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When, What, Why & How to e-file Form 144 with SEC

About Form 144

Form 144 is a document issued by the Securities and Exchange Commission (SEC) that outlines the notice for the proposed sale of securities. This form is typically filed with the SEC by an executive officer, director, or an affiliate of the company. This stipulation falls under Rule 144 of the Securities Act, published in 1933. Rule 144 is a regulation enforced by the SEC to set guidelines about the sale or resale of restricted, unregistered, or controlled securities.

On June 02, 2022, the SEC adopted rule amendments that state that entities are expected to file Form 144 using the SEC’s EDGAR system rather than the traditional paper filing. The SEC has made provisions for a smooth transition period. The compliance date for filers to submit their forms electronically is April 13, 2023.

e-Filing Form 144

Form 144 is filed when placing an order to sell that company’s share or stock. The stock can be sold during any three-month timeframe in which the sale surpasses 5,000 shares or units. In another scenario, one can place an order to sell the stock when the aggregate sale price exceeds $50,000.

The parties filing Form 144 must have a bona fide intention to sell the securities after filing with the SEC, preferably within a reasonable time frame. All filers must register the securities they intend to sell under Section 5 of the Securities Act of 1933, as the sales covered under Form 144 are very close to the interests of the company that issues it.

Tips for Form 144 Filing

Overview of SEC Changes

Impact on Annual Reports and Foreign Private Companies: Recent changes to SEC Form 144 are just part of a broader set of updates affecting annual reports and required documentation for foreign private companies. These adjustments aim to enhance transparency and compliance but can add complexity to the filing process.

Challenges of Keeping Up with SEC Rule Changes

Compliance Burden: For businesses, staying current with SEC rule changes and meeting compliance timelines can be challenging. Even accidental errors in financial reporting can result in significant financial penalties.

Importance of Efficient SEC Reporting Software

Accommodating SEC’s Markup Language: Businesses need robust SEC reporting software that supports the SEC’s chosen markup language, such as Inline XBRL. This technology simplifies the filing process by embedding XBRL data directly within the HTML file, reducing extra steps and ensuring better compliance.

Next-Generation SEC Filing Forms: Modern SEC filing forms now support Inline XBRL, making the filing process more efficient. This feature allows companies to maintain compliance more easily by integrating data validation and reporting within a single workflow.

Benefits of Using the Right Software

Streamlined Filing Process: Using the right SEC reporting software can significantly reduce the time required to prepare mandatory filings. It also helps businesses incorporate rule changes seamlessly, minimizing the risk of errors and ensuring timely compliance.

Ensuring Compliance: Next-generation software solutions not only facilitate the integration of new SEC rules but also enhance the accuracy and reliability of financial reports. This reduces the risk of penalties and improves overall reporting efficiency.

Five Steps to Prepare for Form 144 Filing

Step 1: Identify and Communicate with Affiliates

  • Know Your Affiliates: Ensure you know exactly who your affiliates are and understand the conditions they must meet to sell company securities.
  • Understand Rule 144 Requirements: Affiliates must file Form 144 when placing a sell order with a broker and be prepared to file it electronically on the EDGAR system in a structured data format.

Step 2: Obtain EDGAR Filing Codes

  • Secure Necessary Codes: Affiliates may need EDGAR Filing Codes (CIK and others). Submit SEC Form ID for those who don’t have the required codes.
  • Seek Assistance: If unsure, contact experts (like the DataTracks US team) to file Form ID and assist with obtaining EDGAR codes and your first filing to ensure compliance.

Step 3: Coordinate with Brokers

  • Discuss Filing Responsibilities: Talk to your affiliates’ brokers about their responsibilities regarding SEC EDGAR filings.
  • Designate Filing Executives: Decide who will handle the EDGAR filings, whether it’s the affiliate brokers or someone within the company’s legal team. Ensure access is set up well in advance of deadlines.

Step 4: Learn the New EDGAR System

  • Review the EDGAR Filer Manual: Familiarize yourself with the new EDGAR filing structured data form, which requires specific, complete, and accurate information.
  • Understand Changes: Note that the new forms are less flexible than the paper versions and require precise data.

Step 5: Develop Procedures and Timelines

  • Create a Compliance Plan: Develop procedures that involve the company, affiliates, and brokers, including a detailed timeline to ensure compliance with Form 144.
  • Avoid Missteps: This planning will help you avoid errors and ensure timely and accurate filings.

Account on EDGAR system

For any party to be able to submit their Form 144 electronically, they must have an account on the SEC’s EDGAR filings system. If they do not have an account, they have to apply for it at the earliest. If one has forgotten the access codes to their EDGAR account, they can generate a new or a replacement access code on SEC’s website. The reporting person should have the EDGAR Account number (CIK) and CIK Confirmation Code (CCC) readily available with themselves to file Form 144 electronically.

SEC reporting software

DataTracks provides regulatory reporting solutions to help you prepare accurate compliance reports in xHTML, EDGAR, and inline XBRL formats to file with the SEC. With the DataTracks’ proprietary software – Rainbow- you will be equipped to stay ahead of the curve without the hassles of filing. This cloud-based solution equips your team with the perfect tools for fast, easy, and efficient filing per SEC regulations.

To learn more about how Rainbow can revolutionize your regulatory filings, we offer you a 30-minute call with DataTracks’ compliance expert, who has helped over 1,000 companies in the US with their SEC filing needs. Drop a line at enquiry@datatracks.com or click here.

US EDGAR & iXBRL Reports

FAQs on Form 144

What is Form 144 and when is it required?

Form 144 is a notice required by the SEC when an affiliate of a company intends to sell shares of the company’s stock. It must be filed at the time the affiliate places a sell order with a broker, and it is required to inform the SEC of the proposed sale, ensuring transparency and regulatory compliance.

Who needs to file Form 144?

Affiliates of the company, including officers, directors, and large shareholders, are required to file Form 144 when they intend to sell company securities. These individuals must meet specific conditions outlined in Rule 144 of the Securities Act.

What information must be included in Form 144?

Form 144 must include detailed information about the proposed sale, such as the number of shares to be sold, the name of the security, the date of the notice, and the affiliate’s relationship with the company. The form must also include any changes in the affiliate’s ownership of the company’s securities.

How is Form 144 filed electronically on the EDGAR system?

To file Form 144 electronically, affiliates must have EDGAR Filing Codes, including a Central Index Key (CIK). The form is submitted through the EDGAR system in a structured data format, ensuring compliance with SEC requirements. Affiliates may need to obtain these codes by submitting SEC Form ID if they do not already have them.

What steps should be taken to ensure compliance with Form 144 filing requirements?

To ensure compliance, affiliates should:

  • Identify and communicate with all relevant parties to understand their filing obligations.
  • Obtain necessary EDGAR Filing Codes and submit SEC Form ID if needed.
  • Coordinate with brokers to discuss EDGAR filing responsibilities.
  • Familiarize themselves with the new EDGAR structured data format by reviewing the EDGAR Filer Manual.
  • Develop a compliance plan with detailed procedures and timelines to avoid errors and ensure timely filings.