ILLUSTRATIVE FACTS: On May 23, 2009, Edwin E. Ellis became the chief financial officer of EFG Corporation. On that date, he owned 1,000 shares of EFG common stock and was the trustee of an irrevocable trust for the benefit of his mother which held another 500 shares of EFG common stock. Unaware of his obligation to report the securities held by the trust (see Model Form 42), Ellis executed a Form 3 on June 1 indicating direct beneficial ownership of 1,000 shares of EFG common stock, and filed it on June 2. During the next two months, Ellis made three additional purchases of common stock, all of which he duly reported on Form 4. On August 31, 2009, Ellis was apprised by counsel that he was and at all relevant times had been the beneficial owner of the 500 shares of EFG common stock held in the trust. EFG’s fiscal year ends on December 31.
REPORTING PRINCIPLES: (1) Mistakes May Be Corrected By Filing An Amended Report. A mistake in a filed report should be corrected as soon as possible by filing an amended report. Before the SEC adopted a mandatory electronic filing system (which became mandatory on June 30, 2003), insiders typically amended prior reports by restating the report in its entirety, so that the amendment would read the way the initial report should have read. With the advent of electronic filing, however, the SEC added Instruction 8 to Form 3 and Instruction 9 to Forms 4 and 5 to minimize the amount of information included in an amendment. Now, if an amendment is filed to add one or more lines to a report, only the new lines should be included, together with a footnote explaining the reason for the addition of the new line(s). Line item holdings or transactions that were reported in the original report should not be repeated. Accordingly, Ellis’s amended Form 3 should include only the 500 shares of EFG common stock held by the trust, with an explanatory footnote, and should not re-report the 1,000 shares of common stock held in his own name. Similarly, where an amendment is filed to amend a line-item holding or transaction that was reported in the initial report, the amendment should restate that line item only, and the report should include a footnote explaining the amendment. Where an amendment is filed for a purpose other than adding a new line item or amending a prior line item (e.g., to add a power of attorney as an exhibit—see Model Form 17), the SEC’s position would suggest that the reason for the amendment should simply be disclosed in a footnote or remark. However, the electronic filing system will not accept a filing that includes only a footnote or remark, without the entry of a transaction or holding in Table I or Table II. Accordingly, an insider wishing to file an amendment that does not add a new line item or amend a previously reported line item should report a prior line item and attach to that line item a footnote explaining the reason for the amendment. The insider may also choose to include in the footnote the reason for re-reporting a prior line item (i.e., to gain access to the filing system). See Division of Corporation Finance: Section 16 Electronic Reporting: Frequently Asked Questions (August 14, 2003) (Q. 12.) (not included in the Compliance and Disclosure Interpretations). (2) Indicate Date Of Prior Report In Box 5 Of Amended Form 3 Or Box 4 Of Amended Form 4 Or Form 5. When filing an amendment, the date of the report being amended should be indicated in the appropriate box. According to the staff, the date of the report being amended is the date on which the report was filed with the SEC (i.e., the filing date assigned to the report by the SEC), not the day, month, and year indicated next to the insider’s signature on side two of the original report or any other date. Accordingly, Ellis inserted “06/02/2009” in Box 5 of his amended Form 3. (Box 5 is completed only when filing an amended form.) (3) Special Notation Unnecessary. It is not necessary to write “AMENDMENT” across the top of the form (as is done, for example, when an amended Form 144 is filed in paper). The inclusion of information in Box 5 of Form 3 or Box 4 of Form 4 or Form 5 will make it clear that the report amends a prior report. (4) Omitted Holding Or Transaction May Be Reported On Form 5 Rather Than In An Amendment To Original Report. Holdings omitted from a Form 3 and transactions that should have been reported earlier on a filed Form 4 or Form 5 may be reported on Form 5 rather than in an amendment to the original report, even if the failure to report occurred prior to the year covered by the Form 5. See Model Form 216. Ellis has chosen to amend his Form 3. (5) Item 405 Disclosure May Be Required. Minor amendments to a previously filed report do not require the issuer to disclose a Section 16 reporting delinquency in its annual meeting proxy statement pursuant to Item 405 of Regulation S-K. Examples of minor amendments include correcting the date of a transaction, changing a transaction code, or correcting the vesting or expiration date of a derivative security. Omitting a holding from a Form 3 or a transaction from a Form 4 or Form 5, however, generally must be disclosed by the issuer pursuant to Item 405, whether the omission is corrected by Form 5 or by an amended report (subject to a possible de minimis exception for clearly insignificant omissions). (6) No Obligation To Amend Intervening Reports. The three Forms 4 filed by Ellis subsequent to the filing of the Form 3 and prior to his discovery of his error all failed to include the 500 shares held in the trust. (Because Ellis’s Forms 4 reported transactions in EFG common stock, he should have included in those reports all of his holdings of EFG common stock, including the 500 shares held indirectly through the trust.) Nevertheless, the delinquent holding need be reported only once, in an amendment to the Form 3; the three Forms 4 need not be amended. (An insider should also consider including in the amended report a footnote explaining how the prior error affected subsequent reports, as Ellis has done.) The omitted holding should also be included in future Forms 4 and Forms 5 filed by Ellis. (7) Erroneous Report May Not Be Withdrawn. A mistake in or omission from a filed Form 3, 4, or 5 may be corrected only by amending the report. Once filed, a report may not be withdrawn. See Model Form 20.
