SEC No-Action Letter Simplifies Form 4 and Form 5 Reporting
 
July 14, 2008
 

In a No-Action Letter to the Society of Corporate Secretaries & Corporate Governance Professionals issued on June 25, 2008, the SEC staff simplified Form 4 and Form 5 reporting for insiders by permitting insiders to report same-day, same-way open market purchases and sales on an aggregate basis, i.e., on a single line of Form 4 (or a late Form 5), even though the transactions occur at different prices, so long as all the following conditions are met:

• the trades must be open market transactions executed by a broker-dealer
• the trades must involve securities owned in the same form (i.e., trades in indirectly owned shares may not be aggregated with trades in directly owned shares or trades in shares owned indirectly in another form)
• the trades must occur within a one dollar price range
• the price column must report the weighted average purchase or sale price for the transactions reported on that line
• the report includes footnote disclosure reporting the range of prices paid or received for transactions reported on each line
• the reporting person includes a footnote where it undertakes to provide to the staff, the issuer, or a security holder full information regarding the number of shares purchased or sold at each separate price

The No-Action Letter reverses the staff’s prior position that each separately priced transaction has to be reported on a separate line of Form 4 or Form 5, even if the trades occurred at prices separated by only a penny. The staff’s prior position led to lengthy Form 4s, even multiple Form 4s in certain cases for an insider to report incremental sales or purchases during the course of one day.

http://www.sec.gov/divisions/corpfin/cf-noaction/2008/scsgp062508-sec16.htm