In 1993, the Securities and Exchange Commission (SEC) began mandating the electronic submission of various reports and other documents filed with the SEC. The SEC has once again expanded the categories of documents that must be filed electronically; the rule amendments became effective on July 11, 2022, subject to the transition periods described below. Two factors drove the SEC to adopt these changes: to make the Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system more comprehensive; and to comply with the Paperwork Reduction Act of 1995 adopted to reduce internal burdens on filers. The additional documents as to which electronic filing or submission will be required include:
- annual reports to security holders (aka the “glossy” report);
- Form 144 notices of intent to sell restricted or control securities;
- annual reports on Form 11-K filed by certain employee benefit plans;
- the use of Inline XBRL for the financial statements and accompanying notes of employee benefit plans required to file an annual report on Form 11-K;
- certifications that a security has been approved for listing and registration; and
- certain foreign language documents.
Electronic submission of the “glossy” annual report to shareholders
The SEC’s previous rule required registrants to mail seven copies of their annual reports to shareholders to the SEC. In 2016, the SEC’s Division of Corporation Finance issued guidance indicating that it would not object to a public company’s posting of its annual report on its website in lieu of mailing paper copies, as long as the report remained accessible for a minimum of one year. While that exception supported the SEC’s environmental goals, not all companies followed suit, which prevented standardization and efficiency.
Under the new rule, beginning January 11, 2023, registrants will be required to furnish their annual reports to shareholders electronically on EDGAR in PDF format, thereby meeting the SEC’s goals of reducing harmful environmental impacts and increasing efficiency. The report, which will not be deemed filed unless incorporated by reference in another filing, must be submitted no later than the date on which it is first sent or given to shareholders. Companies may still post their annual reports on their websites, but posting will not serve as a substitute for the required electronic filing. The requirement also supports the SEC’s vision of maintaining EDGAR as a repository to make documents easily available to the public. Notably, registrants may be required to post their glossy annual reports to security holders on a different website under the proxy solicitation rules.
Required electronic filing of Form 144s
Form 144s submitted in paper have been accessible only by large institutional investors with the financial means to purchase the information sheet by sheet. By requiring electronic filing, the information regarding proposed sales of restricted or control securities by insiders and other holders will become part of the public domain, thereby making the information more widely available to investors, market participants, and other EDGAR users. The change will also benefit the SEC by allowing efficient file storage and tracking. During 2021, 99% of Form 144s were either filed in paper, or sent as a PDF via email under a temporary rule adopted in response to the pandemic. To facilitate electronic filing, Form 144 will become an online fillable form, similar to Forms D, 3, 4 and 5. The SEC also noted that the electronic system allows bulk filings for multiple clients simultaneously. To accommodate potential challenges faced by brokers and dealers in getting their clients set up with EDGAR access credentials, the SEC has provided a longer transition period ending six months after updates to Form 144 are published in the Federal Register, expected to occur in the fall of 2022.
Required electronic filing of annual reports on Form 11-K and use of Inline XBRL for financial statements and notes filed under cover of Form 11-K
Annual reports of employee stock purchase, savings, and similar plans on Form 11-K will be required to be filed electronically beginning January 11, 2023. In addition, following a three-year transition period, the financial statements and accompanying notes included in the Form 11-K will become subject to Inline XBRL requirements. Inline XBRL requires companies to submit and tag information from financial statements in a structured machine-readable data language directly into an HTML document in lieu of a separate exhibit. The Inline XBRL requirement will enable automatic information extraction, which bolsters access and utility for plan participants and analysts.
Editor's Note: Sofia McDonald, a 2022 Miller Nash summer associate, contributed to this blog post.