The SEC recently released new telephone interpretations on Section 16 of the Securities Exchange Act and related rules and forms. The new guidance replaces the Section 16 interpretations in the July 1997 Manual of Publicly Available Telephone Interpretations, the March 1999 Supplement to the Manual, the Section 16 Electronic Reporting Frequently Asked Questions, and the November 2002 Sarbanes-Oxley Act Frequently Asked Questions.
Two issues that arise fairly frequently are highlighted in questions 102.02 and 133.08 of the Guidance. Question 102.02 highlights the fact that when filing a Form 4 or Form 5, the insider need only report ownership for all classes of equity securities for which there was a transaction. The issue arises because Section 16(a)(3)(B) of the Exchange Act states that Forms 4 and 5 “shall indicate ownership by the filing person at the date of filing.” This language led some to wonder whether ownership of all classes of securities must be reported with every filing, regardless of whether there was a transaction for every class. The SEC says “no.”
Question 133.08 highlights an important issue for brokers reporting their clients’ sales to the securities lawyers. When a sale is executed in increments at different prices on the same day, the number of securities sold at each price must be reported. The SEC states, “It is not acceptable to report the aggregate number of securities and a weighted average price.”
Several other specific situations and questions are detailed in the Guidance.
