SEC Approves New Rules That Expand Electronic Filing Requirements

By: Ran Ben-Tzur , Amanda L. Rose , David A. Bell , Ron C. Llewellyn

On June 2, 2022, the U.S. Securities and Exchange Commission adopted rule and form amendments (the “Amendments”) that mandate the electronic filing or submissions of certain documents on its Electronic Data Gathering, Analysis and Retrieval (EDGAR) system as described in Release Nos. 33-11070; 34-95025 (the “Adopting Release”).

Prior to the Amendments, companies were permitted but not required to file or submit most of these documents electronically under Rule 101(b) of Regulation S-T. Alternatively, the forms were submitted or filed in paper format. The Amendments also provide for structured data reporting using Inline eXtensible Business Reporting Language (“Inline XBRL”) for the financial statements and accompanying notes required by the annual report on Form 11-K for employee benefit plans.

The documents that will be subject to electronic filing or submission under the Amendments include:

  • Form 144 for trades under Rule 144 in the securities of reporting companies
  • The “glossy” annual report to security holders
  • Reports or other documents submitted by foreign private issuers under cover of Form 6-K
  • Notices of exempt solicitation
  • Notices of exempt preliminary roll-up communications
  • Annual reports on Form 11–K
  • Filings made by multilateral development banks
  • Certifications of approval of exchange listing
  • Certain foreign language documents
  • Documents filed pursuant to Section 33 of the Investment Company Act

Some of the more notable amendments described in the Adopting Release are discussed below.

Form 144

The Amendments require the electronic filing of Form 144 and eliminate the requirement that an affiliate send a copy to the principal exchange on which the security is listed. They also make Form 144 an online fillable form to facilitate electronic filing and making the form’s data machine-readable. The Amendments provide for a six-month transition period from the date when the SEC updates the EDGAR Filer Manual to reflect the updates to Form 144 in order to provide paper filers with sufficient time to apply for access to file on EDGAR.

Virtually all trades in the open market by corporate officers and directors and other affiliates are done under Rule 144. That rule requires, among other things, the filing of Form 144 prior to the commencement of the trades covered by the form. In the past, Forms 144 could be filed in paper and when filed in such format were not picked up in the EDGAR system and, accordingly, these forms were largely not visible to the public. When the Amendments take effect, the anticipated sales covered by the Form will, of course, be viewable in advance.

Glossy Annual Report

Currently, reporting companies are required to furnish paper copies of their glossy annual reports to the SEC under Rules 14a-3 and 14c-3 of the Securities Exchange Act of 1934, as amended (the Exchange Act), but may satisfy this requirement by submitting their glossy annual report electronically on EDGAR or posting such reports on their corporate websites. Under the Amendments, companies will no longer be permitted to furnish paper copies of their glossy annual reports, and references to furnishing paper copies of the glossy report will be removed from Exchange Act Rule 14a-3(c) and Exchange Act Rule 14c-3(b) and Forms 10-K and 6-K. Similarly, companies will no longer be able to satisfy the obligation to submit the glossy annual report by posting it on their website. According to the Adopting Release, EDGAR will serve as the repository for electronic copies of the glossy annual reports, although companies may also post the reports to their corporate websites as they may do with other SEC filings. The electronic submission of the glossy annual reports should also capture the same graphics, style and presentation of the actual reports.

Certificates of Approval of Exchange Listing

The Amendments require the certification that must be filed with the SEC for securities to be listed on an exchange under Section 12(d) of the Exchange Act and Exchange Act Rule 12d1-3 to be filed via EDGAR.

Inline XBRL Reporting for the Filing of Financial Statements and Related Notes to Form 11-K

Currently, the annual report on Form 11-K and its financial statements and related notes are not required to be in a structured data reporting format and, therefore, are not machine readable. The Amendments mandate the same tagging requirements for Form 11-K’s financial information as the financial information contained in Forms 10-K, 20-F and 40-F. Accordingly, pursuant to the Amendments, filing companies will need to tag every data point in Form 11-K’s financial statements using Inline XBRL. Similarly, companies will have to apply block tags to narrative disclosures and detailed tags to numeric amounts in the narrative text (similar to the approach required for Forms 10-K, 20-F and 40-F).

Electronic Submission of Certain Foreign Language Documents

The Amendments will eliminate paper submissions of unabridged foreign language documents or foreign language versions of foreign governments’ annual budgets as currently required under Rule 306 of Regulation S-T. Companies will be required to submit these documents electronically in a format supported by EDGAR.

Transition Period

The Amendments will become effective 30 days after the final rules are published in the Federal Register, but provide for a six-month transition period to electronically file glossy annual reports, notices of exempt solicitations and exempt preliminary roll-up communications, annual reports on Forms 11-K, filings for multilateral development banks, reports or other documents submitted by foreign private issuers on Forms 6-K, certain foreign language documents, and certifications of approval of exchange listings. However, the requirement to begin filing Forms 144 on EDGAR will begin six months from the date of publication in the Federal Register of the SEC’s release adopting the EDGAR Filer Manual addressing updates to Form 144, which, according to the Adopting Release, the SEC expects to occur after September 2022. Accordingly, Form 144 filers will have an extended transition period to comply with the electronic filing requirements – after March 2023. In addition, the Amendments provide for a three-year transition period after the effective date to comply with the data structuring requirements to use Inline XBRL for the financial statements and accompanying notes to Form 11-K.

Key Takeaways

Although many companies have been voluntarily filing or submitting some of the documents that are subject to the Amendments for convenience, other companies may have to put in place additional processes to create electronic versions of such filings or submissions. Executive officers and directors and other affiliates of public companies who must file Form 144 in connection with the sale of securities should apply for access to file on EDGAR as necessary.

Companies should inform any executive officers and directors that are Form 144 filers of the electronic filing obligations under the amendments so that they can coordinate with their brokers and advisors to ensure that the electronic Forms 144 are filed in a timely manner. Many executive officers and directors will already have the necessary codes to file on EDGAR to complete their equity ownership filings under Section 16 of the Exchange Act and can provide such information to their brokers. In addition, companies that file Forms 11-K should also take steps to adopt Inline XBRL reporting for the form’s financial statements and schedules, including by determining appropriate processes and procedures to implement tagging and reviewing of applicable financial data before the end of the transition period.