On June 3, 2022, the US Securities and Exchange Commission (SEC) updated electronic filing requirements, making it mandatory to submit certain documents to the SEC electronically via EDGAR. Among other documents, this new requirement will apply to Form 144 and to “glossy” annual reports to security holders. The amendments will also require the use of Inline XBRL for the financial statements and accompanying notes to the financial statements required by Form 11-K. The amendments will be effective 30 days after publication in the Federal Register, although the SEC provided for later compliance dates to facilitate transition.
Form 144. Rule 144 is an SEC safe harbor from the registration requirements of the Securities Act of 1933 for resales. If a person satisfies Rule 144’s specific criteria for not being deemed engaged in a distribution, that person will not be treated as an underwriter and therefore will be eligible to rely on the Section 4(a)(1) exemption from registration. Form 144 is a notice of a sale of securities pursuant to this safe harbor.
Currently Form 144 may either be mailed to the SEC or submitted electronically via EDGAR. The amendments require that Form 144 be submitted electronically where the issuer of the securities is subject to the reporting requirements under Section 13 or 15(d) of the Securities Exchange Act of 1934 (Exchange Act).
In conjunction with this rule change, the SEC plans to provide an online fillable Form 144 to enable the convenient input of information without additional software and to support the electronic assembly of such information and transmission to EDGAR.
The compliance date for mandatory EDGAR filing of Form 144 will be six months after the date on which the amendments are published in the Federal Register.
Glossy Annual Reports. Many companies use a “glossy” annual report as part of their proxy materials, for example, wrapping additional pages around the Form 10-K that typically contain photographs, graphics, and reader-friendly descriptions of their business and its achievements. The amendments require these glossy annual reports to be submitted to the SEC in accordance with the EDGAR Filer Manual. This is in addition to the EDGAR filing of the annual report on Form 10-K itself.
Prior to the amendments, Rule 14a-3(c) required that seven copies of the glossy annual report be mailed to the SEC. In 2016 the staff of the SEC’s Division of Corporation Finance issued guidance indicating that it would not object if a company posted an electronic version of its glossy annual report to its corporate web site by the requisite dates, in lieu of mailing paper copies to the SEC or submitting the report via EDGAR, as long as the glossy annual report remained accessible for at least one year after posting. The amendments supersede this 2016 staff guidance, which is being withdrawn upon the compliance date for the amendment.
Similarly, the amendments require foreign private issuers that furnish their “glossy” annual reports to the SEC in response to the requirements of Form 6-K to do so via EDGAR.
The compliance date for mandatory electronic filing of glossy annual reports is six months after the effective date of the amendments. Therefore this requirement will be in effect for the 2023 proxy season. Public companies should add this requirement, and related coordination with their service providers, to their proxy season calendars.
Inline XBRL for Form 11-K. Form 11-K is the form used for annual reports of employee stock purchase, savings and similar plans that are filed with the SEC pursuant to Section 15(d) of the Exchange Act. Currently, these reports are not subject to the SEC’s structured data reporting requirements. The amendments require that the financial information required by Form 11-K, including narrative disclosures such as the notes to the financial statement, be tagged using Inline XBRL, which is both machine readable and human-readable. This new requirement applies whether the financial information is prepared in accordance with Regulation S-X or the financial reporting requirements of ERISA.
The compliance date for Inline XBRL for Form 11-K is three years after the effective date of the amendments.
The adopting release is available here.
The SEC’s fact sheet is available here.