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April 7, 2021

Directors and Officers of a US Listed Company: Legal Requirements to File Reports at the US Securities and Exchange Commission

Canadians who are directors or executive officers of a corporation listed on a United States securities exchange—principally the New York Stock Exchange and the Nasdaq—or who are significant shareholders of a corporation listed on a US securities exchange need to become familiar with some of the US Securities and Exchange Communication’s (SEC) reporting forms. The forms are (1) Forms 3, 4, and 5, which report transactions in the company’s stock by the director or officer and (2) Schedule 13D and Schedule 13G. The forms are tied to companies that have a class of securities registered with the SEC under Section 12 of the Securities Exchange Act of 1934 (the Exchange Act). Companies are required to register the class of securities with the SEC if the class is traded on a national securities exchange or is owned by a number of shareholders above certain thresholds. Most US companies that are large and publicly traded are Section 12 registrants.

The Exchange Act requires directors, principal executive officers, and holders of 10 percent or more of a class of securities (sometimes referred to as insiders) of a Section 12 registrant to report their ownership of the registrant’s securities with the SEC. The report covers stock and options. The insider’s initial report is made on Form 3 and filed within 10 calendar days after the insider first becomes obligated to file the reports. Form 4 is filed within two business days after the insider’s ownership changes, such as by a purchase or a sale of stock or because of a grant of stock options from the company. Form 5 is a kind of catch-up report covering miscellaneous exempt transactions and is filed within 45 calendar days after the end of the company’s fiscal year.

The US Congress enacted the reporting requirement in 1934, when not much was known about how to control insider trading. The Exchange Act coupled the reporting requirement with a liability provision: if the insider buys a company security and then sells it within six months or sells a company security and then buys it within six months, the difference between the prices is owed by the insider to the company. Further, if the company does not pursue the insider for the liability, then any shareholder can sue the insider for the liability and divide the proceeds with the company. Not surprisingly, the United States has law firms who specialize in tracking Form 4s. These firms start legal proceedings within hours after an insider report is filed showing potential liability.

To make sure that insiders file Form 4s on time, the SEC requires each registrant company to survey the reports that its insiders have or have not filed, make a statement in the company’s annual meeting proxy statement disclosing whether all reports have been filed on time, and to disclose details if any reports have not been filed on time.

Form Schedule 13D is required when any person acquires more than 5 percent of the registered company’s securities and is to be filed with the SEC within 10 calendar days after crossing the 5 percent threshold. If the person does not hold the securities with the purpose or effect of changing or influencing control of the issuer, Schedule 13G—a simpler form—is due instead. Schedule 13G is due by February 14 after the calendar year when the holder crossed the 5 percent threshold. Being an insider does not carry an obligation to file one of these schedules.

How are these reports and schedules filed? Barring a few hardship exceptions, all reports are filed with the SEC on the Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system, its electronic database. Because the SEC commenced designing the computer program for EDGAR in 1983, EDGAR is not compatible with present-day commercially available word processing programs. Documents to be filed with the SEC have to be converted into EDGAR format. There are many commercial EDGARizers providing good service at reasonable prices.
All documents filed on EDGAR are available at no cost to the general public at

At Barclay Damon, we can help you with Forms 3, 4, and 5 and Schedule 13D and Schedule 13G. We are experienced at preparing the content of the forms, and we work with experienced service companies to file the forms on the EDGAR database.

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