Now that the SEC's new Section 16 rules are in effect, companies must file all Forms 3, 4 and 5 electronically.
The electronic filing process is pretty straightforward — the SEC has a new on-line filing system for all forms, and documents submitted by direct transmission on or before 10 p.m. EST are deemed filed on the same business day.
(Details are available in the right-hand column if you need a refresher).
But the Web-posting process is a bit more subjective.
Though the rules are clear — issuers with Web sites must post filings by the end of the business day after the filing, and can satisfy the posting requirement by providing direct access to the filing or by linking to a third-party — companies can add tremendous value by organizing and categorizing filings in a way that is intuitive for investors.
This week, we take a look at examples of how companies are going above-and-beyond compliance to identify "best practices" for the Web-posting components of the rule.
Oh ya, and we also identify a few "worst practices" as well.
Company
Feature
Description
Link
BEST PRACTICES
Allstate
Chart With Comments
Excellent chart of recent transactions with brief explanatory comments for each. For example, a stock purchase by BellSouth CEO and Allstate Director Duane Ackerman stated "Acquisition of stock in lieu of cash compensation pursuant to directors equity plan." Chart includes a useful "Total [stock] Held" column, as well as links to recent historical transactions for each individual listed.
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Berkshire Hathaway
Easy To Find
There's nothing special about Berkshire Hathaway's display of Section 16 reports — they simply link the SEC's Web site. What is unique is the way in which investors can find it — right on their home page. The firm, let by billionaire investor and shareholder advocate Warren Buffett, clearly notes and defines "Section 16 Reports of Directors, Officers and Principal Stockholders" in a place everyone can find it.
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Cendant
Transaction Comments
Besides providing standard filings, Cendant Corp. provides a detailed narrative about recent transactions, including explanations of more complicated items that could be misunderstood by investors. An example is below:
On each of July 1, 2003, June 2, 2003, May 1, 2003, April 2, 2003 and March 18, 2003, Thomas D. Christopoul, Chief Administrative Officer, pursuant to a pre-established 10b5-1 plan, exercised a stock option of 22,000 shares with an exercise price of $9.8125. He simultaneously sold those shares at a price of approximately $18.00, $14.34, $13.00 and $13.00 per share, respectively. Mr. Christopoul's 10b5-1 plan covers approximately 10% of the shares he beneficially owns, which include the shares he owns directly and vested stock options as of April 30, 2003.
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FedEx
Historical Views
FedEx provides an historical view of all directors' and officers' transactions over the past few years. The information is provided in a tabular format by date, although it would have been nice to be able to sort the information by individual or type of transaction.
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Intel
Officers vs. Directors
Intel provides an excellent entry point for Section 16 filings by separating corporate officers from outside directors. By charting a distinction among the two categories and by including titles as well, the company makes it very easy to ascertain what types of executives are executing on what types of trades.
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Johnson & Johnson
Form By Form
Johnson & Johnson goes the extra mile by separating access to Forms 3, 4 and 5, which have vastly different uses. As changes reported on Form 4 are usually of most interest to users, J&J enables investors to access that information quickly. In addition, the company provides a detailed insider-trading chart like FedEx, above.
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WORST PRACTICES
CitiGroup
Hidden Link
According to the SEC's adopting rule release, the link provided by a company to its Section 16 filings must go directly to those filings or a list of them. The investor-relations section of CitiGroup's Web site links to SEC filings by subsidiary, but those links include Section 16 filings intermingled with other filings (e.g., 8-Ks). According to Citigroup's Heather Suran, the company does indeed link directly to Section 16 filings, but the link — for some reason — is not in the IR section of the company's Web site. Instead, the company placed those filings in an entirely unique area called "Corporate Governance" that can be found on the company's home page. CW was relieved to discover CitiGroup was in compliance, but it shouldn't have taken three emails and two days to find out how.
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General Motors
Burdensome Access?
It took Compliance Week editors nearly ten minutes to find the link to Section 16 filings, ultimately requiring an inquiry into GM's investor relations department (which never got back to us). Turns out the link was listed under SEC Filings, but was placed in such small type and in such a location that it was easily overlooked.
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United Parcel Service
Who Did What?
One of the great "no-no's" of the Web involves forcing users to click on links that are unclear or — worse yet — unnamed. Yet that's just what UPS does. On the company's Section 16 page, it lists the most recent Form 4 filings, but they all say the same thing: "Statement of Changes of Beneficial Ownership." The name of the insider is nowhere to be found, requiring investors to click on every single link until they find what they want. The practice renders the service both frustrating and ostensibly useless.
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