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SEC simplifies Section 16 Reporting

Posted in SEC News

As described in a recently-issued No Action Letter, the SEC has lessened the burden of reporting multiple stock sales of insider holdings. Section 16 reporting persons may now report multiple transactions with similar prices on an aggregate basis instead of listing each transaction at each price.

When a Section 16 insider sells a large block of stock, the sale is often accomplished by his or her broker selling smaller blocks of stock at different prices. For example, a sale of 50,000 shares might be accomplished by selling 50 blocks of 1,000 shares, each block priced within as little as one penny of the previous block. The previous SEC rules would have required 50 different line items on multiple Form 4s, which was time-consuming and tedious to file with the SEC. The new rules allow for reporting of same-day transactions on an aggregate basis (i.e., one line item), so long as the following requirements, among others, are met:

  • Trades occur within a one dollar price range for each line item;
  • The report specifies, in a footnote, the range of prices for the transaction reported;
  • The reporting person undertakes to provide full information if requested; and
  • The securities traded have the same type of ownership by the reporting person (all direct or indirect)

Not only was the old rule inefficient, but it actually made it more difficult for an investor to understand the insider transaction. The new rule should bring clarity to certain reports as well as save time and money.