Insiders Must Report Trades Within 2 Days
>>The new law, largely written by Maryland Democratic Sen. Paul Sarbanes, was spurred on by the weak stock market, voter anger over the recent spate of accounting scandals and approaching congressional elections.<<
WASHINGTON (Reuters) - Insider trades must be reported to the Securities and Exchange Commission within two days of the transaction as part of a new landmark corporate reform law, the SEC said on Tuesday.
The change, which is a provision of the new landmark accounting reform law, goes into effect August 29 and applies to officers, directors and principal security holders, the SEC said.
It essentially requires an accelerated filing of a so-called Form 4, which currently must be submitted with the SEC within the 10th day after the month in which the insider sale transaction took place.
The new deadline is part of a legislation signed into law by President Bush last week designed to make it harder for company executives to deceive investors.
The new law, largely written by Maryland Democratic Sen. Paul Sarbanes, was spurred on by the weak stock market, voter anger over the recent spate of accounting scandals and approaching congressional elections.
The change will require insiders to file reports "before the end of the second business day following the day on which the subject transaction has been executed ...," the SEC said in a statement.
The law does not apply to Form 144s, which indicate an intention to sell rather than an actual sale.
It also contains language that does not require certain transactions to be reported within that time frame, allowing reports to be filed "... at such other time as the commission shall establish, by rule, in any case in which the commission determines that such two-day period is not feasible."
Those exemptions would apply to pre-approved regular stock sale plans such as "10b5," which are set up by officers and directors who are not in possession of material, nonpublic information.
Certain market orders, such as limit orders involving more than one day, and employee benefit plans such as 401(k) retirement plans, among others, would not have to be filed by the new time deadline.
The SEC did not say when it would craft and adopt rules to address those exemptions but said they anticipate adopting them by August 29.
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