On September 23, 2022, the Securities and Exchange Commission (the "SEC") released the electronic version of Form 144. This follows the SEC's adoption on June 2, 2022 of rule amendments that require all Forms 144 to be filed electronically on EDGAR, rather than through a paper filing.1
A Form 144 is required to be filed with the SEC by an affiliate of a reporting company relying on Rule 144 for a resale transaction, as a notice of a proposed sale of that company's stock when the amount to be sold under Rule 144 during any three-month period exceeds (i) 5,000 shares or units or (ii) has an aggregate sales price greater than $50,000. An affiliate is defined as a person in a relationship of control with the issuer.2 This traditionally includes executive officers and directors of the company, as well as large shareholders.
Prior to the rule change, Form 144s were permitted to be submitted either electronically via EDGAR or in paper form; however, they have been almost exclusively submitted in paper form (including by email3), rather than electronically.
The new rule includes a transition period, but starting April 13, 2023, filers will be required to make all Form 144 filings using the electronic form. As a result, the information in Forms 144 regarding sales (or potential sales) by directors and officers may become publicly available sooner than it otherwise would have through the reporting of such sales in Section 16 filings, which must be filed within two business days.
To prepare for the new compliance requirement, affiliates required to file Forms 144 should obtain and/or confirm their EDGAR codes needed to make the required electronic filings well ahead of the planned sale. For directors and executive officers selling company equity securities, companies should be prepared to obtain and/or confirm those codes on their behalf.
While directors and executive officers of domestic companies already have EDGAR codes that they use for making Section 16 filings, directors and executive officers of foreign private issuers ("FPIs") who are not beneficial holders required to make Schedule 13 filings, do not typically have EDGAR codes, as they are not required to make Section 16 filings. Therefore, before Form 144 electronic filings become mandatory, FPIs will need to apply for and receive EDGAR codes for all of their directors and executive officers who may rely on Rule 144 for sales of company equity securities.4
Companies should also check with the brokers used by directors and executive officers to confirm that the necessary steps are being taken to make the electronic Form 144 filings, as required by the new rules.
The SEC has created a Form 144—Resources for Filing Electronically webpage to support Form 144 filers and filing agents in applying for access to EDGAR and in preparing and submitting the electronic Form 144.
1 The SEC's press release is available here. The amendments also eliminate the requirement to send a copy of the Form 144 to the principal exchange on which the securities are admitted to trading.
2 "Control" means the power to direct the management and policies of the company in question, whether through the ownership of voting securities, by contract, or otherwise.
3 In 2020, in response to COVID-19 conditions, SEC staff announced a no-action position that temporarily affords Form 144 filers a third option to submit paper Form 144s via email.
4 The SEC may take anywhere from a few business days to several weeks to process EDGAR codes, depending on demand.
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