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Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations

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Securities and Exchange Commission Eliminates Paper Filing for Section 16 Filers

May 2003

On May 7, 2003, the Securities and Exchange Commission (the "SEC") adopted new rules (the "New Section 16 Rules") requiring the electronic filing of Forms 3, 4, and 5 ("Section 16 reports") by officers, directors and greater than 10% shareholders (collectively "Section 16 filers") of public companies. The New Section 16 Rules also require public companies to provide access on their websites to the Section 16 reports filed by their Section 16 filers.

The Sarbanes-Oxley Act of 2002 required the SEC to adopt rules reducing the filing deadline for Form 4 to two business days following the date of the reportable transaction and requiring the electronic filing of Section 16 reports. The two day filing deadline went into effect on August 29, 2002. The SEC has been encouraging electronic filing of Section 16 reports since that date in order to facilitate compliance with the shortened filing deadline and to provide investors greater access to Section 16 reports.

The New Section 16 Rules will go into effect on June 30, 2003. Until that date, Section 16 reports may continue to be filed in paper or electronically with the SEC. Beginning on June 30, 2003, Section 16 filers may only file electronically. In addition, public companies with public websites will have to provide website access to their Section 16 filers' Section 16 reports beginning on June 30, 2003. This requirement is in addition to previously announced rules relating to the posting of periodic filings by "accelerated filers."

Procedures for Filing Electronically

Section 16 filers may file their Section 16 reports directly on the SEC's webpage for electronic filing of Section 16 reports. On that webpage, https://www.onlineforms.edgarfiling.sec.gov/, a filer must manually input the Section 16 data on an electronic template. Once the data has been entered, the Section 16 report must be immediately filed. It cannot be saved and completed later. A Section 16 filer will need a CIK number, CCC number and pass code ("EDGAR filing codes") to access the system. If a Section 16 filer does not already have EDGAR filing codes, the Section 16 filer must obtain his or her own EDGAR filing codes by faxing in a request to the SEC on Form ID. A Section 16 filer will use the same EDGAR filing codes for all of his or her Section 16 filings, even for Section 16 filings involving different companies. Many companies will continue to file Section 16 reports on behalf of their officers and directors either by accessing the electronic filing system themselves or by relying upon third parties to make the filings.

Temporary Relief for Annual Report and Proxy Disclosure of Late Form 4s

Item 405 of Regulation S-K requires public companies to disclose Section 16 reporting delinquencies for the past year in their annual reports on Form 10-Ks and annual meeting proxy statements. Foreign private issuers are not required to provide Item 405 disclosure. As an accommodation to public companies while their Section 16 filers become familiar with the electronic filing procedures, until June 30, 2004, companies will not have to report late Form 4s filed on or after June 30, 2003 if they are filed within one business day of their regular due date. No temporary relief has been granted for reporting filing delinquencies for Forms 3 and 5 because their filing deadlines were not shortened.

Expanded SEC Filing Hours for Section 16 Reports

Currently, Section 16 filings must be received by the SEC either electronically or in paper form prior to 5:30 pm EST on a business day to be considered filed on that same day. Any filing made after 5:30 pm EST would be considered filed the next business day. In recognition of the compressed filing deadlines for Section 16 reports, the SEC will extend the 5:30 pm EST deadline until 10:00 pm EST beginning on June 30, 2003 . The SEC is considering extending the deadline for all SEC filings but is not doing so at this current time.

Limited Relief for Late Filers

In general, there are hardship exemptions for electronic filers who experience technical difficulties or other problems when attempting to make an electronic filing. A SEC filer may file a temporary paper copy instead of an electronic copy if technical difficulties prevent the filer from making a timely electronic filing. A electronic copy must be filed within six days of its due date unless the SEC filer applies in writing to the SEC for a continuing hardship exemption. Under the New Section 16 Rules, Section 16 filers are not permitted to utilize the temporary hardship exemption procedure and will rarely be able to convince the SEC to grant a continuing hardship exemption. A Section 16 filer who is unable to timely file due to technical difficulties or reasons outside his or her control may apply to the SEC for a filing date adjustment only after the electronic filing has been made. The SEC warns, though, that filing date adjustments and continuing hardship exemptions will be rarely given due to the relative ease of the new on-line Section 16 filing system and strong public interest in having timely, easily accessible electronic filings.

Website Posting of Section 16 Reports

All companies with a corporate website that the public may visit to obtain information about the company must provide website access to the Section 16 filers' Section 16 reports that are filed on or after June 30, 2003. For each public company, the SEC website contains a separate webpage containing only that company's Section 16 reports. In lieu of posting their Section 16 filers' Section 16 reports on their websites, we recommend that companies comply with the website posting requirement by including a hyperlink on their websites to the SEC webpage containing their Section 16 reports.

The Time to Prepare to Electronically File is Now

Electronic filing of Section 16 reports should not be more difficult than filing in paper, and in many ways might be easier. The transition for those who still file in paper should not be problematic; however, preparation now is necessary to ensure a smooth transition. Some items to consider are:

Avoid the last minute rush to obtain EDGAR filing codes. Apply now for EDGAR filing codes because EDGAR filing codes must be obtained from the SEC before the on-line system can be accessed.
Decisions must be made as to who will handle the mechanics of filing.
For those who decide to outsource, third party vendors will have to be selected.
Those who decide to file on behalf of their Section 16 filers must train their personnel to input data on the SEC's on-line filing system.

Although the responsibility of filing Section 16 reports lies with the Section 16 filer and not the subject company, the SEC encourages companies to assist their Section 16 filers in making timely filings. The New Section 16 Rules will result in greater transparency of insiders' transactions, and a company's ability to maintain control over the timely disclosure of such transactions will help to avoid the embarrassment and potential media backlash of delinquent filings.