpful, they are not adequate to overcome the difficulties inherent in the current system. Accordingly, we strongly encourage the Commission to allow greater flexibility with respect to the filing process, as described below. This would both significantly improve compliance with the Act's accelerated filing deadlines and encourage voluntary early compliance with the Act's directive that all Section 16(a) reports be filed electronically not later than July 30, 2003.

Currently, most insiders file their Section 16(a) reports in paper format. Because a report is not deemed filed until received by the Commission,8 insiders (or issuers filing reports on behalf of insiders) typically make paper filings of Forms 4 through one of the following methods:

In order to assure that the Commission receives a Form 4 report by the end of the second business day following a transaction, filers will have to cease using the U.S. Postal Service's standard mail service. This means that issuers and insiders will face the following choices with respect to filing:

While all of these methods should result in timely filing of the Section 16(a) reports, each involves additional costs and, with the exception of electronic filing, entails some form of delay from the time the report is ready for filing to the time it is received by the Commission. Electronic filing, because of its speed and minimal transmission expense, should be the most efficient, cost-effective and practical filing method. But the many shortcomings of the EDGAR system hinder issuers and insiders desiring to file electronically.10 To deal with these shortcomings during the interim period prior to the implementation by the Commission of a user-friendly system for filing on EDGAR, we believe the Commission should make the following temporary accommodations to encourage the filing of Section 16(a) reports electronically:

  • Permit insiders to use issuer access codes. Under current Commission rules and procedures, each insider is required to obtain an individual EDGAR filing number and access codes.11 The tedious process of obtaining and utilizing these filing numbers for each insider often is cited by public companies as a principal reason why they do not pursue EDGAR filing capability for their insiders. Further, the time required to complete the process means that it cannot always be finalized in advance of the deadline for filing a report.12 While we recognize that there are some drawbacks to permitting the use of issuer EDGAR codes for insider filings, we think a temporary accommodation of this nature for a limited period of time (i.e., until EDGAR filing becomes mandatory for Section 16 insiders) is justified. This temporary accommodation would allow insiders sufficient time to obtain their own filing numbers prior to the mandatory deadline, while enabling them (and the public) to receive the benefits of EDGAR filing immediately. The use of issuer codes by insiders should not create an undue hardship for investors, who still would be able to readily access the insider reports by examining the inventory of reports under the issuer's name on EDGAR.13

  • Allow insiders to file reports by email. Filing reports on EDGAR requires special training and skill to convert the data in the reports to a form acceptable to the EDGAR system. Insiders cannot be expected to have such training or skills, so they necessarily must rely on their company to complete the conversion and transmission process. The process is both costly and time-consuming,14 and could be avoided entirely by the simple measure of allowing insiders to email their completed reports to the Commission (for example, to an email address at the Commission dedicated to the receipt of Form 4 reports). The Commission could then do what is necessary to make the reports available to the investing public in a manner that would permit relatively easy access to specific reports.

  • Authorize direct fax filings. The Commission currently allows the filing of faxed Section 16(a) reports only if they are hand-delivered, or delivered by mail. We assume that the Commission does not permit direct faxing of reports because it is concerned that it may be overwhelmed with faxed filings. While we do not discount the possibility of a significant number of such filings, we believe the staggered filing dates for reports under the two-day deadline system would minimize its occurrence. Further, to the extent a large number of such filings were received, we believe the use of a fax server rather than a traditional fax machine could eliminate many of the mechanical concerns (such as busy phone lines and paper jams) that might otherwise arise. If an excessive number of filings were anticipated, the Commission could consider drawing upon some of the substantial additional resources provided to it by the Sarbanes-Oxley Act to acquire a fax server and personnel necessary to deal with unusual demands imposed by faxed filings during the interim period prior to mandatory EDGAR filings.15 On a cost/benefit basis, we believe that the cost to the Commission of such an arrangement would be a fraction of the cost that otherwise will be imposed on thousands of issuers, and that the cost to the Commission is reasonable in light of the extent to which it will implement the prompt disclosure objectives of the Sarbanes-Oxley Act.

    Finally, we note that filers located in places having time zones different from the East Coast time zone face a significant disadvantage in meeting filing deadlines relative to their East Coast counterparts. The Commission's requirement that filings be received at its D.C. office by 5:30 p.m. Eastern Time on the due date means, for example, that West Coast-based filers have a filing deadline that is almost half a day shorter than the deadline facing East Coast-based filers.16 The problems relating to the East Coast-based filing deadlines will be greatly exacerbated by the new two-day deadline, and would seem to increase the likelihood of tardy filings for insiders located in non-East Coast time zones. Accordingly, we encourage the Commission either to permit filers located in time zones other than the East Coast to file by 5:30 p.m. local time or, for the sake of simplicity, to adopt a filing deadline for all filers of 12:00 midnight Eastern Time.


    We believe it would be advisable for the Commission to provide specific guidance in the adopting release regarding various matters relating to the transition from the current reporting system to the new system mandated by the Sarbanes-Oxley Act. Among the matters that we think the Commission should address are the following, along with our recommendations for dealing with these matters:

    * * * * *

    We appreciate the opportunity to submit the foregoing comments to the Commission. Members of the Subcommittee are available at the staff's convenience to discuss our comments should the Commission staff wish to do so.

    Respectfully submitted,

    Stanley Keller, Chair
    Committee on Federal Regulation of Securities

    Scott P. Spector, Chair
    Subcommittee on Employee Benefits,
    Executive Compensation and Section 16

    Drafting Committee

    Alan L. Dye
    Sharon Hendricks
    Peter J. Romeo, Chair

    cc: Hon. Harvey L. Pitt, Chairman
    Hon. Cynthia A. Glassman, Commissioner
    Hon. Harvey J. Goldschmid, Commissioner
    Hon. Paul Atkins, Commissioner
    Hon. Roel Campos, Commissioner-designate
    Alan L. Beller, Director, Division of Corporation Finance

    1 Specifically, those exempted under Rule 16b-3(d), (e) or (f).
    2 We note that characterization of the transaction as a "Rule 10b5-1-type" transaction for purposes of reporting it, under Section 16 or otherwise, is not and should not be a condition of the affirmative defense, nor should compliance with any applicable reporting requirement.
    3 By way of example, a typical pre-arranged periodic trading program might involve the insider's entering into a written plan or a binding contract with, or otherwise providing instructions to, the broker whereby the broker is instructed or agrees to sell shares owned by the insider on a periodic basis (e.g., daily, weekly or monthly) during a specified period (e.g., 12 or 18 months), where the number of shares to be sold each period is specified in the plan, contract or instruction either as a fixed number of shares or as a formula (which formula may include a limit order feature). Other types of programs might involve periodic sales of shares acquired by the insider upon exercise of vested stock options (where the options are exercised automatically under the plan or contract) or, alternatively, the purchase of shares in the market. In our experience, most pre-arranged periodic trading programs contemplate transactions occurring at regular intervals, but it is also possible for such programs to provide for transactions to occur on an irregular periodic basis. A Pre-Arranged Transaction might also include a single transaction where the transaction date is specified to occur sometime in the future as described above, but where the transaction takes place on a single day.
    4 We recognize that the Commission has expressed an intention not to provide exemptions from the two-day reporting deadline based on type of issuer. However, the compliance processes necessitated by the new reporting deadline (e.g., hiring additional personnel and obtaining enhanced services from third-party vendors) will impose costs that will have a disproportionate impact on smaller issuers. To alleviate the compliance burden on small issuers, we believe that the Commission should consider exempting insiders of small business issuers from the two-day reporting deadline, and permitting them to report their Form 4 transactions within ten calendar days instead.
    5 Unlike acquisitions of issuer securities resulting from payroll deduction contributions to a qualified plan or a Section 423 employee stock purchase plan, periodic acquisitions of issuer securities under a non-qualified deferred compensation plan are not exempt from the reporting requirements of Section 16(a). As a result, insiders who participate in a company stock fund available under a deferred compensation plan will be required to file a Form 4 after the end of every pay period, which for many insiders will mean 26 Forms 4 per year. Under the current Section 16 rules, the staff permits insiders to report their periodic acquisitions of issuer securities under a deferred compensation plan on an aggregate basis, on a single line of Form 5. See American Bar Association (February 10, 1999) (Q.3). Given the routine nature of these acquisitions, we urge the staff to continue to permit periodic acquisitions under a deferred compensation plan to be reported on a deferred, aggregate basis. This could be achieved, for example, by permitting insiders to indicate, in the first Form 4 filed to report a post-August 29 transaction under a deferred compensation plan, the insider's participation in the deferred compensation plan and the material terms of that participation. Thereafter, the insider could be permitted to report acquisitions under the plan on a periodic (e.g., quarterly or annual), aggregate basis. Any modification of the terms of the insider's participation would be disclosable in the next Form 4 filed to report a plan transaction.
    6 Even though "transactions" in non-qualified deferred compensation plans typically do not involve market transactions but instead are calculated from a readily available price, such as average of high and low price for a day, it often takes several days for an administrator to determine the exact amount of an insider's contribution to such a plan (typically based on an after-tax earnings amount which may vary from payroll to payroll depending on what other deductions are made). Therefore, we believe deferred reporting is appropriate for these types of plans.
    7 In our view, the terms of Trading Programs that might be required to be disclosed should be limited to: the identity of the insider, whether the Program involves purchases or sales, the fact that an insider has entered into, modified the terms of, or terminated a Trading Program, the maximum number of shares subject to the Trading Program, and the duration of the Trading Program. We do not believe insiders or issuers should disclose price or limit orders or trading intervals.
    8 See Rule 16a-3(h), which allows as the only exception to this "filed when received" rule a safe harbor "mailbox rule" if and only if the filer can establish that he or she timely delivered the filing to a third-party company or governmental entity providing delivery service in the ordinary course of its business that guarantees delivery to the Commission no later than the required filing date.
    9 In our experience, such services charge approximately $50-60 per filing for this service.
    10 The letter filed with the Commission on July 2, 2002 in response to Release No. 33-8090 by the so-called "Grundfest Group" sets forth a description of the issues posed by the EDGAR system.
    11 The access codes consist of (i) a Central Index Key ("CIK") number, (ii) a CIK Confirmation Code ("CCC") number, and (iii) a password that is used in combination with the CIK number to log on to EDGAR. One difficulty with the CIK numbers, which we hope the Commission will remedy prior to the time EDGAR reporting under Section 16(a) becomes mandatory, is the automatic voiding of a previous CIK number assigned to an insider of a company if the person also becomes an insider of another company and that company obtains another CIK number for the person. Instead of informing the second company that a CIK number already has been assigned to the person and rejecting the application for the second number, the EDGAR system automatically replaces the former number with the new number, resulting in all future reports filed by or on behalf of the insider under the former number with respect to the first company being rejected. The system should be redesigned to reject second requests for CIK numbers for individuals who already have been assigned such a number.
    12 Although the Commission offers a telephone service that assigns new EDGAR codes within 24 hours, the service sometimes gets overwhelmed at peak demand times (e.g., shortly before the annual Schedule 13G deadline).
    13 Access can be accomplished easily by typing the insider's name in the "Search Companies and Filings" feature of EDGAR. We believe that most third party EDGAR-linked sites also have a word searchable feature that permits the public to conduct searches for an insider's reports by searching for the insider's name.
    14 We are advised by knowledgeable parties that the cost of having a financial printer or other third-party provider convert a single Form 4 report to EDGAR on a one- to two-day turn-around ranges between $500 and $1,200. We also are advised that the cost of using a vendor to train an employee to make EDGAR filings ranges between $1,300 and $5,000
    15 There is Commission precedent for making a dedicated fax line available for filings. See the Commission's commentary entitled "Frequently Asked Questions About Commission Order No. 4-460" (August 8, 2002), Q.2.
    16 We note that the practical filing deadline imposed by the financial printers for West Coast-based issuers is 1:30 p.m. PST. We also note that the D.C.-based filing services require receipt of faxed or emailed copies of Forms 4 by 12:00 noon PST to guarantee filing on that day.
    17 Errors in reporting a person's holdings in a Form 4 or Form 5 already are excluded from Item 405 disclosure, per American Society of Corporate Secretaries (January 24, 1992).