During the Section 16 Q&A webcast in January, Alan Dye discussed the new procedures for resetting an EDGAR passphrase. The passphrase is used if you need to generate new EDGAR codes (CCC, password, and PMAC) for you or your insiders in the event that you’ve forgotten the password or it has expired.
Linda Epstein from Hewlett Packard Enterprise emailed to tell us that there is an easier way to update an insider’s expired password, assuming the following:
You know the insider’s EDGAR codes (CIK, CCC, expired password, and PMAC—you don’t need the passphrase for this), and
Have your own access to EDGAR.
The Easier Way
Rather than logging into the insider’s account, you can simply log into the main EDGAR website (or the EDGAR Online Forms Management website) under your account and select the Retrieve/Edit Data function. EDGAR will ask you to enter the CIK and CCC for the account you want to edit. Turns out, you can enter any account here (so long as you have the access codes for that account)—it doesn’t have to be your own account.
Once you enter the CIK and CCC code, you then have the ability to change the password for the account, provided you know the old password and the Password Modification Authorization Code (PMAC). This is easier than generating all new EDGAR codes, especially if the individual is an insider at more than one company (which would require you to notify all the other companies of his/her new CCC).
Update Contact Info Too
You can also use the Retrieve/Edit Data function to update an insider’s contact info, including email address, and you don’t need the insider’s password or PMAC to do this.
Given the ability to do this, I’m not sure you’d even need to update the insider’s password (you can still submit filings for an insider whose password has expired). But if you did need to do so, without the insider’s password or PMAC, you’d be stuck generating new EDGAR codes. Here again, this feature could be handy. Because, let’s face it, if you don’t know those two things, you also probably don’t know the insider’s passphrase and you’re going to have to generate a new passphrase. This feature would at least allow you to ensure that the insider’s email is correct (or change it to an email address that you can access), since, under the new passphrase procedures, you have to provide the “electronic security token” that is emailed to the insider when the new passphrase is requested.
It also means that instead of the nightmare I went through to update my passphrase, I could have had one of my friends who does Section 16 filings update my expired password for me (ironically, I knew my old password and PMAC, I just didn’t know my passphrase). I’m sure one of you would have come through for me. Good to know for the future (not that I am ever going to forget my passphrase or let my password expire again).
This Explains a Lot
Well, maybe not a lot, but it does at least explain why you have to enter your CIK and CCC to change your password after logging into EDGAR, something that, until now, seemed like a useless extra step to me. I’m not sure it explains the need for the PMAC, however (if you already know the insider’s old password, how much more authorization do you need).
If anyone else has any handy EDGAR tips, I’m all ears.
Just when you thought it was safe to withhold shares to cover taxes, a shareholder has started issuing demand letters to companies claiming that share withholding is a nonexempt sale for purposes of Section 16b.
Shareholder?
Yep, I say “shareholder” because apparently it’s just one guy and he’s representing himself, he’s not even engaging the services of the plaintiffs’ bar.
What the Heck?
But wait, you say, that’s ridiculous. Share withholding is exempt from Section 16(b) pursuant to Rule 16b-3(e), which covers dispositions back to the issuer that are approved in advance by the board or compensation committee (and approval of the grant agreement allowing said disposition counts as approval of the disposition).
You are correct, but the shareholder is claiming that Rule 16b-3(e) applies only if shares are withheld automatically. His claim is that if the insider could pay the taxes in some other way (e.g., cash), the transaction isn’t exempt.
Is My Company Going to Hear from this Guy?
Only if the share withholding transaction can be matched against a nonexempt purchase that occurs within six months before or after it. A nonexempt sale by itself is nothing to be alarmed about; the sale has to be matched against a nonexempt purchase to trigger profits recovery.
Also, since the shareholder’s argument hinges on the share withholding transaction being at the election of the insider, if you don’t allow insiders a choice in how to pay their taxes (and the shareholder can figure this out), you may not hear from him.
“For what it’s worth, Peter Romeo and I disagree strongly with the shareholder’s position, as do the attorneys I’ve spoken with who are responding to similar demand letters.”
Alan also notes that the shareholder has just issued demand letters, he hasn’t filed any complaints yet. But Alan says that he has been litigious in other Section 16(b) contexts.
What Should We Do?
If you allow insiders to use share withholding to cover their taxes on either awards or stock options, you should make sure your in-house legal team is aware of this, so they can decide how to proceed.
In addition, at the time shares are withheld to cover taxes, it is a good idea to check (or have whoever is responsible for Section 16 filings check) for nonexempt purchases by insiders in the past six months. Even though you might still allow the insiders to go ahead with the share withholding, it will be helpful to know ahead of time that the transaction might attract a demand letter, so your legal team can be prepared for it.
It’s been a while since I tackled Section 16 reporting in this blog. The last time I covered it, the SEC was on widespread mission to crack down on the smallest of infractions, Section 16(a) included. That was in 2014, and things seem to have quieted since then. Or have they? In today’s blog I’ll address that question.
All is (not) Quiet on the Section 16 Front
This time last year, there was a fair amount of buzz circulating around about the SEC’s (at the time) newfound aggression in pursuing enforcement for Section 16(a) reporting violations. It was the latest in a line of actions brought by the Commission as part of what SEC Chairman White had described as a “broken windows” initiative, where the agency put focus on frequently overlooked minor violations and highlighted that it was “important to pursue even the smallest infractions.”
While some companies have struggled to file Section 16 reports on a timely basis, the SEC’s ability to identify even the smallest of those infractions has increased greatly in recent years. Advances in technology and renewed attention to enforcement have combined to create an environment where it’s no longer safe to assume that a tiny infraction, even if just an oversight, will be overlooked. Although hype around this type of enforcement has quieted in recent months, it doesn’t mean that SEC attention has waned. Companies should be attentive in pursuing flawless (or near flawless) compliance with Section 16 reporting requirements.
Proxy season is on the horizon for many companies, and although any Section 16(a) reporting violations that happened in the past are what they are, there’s still time to focus on the Item 405 proxy disclosure piece that identifies any late reported Section 16 activity. Effort can also be made to ensure no Section 16 reporting mishaps occur going forward. It’s time to examine opportunities for improvement in these areas.
Inadvertent Mistakes Aren’t a Defense
There was a time where it almost seemed reasonable to say “it was just an inadvertent mistake.” That language appears in the Item 405 disclosure of many proxy statements. Why? Because, the truth is that inadvertent mistakes do happen. What is important to know is that violations of Section 16(a) reporting requirements are enforced only by the SEC, and (key to note) there is no “intent” or other “state of mind requirement” for there to be a “violation”; therefore, inadvertent failures to timely file Section 16 Forms 3, 4 and 5 may constitute violations of the federal reporting requirements. Essentially, nobody had to have “intended” to violate Section 16 in order for there to be an infraction. Additionally, relying on others is not a defense either: (“The insider didn’t give us timely information and therefore, I couldn’t make the filing on time.”)
Since an inadvertent mistake won’t necessarily absolve an issuer (or an insider) from responsibility and potential SEC enforcement action, it’s more important than ever to develop practices that prevent mistakes from occurring in the first place.
Must-Have Section 16 Resources
This month, Section 16 is getting a lot of NASPP coverage. With the goal to achieve “flawless” reporting this year, there’s lots to focus on, especially if you have a history of recent Item 405 disclosures in the proxy (pointing to opportunities for improvement in this area).
On January 27, Alan Dye will be doing his annual webcast on the Latest Section 16 Developments (free for NASPP members). Since the SEC’s major Section 16 enforcement initiative in late 2014, involving 28 insiders and civil penalties totaling $2.6 million, Section 16 filings have been in the spotlight like never before, commencing a new era of enforcement for the SEC. This is a Q&A webcast, designed to make sure you are equipped to comply. Hear practical tips on refining your Section 16 procedures and answers to your questions on the challenges you are facing today (submit your questions to adye@Section.net).
We’ve also got a great interview with Alan Dye that will be featured in the next episode of our Equity Expert podcast series (out next week). Be sure to subscribe today so that you are notified when Alan’s interview becomes available. The podcast is all audio, and is accessible on the NASPP website or through a podcast app on your mobile device (search for “Equity Expert”). The podcast is available for free to everyone. If you’re not listening to it, you’re missing out on some great interviews!
The Jan-Feb issue of The NASPP Advisor is due out next week, and both the Top 10 List and Administrators’ Corner articles are dedicated to Section 16 practices. Keep an eye out for it, because you won’t want to miss the tips and practices for achieving better compliance with Section 16 reporting requirements.
Watch for and take advantage of these great resources to help improve Section 16 compliance and reporting practices this year.
Fake EDGAR filings are a thing. The EDGAR system requires more access codes than any of my financial accounts: there’s the CIK, CCC, password, password modification code, and passphrase. That’s five codes to access the system. And, to get the codes, you have to submit a notarized form to the SEC. So it seems surprising that anyone would be able to submit a fake EDGAR filing, but apparently it happens.
Recently, someone filed a fake Schedule TO announcing a takeover of Avon (“A Phantom Offer Sends Avon’s Shares Surging,” NY Times, May 14, 2015). In 2012, someone (probably the same someone) submitted a fake buyout offer for the Rocky Mountain Chocolate Factory. A guy named Johnny Earl Satterwhite has filed 61 highly suspicious Section 16 filings claiming, among other things, that he owns 999 billion shares of Microsoft and Exxon Mobil, which is something like more than 100 times the number of shares that actually exist in these companies (“Texan Plays April Fool’s Joke on SEC, Investors with 999 Billion Shares,” Footnoted*, June 20, 2011).
From Broc Romanek’s May 19 blog on TheCorporateCounsel.net:
This latest incident [fake Schedule TO for Avon] is a cautionary tale for investors as it’s not the first fake takeover announcement. My favorite dates back to 2001, as noted in this piece, when a fake “blank check” company calling itself “Toks Inc.” filed a Form SB-2 with the SEC announcing plans to take over General Motors, General Electric, AT&T, Hughes Electronics, AT&T Wireless, AOL Time Warner and Marriott International—roughly $2 trillion in “Toks” stock. The promoter—Ade O. Ogunjobi—didn’t give up even when the SEC issued a “Stop Order” to prevent the registration statement from going effective and suing him for selling unregistered securities, later launching a website to promote his wild ambitions and plans to then hold press conferences to announce his plans for these major US companies he was to take over!
While the idea of fake EDGAR filings may seem a little crazy and fantastical, the fraudulent filings can have serious repercussions. Avon’s stock price increased by about $1 per share (a 20% increase) after the fake Schedule TO filing, then dropped back to prior levels after the TO was revealed to be a hoax. But, according to Bloomberg, $91 million worth of Avon shares changed hands before trading was halted in Avon’s stock, four times Avon’s trading volume the prior day (“About $91 Million of Avon Stock Traded at Peak of Frenzy,” Bloomberg Business, May 14, 2015). The SEC has charged a Bulgarian, Nedko Nedev, with filing using the fake buyout offer to manipulate Avon’s stock price for his personal gain, (“S.E.C. Charges Man in Bulgaria in Fake Takeover Offer for Avon,” NY Times, June 4, 2015).
Here are my key takeaways on this:
Don’t believe everything you read on the internet, even if it is on EDGAR.
Don’t submit fake EDGAR filings for your own personal gain because it seems like it probably isn’t going to be all that hard for the SEC to catch you, even if you are in Bulgaria. Definitely don’t do it more than once.
I feel like I should have some key takeaways on how you an prevent your company from being a victim of a fake EDGAR filing, but I’ve got nothin’ on that. I would suggest not sharing your CIK, but that number is already publicly available all over EDGAR.
– Barbara
Thanks to Tami Bohm of Radian for suggesting this topic.
How many grant dates can one option have? The answer, as it turns out, is more than you might think. I was recently contacted by a reporter who was looking at the proxy disclosures for a public company and was convinced that the company was doing something dodgy with respect to a performance option granted to the CEO. The option was not reported in the SCT for the year in which it was granted, even though the company discussed the award in some detail in the CD&A, had reported the grant on a Form 4, and the option price was equal to the FMV on the date the board approved the grant. The reporter was convinced this was some clever new backdating scheme, or some way of getting around some sort of limit on the number of shares that could be granted (either the per-person limit in the plan for 162(m) purposes or the aggregate shares allocated to the plan).
Bifurcated Grant Dates
When I read through the proxy disclosures, I could see why the reporter was confused. The problem was that the option had several future performance periods and the compensation committee wasn’t planning to set the performance goals until the start of each period. The first performance period didn’t start until the following year.
Under ASC 718 the key terms of an award have to be mutually understood by both parties (company and award recipient) for the grant date to occur. I’m not sure why the standard requires this. I reviewed the “Basis for Conclusions” in FAS 123(R) and the FASB essentially said “because that’s the way we’ve always done it.” I’m paraphrasing—they didn’t actually say that, but that was the gist of it. Read it for yourself: paragraph B49 (in the original standard, the “Basis for Conclusions” wasn’t ported over to the Codification system).
The performance goals are most certainly a key metric. So even though the option was granted for purposes of Section 409A and any other tax purposes (the general standard to establish a grant date under the tax code is merely that the corporate action necessary to effect the grant, i.e., board approval, be completed), the option did not yet have a grant date for accounting purposes.
And the SCT looks to ASC 718 for purposes of determining the value of the option that should be reported therein. Without a grant date yet for ASC 718 purposes, the option also isn’t considered granted for purposes of the SCT. Thus, the company was right to discuss the grant in the CD&A but not report it in the SCT. (The company did explain why the grant wasn’t reported in the SCT and the explanation made perfect sense to me, but I spend an excessive amount of time thinking about accounting for stock compensation. To a layperson, who presumably has other things to do with his/her time, I could see how it was confusing and suspicious).
Trifurcated Grant Dates?
The option vested based on goals other than stock price targets, so it is interesting that the company chose to report the option on a Form 4 at the time the grant was approved by the compensation committee. Where a performance award (option or RSU) is subject to performance conditions other than a stock price target, the grant date for Section 16 purposes doesn’t occur until the performance goals are met. So the company could have waited until the options vested to file the Form 4.
If you are keeping score, that’s three different grant dates for one option:
Purpose
Grant Date
1. Tax
Approval date
2. Accounting / SCT
Date goals are determined
3. Form 4
Date goals are met
If the FASB is looking for other areas to simplify ASC 718, the determination of grant date is just about at the top of my list. While they are at it, it might nice if the SEC would take another look at the Form 4 reporting requirements, because I’m pretty sure just about everyone (other than Peter Romeo and Alan Dye, of course) is confused about them (I had to look them up).
We are excited to bring our popular “Meet the Speaker” series back to the NASPP Blog, featuring interviews with speakers at the 22nd Annual NASPP Conference. This is a great way to get to know our many distinguished speakers and find out a little more about their sessions in advance of the Conference.
NASPP: Why is your Section 16 compliance particularly time right now?
Alan: Section 16 compliance is a particularly timely topic because the importance of the reporting function for compliance personnel remains high. Mistakes result in highly visible delinquency disclosures in the company’s proxy statement, and the rule requiring disclosure leaves little room for forgiveness. The person responsible for Section 16(a) compliance needs to be aware of recent developments in an envirnoment of changing types of equity compensation.
NASPP: What are some best practices companies should implement?
Alan: Every public company should have a designated compliance person who is responsible for preparing and filing Section 16(a) reports and who is empowered to assure that directors and officers provide to him or her adequate information about their securities transactions in time to permit timely and accurate reporting on Form 4.
NASPP: There’s always a silver lining; what is the silver lining to Section 16 reporting?
Alan: Rarely does a failure to file a Form 3 or Form 4 on time result in any SEC interest in bringing an enforcement action. Disclosure of the deliqnency in the proxy statement is the extent of the insider’s punishment.
NASPP: Tell us something people don’t know about you.
Alan: I was serving as special counsel to SEC Chairman John Shad when some of the staff had the idea to start the George Fitzsimmons Memorial Golf Classic in honor of the late Secretary. I presented to Chairman Shad the “order” declaring the tournament an official SEC tournament. I came in second place in one of the early Fitzsimmons tournaments in the 1980’s, and won the event in 1990. My golf has never been as good since.
The 22nd Annual NASPP Conference will be held from September 29-October 2 in Las Vegas. This year’s program features 60+ sessions on today’s most timely topics in stock compensation; check out the full agenda and register today!
The newest edition of Peter Romeo and Alan Dye’s Section 16 Forms & Filing Handbook arrived in my mailbox last week. I thought the last edition contained a model form for every possible Section 16 reporting scenario, but no–there are 15 new forms in this version. It’s so big, I practically needed some assistance toting it upstairs to my office. Here are four things I learned from perusing the new forms.
1. Reporting Performance Awards with a Service Tail
New Model Form 135 clears up some of the confusion with respect to a performance award that is still subject to service-based vesting conditions after the performance goal has been achieved. As my readers know, performance awards in which vesting is conditioned on goals other than stock price targets aren’t reportable until the performance goes are achieved. Once the compensation committee has certified achievement of the goals, however, the award is reportable, even where it isn’t paid out immediately or is still subject to time-based vesting requirements. The award essentially becomes a standard RSU once the performance goals have been achieved. Assuming the award can only be paid out in stock, it can then be reported as the acquisition of either a derivative security or common stock, just like any other time-based RSU.
2. Voluntary Reporting of ESPP Purchases
Alan Dye doesn’t always report purchases under Section 423 ESPPs, but when he does, he uses transaction code A of J. (I couldn’t resist–it’s not often that I can invoke beer commercials in my blogs). Because purchases under an ESPP aren’t reportable, there’s no transaction code assigned to them. If you are going to voluntarily report these transactions, New Model Form 145 suggests using code A or J and including a footnote to explain the transaction. Personally, I like code A because it specifically applies to exempt acquisitions, whereas code J can apply to either exempt or nonexempt transactions.
3. Voluntary Exit Forms
I did already know that it isn’t necessary to file an exit form unless the former insider has reportable transactions that occur after his/her termination. Despite this, some companies voluntarily file exit forms for departing insiders anyway. I’d never really thought about some of the specifics related to filing a voluntary exit form when there aren’t any transactions to report on the form. New Model Form 214 provides some guidance. In addition to the obvious (check the “Exit” box and include a note in the remarks field explaining the reason for the filing), if using a Form 4, the date of the “earliest transaction” in box 3 should be the insider’s termination date (if using a Form 5, the date of the fiscal year end is reported in box 3), and the insider’s title in box 5 can either be his/her former title or you can select the “other” checkbox and specify his/her status (e.g., “former insider”).
4. Grants to Spouses of Insiders
Given how common dating is in the workplace, I bet that this situation comes up more frequently than you’d think: an insider meets someone at work, they fall in love and get married and then, unconnected to the marriage, the insider’s spouse is granted an option or an award. Because they are married, the grant has to be reported as an acquisition of an indirectly held security on a Form 4 for the insider. But because the spouse isn’t an insider, the award might not be submitted to the compensation committee/board for approval, making it a non-exempt grant unless the shares underlying the grant are held for at least six months. The 2014 Handbook includes new Model Form 91 explaining how to report the grant.
It’s probably unlikely that the shares underlying the grant would be sold within six months, but even so, my takeaway here is to consider submitting grants to spouses of insiders to the comp committee for approval. I imagine that it wouldn’t be that much extra work for the committee, it seems like it might be a good idea from a shareholder optics perspective anyway, and then the exempt status of the grant is one less thing to worry about.
Luckily, grants to any person(s) the insider is having an affair with probably aren’t considered to be indirectly owned by the insider (unless it’s some sort of weird Woody Allen-type situation) and, thus, aren’t reportable. Moreover, when the insider divorces, Model Form 74 (which is not new) explains that any transfers of securities pursuant to the divorce settlement generally aren’t reportable.
It’s a holiday week so I thought I’d do something a little lighter for today’s blog entry. Over the nearly 20 years that I’ve worked in this industry, I have asked a lot of questions about stock compensation. I’ve also found the answers to a lot of them, but there are still a few questions that remain a mystery to me. For today’s entry, I present some of my unanswered questions.
IFRS 2?
The international financial reporting standard for stock compensation is IFRS 2. Two? Is this really the second standard that the IASB drafted? Seriously? Of all the possible areas of discrepancy in worldwide accounting, stock-based compensation was the second most important area they could think of? And, if so, what the heck was so important that it beat us out for the number 1 spot?
Why Two and a Half Months?
What is magical about two and a half months after the end of the calendar year for the IRS? Would anyone care if the deadline were just two months (i.e., the end of the second month)? Because in terms of explaining both the provisions of 409A and the FICA short-term deferral rule, this would be a heck of a lot easier to say.
Forms 1 & 2?
Whatever happened to Forms 1 and 2? I must remember to ask Alan Dye about this. Wouldn’t it have made more sense to call Forms 3, 4, and 5 something like “Forms 16A, 16B, and 16C”? Or maybe 16H (“H” for holdings), 16NE (“NE” for non-exempt transactions), and 16E (“E” for exempt transactions)? The form for Rule 144 is called “Form 144,” why not use the same naming system for Section 16 forms?
When Is 30 Days After June 30?
Why does Form G-4 (filed by companies that have issued loans for the purchase of their own stock in excess of the Federal Reserve Board thresholds) have to be filed within 30 days following June 30? Wouldn’t that always be by July 30? Why couldn’t the Federal Reserve Board just say, “file this form by July 30”? Does the Federal Reserve Board have a different calendar than I do?
How Does the IRS Determine What Constitutes “News”?
Why does the IRS send out an email announcing inflation adjustments for the carbon dioxide (CO2) sequestration credit under §45Q but doesn’t send an email announcing proposed rule changes under Section 83?
How Many EDGAR Passwords Does It Take to Change a Lightbulb?
Why the heck does it take four–count ’em, that’s 4–codes to change my EDGAR password? That’s two more codes than I have to enter to change the password on any of my financial accounts. And it’s useless as a form of security because I can’t remember any of them, so I have them all written down in the same document–if someone manages to get one of them, he/she probably has them all. Heck, I bet most companies have a single document where they store all of these codes for all of their insiders–all in one handy place for anyone who wants to sabotage their insiders’ Section 16 filings. This is a perfect example of why lawyers shouldn’t be allowed to develop computer systems.
What Is a Borker, Anyway?
Does anyone else consistently mistype the word “broker” as “borker”? It seems so inappropriate but also kind of appropriate at the same time. “Consluting” for “consulting” is another typo I make with some regularity. Thankfully, both errors are caught easily with spellcheck.
Just a few thoughts to ponder and perhaps discuss with your family as you enjoy Thanksgiving dinner. Enjoy your holiday!
In today’s entry I highlight a few articles that are available on the NASPP website that I think are particularly valuable. Many of these articles are updated on an annual basis; together they comprise the core foundational knowledge necessary to be proficient in stock compensation.
Restricted Stock and Units: The article “Restricted Stock Plans” covers just about anything you could want to know about restricted stock and unit awards and is updated annually.
ESPPs: “Designing and Implementing an Employee Stock Purchase Plan” takes an in-depth look at the regulatory and design considerations that apply to ESPPs, particularly Section 423 plans. This is a reprint of my chapter in the NCEO’s book “Selected Issues in Equity Compensation” so it is updated annually.
Securities Law: Alan Dye and Peter Romeo’s outlines of Rule 144 and Section 16 provide great overviews of these areas of law and are also updated annually.
In today’s blog, I provide an update on the status of FICA taxes as we head into next year and include a note from Alan Dye on the impact of Hurricane Sandy on EDGAR filings.
FICA Tax Increases for 2013 The Social Security Administration announced in a press release on October 16 that the annual wage base for Social Security tax is increasing to $113,700 in 2013 (up from $110,100 in 2012).
In addition, the current 2% rate cut for the employee portion of FICA is due to expire at the end of this year. If Congress doesn’t take action before the end of the year, the withholding rate for Social Security will return to 6.2% next January. If I managed to do the math correctly (something you should never take for granted), that will bring the maximum Social Security tax payment for 2013 up to $7,049.40. This is up from $4,624.20 this year, an increase of over 50%.
For the first time since I’ve started working in stock compensation, the Medicare tax is also increasing, at least for those in the top income tax brackets. As noted in my August 7 blog, “The Supreme Court and Stock Compensation,” wages in excess of $200,000 per year ($250,000 for married taxpayers that file jointly, $125,000 for married taxpayers that file separately) are subject to an additional .9% Medicare tax. Companies will apply the higher rate to any wages in excess of $200,000, regardless of the employee’s filing status and the rest will be sorted out when employees file their tax returns.
The additional Medicare tax applies only to employees; the company’s matching payment is not increased.
There are already a couple of threads started on administering the new Medicare tax in the NASPP Discussion Forum, see topics 7186 and 7354.
Highly Compensated Employees The wage threshold for which employees are considered highly compensated for purposes of Section 423 qualified ESPPs will remain at $115,000 for 2013.
Hurricane Sandy and EDGAR Filings Alan Dye notes in his blog on Section16.net that Hurricane Sandy is preventing folks on the East coast from submitting Section 16 filings and that the SEC was quick to offer relief. From Alan’s blog yesterday:
With Hurricane Sandy bearing down on DC and much of the Northeast, some filers and filing agents are having trouble getting to their offices to make Section 16(a) filings that are due today. The staff is taking an accommodating position for purposes of Section 16(a) and Item 405, saying that “For those affected by the hurricane — filers (or their lawyers/agents) along the East Coast — we won’t object if the filings that are due today are filed tomorrow (assuming that tomorrow is a day on which people can go to work). For filers not affected by the hurricane, then today is a regular business day and filings due today have to be filed today. So, this is effectively a no action position for only those filers (or their lawyers/agents) affected by the hurricane.”
Presumably filers not affected by the hurricane have no need for relief and will file on time. Filers scrambling to find a filing agent, though, now have some breathing room and can file tomorrow (assuming tomorrow is a normal business day). Thanks to the staff for getting on top of this issue quickly.
Hurricane Sandy and Option Exercises We also had a couple of threads started in the NASPP Discussion Forum on how employees that are up against the contractual expiration of their in-the-money stock options can exercise despite the market’s unexpected closure due to Hurricane Sandy. Here is a quick list of the alternatives:
pay cash for the exercise
net exercise
stock-for-stock or pyramid exercise
margin loan to be closed out when the market reopens and the stock acquired up exercise can be sold
loan from the company (if the optionee is not an officer or director) to be repaid as soon as the market opens and the stock can be sold
See NASPP Discussion Forum topics 7361 and 7362 for more information.