More Sunday afternoon reading stuff, hey Gary I wonder if Medinah has any forms 3, 4, or 5. Hmmmmmmmmmmmmmmm
stocks.miningco.com
Recent Changes to Insider Trading
Reports Under Rule 16a
Federal securities laws require that directors, officers and greater-than-10% stockholders ("Insiders") of a company report their purchases and sales of their company's equity securities. The Securities and Exchange Commission ("SEC") has recently adopted significant changes to its rules in this area, and we have set forth below a brief analysis of the changes and our additional insight based upon subsequent discussions with SEC staff members in Washington, D.C.
Recommendations
Because of the significance of these changes, publicly-traded companies should take action to ensure proper reporting of transactions. Such actions include the following:
Use the new Forms 3, 4 and 5, which became effective on August 15, 1996, to report all Insider transactions after that date;
they contain new instructions for properly identifying transactions, including those that no longer need to be reported on a regular basis.
Require all directors and officers to sign a statement at year-end that they have either filed a Form 5 for year-end reporting or that they are not required to do so;
otherwise, the company will need to report in its proxy statement that the director or officer failed to file a required report under the short-swing profit rules.
Advise the directors and officers of the transactions that must now be reported monthly on Form 4 rather than annually on Form 5
this includes all option exercises.
Ensure that any delinquent reports disclosed in the proxy statement are set forth under the separate caption specified in the new rules.
Consider adopting the new short-swing liability rules relating to benefit plans earlier than its November 1, 1996 effective date to take advantage of its related reporting rule changes.
Background
On May 31, 1996, the SEC released amendments to its rules and forms established under Section 16 of the Securities Exchange Act of 1934 (the "Act"). The amendments revised both the rules under Section 16(a) of the Act ("Rule 16a"), which cover reporting by Insiders, as well as the short-swing profits liability rule of Section 16(b) of the Act ("Rule 16b-3"). Section 16(b) attempts to prevent speculative, "short-swing" transactions by making the profits of Insiders' purchase and sale transactions in their company stock within six months of each other subject to recovery by the company or by a shareholder acting on the company's behalf, and Rule 16b-3 provides exemptions from the short-swing profit recapture rules for transactions between a company's employee benefit plan and its officers and directors. The new Rule 16a went into effect on August 15, 1996, and the new Rule 16b-3 will go into effect on November 1, 1996 unless the company elects to have them apply earlier to all its benefits plans.
Reporting Changes
The changes to Rule 16a result in a dramatic change in reporting requirements. Reporting of transactions may now be eliminated, changed to a different form or jointly reported.
A. Elimination of Certain Reporting.
A number of transactions that currently must be reported on SEC Form 5 no longer will need to be reported at all. These include:
routine transactions under Tax-Conditioned Plans (a new term referring to plans which satisfy certain tax code requirements);
NOTE: this reporting change will only become effective once the company adopts the new Rule 16b-3
both acquisitions or dispositions (rather than just dispositions) of securities pursuant to a domestic relations order (rather than the more restrictive "qualified domestic relations order");
acquisitions under a dividend reinvestment plan;
transactions that change only the form of beneficial ownership but do not affect an Insider's actual interest in the subject stock (such as transfers from an Insider to his or her trust). However, two types of such transactions must be reported as line items on Forms 4 or 5: (a) exercises and conversions of derivative securities which result in the Insider acquiring beneficial ownership of the underlying securities which were deemed indirectly owned prior to the exercise (e.g., the exercise of stock options), and (b) deposits to and withdrawals from voting trusts;
transactions by a former Insider within six months of termination; however, reporting is still required of non-exempt transactions which occur within less than six months of another nonexempt "opposite-way" transaction that occurred while the person was an Insider;
expirations or cancellations of certain derivative securities (such as stock options), unless the Insider received value in return;
tax withholding and similar rights (such as those that normally accompany an option);
stock received in a spin-off; and
In addition, trusts that are not 10%-or-greater stockholders but have an Insider as a trustee are also exempt from reporting under the new Rule 16a.
Even though specific reporting of these transactions is no longer required, changes in stock holdings from these transactions must still be reflected in the "Total" columns of any Form 4 (month-end reporting) or Form 5 (year-end reporting) filed by the Insider. This requirement may, unfortunately, actually increase the record-keeping burden by Insiders.
B. Other Changes to Reporting Requirements.
Several additional changes were made to the reporting requirements. They include:
Exercises and conversions of derivative securities, including exercises of employee stock options and stock appreciation rights ("SARs") must be reported monthly on Form 4. Previously, such transactions could have been reported either at month-end on Form 4 or at year-end on Form 5.
All other exempt transactions and small acquisitions (not exceeding $10,000) will now be reported annually on Form 5, with earlier reporting on Form 4 permitted. Exempt option grants and other employee benefit plan acquisitions will no longer be included in the $10,000 calculation. Previously, such transactions were required to be reported on Form 4.
In instances where more than one person subject to Section 16 is deemed to be a beneficial owner of the same stock, such persons may now file reports either separately or jointly. Required information must be given for each beneficial owner, and such filings must be signed by, or on behalf of, each beneficial owner by a "designated filer." Previously, each Insider was required to report separately ownership of the same shares of stock.
Issuers are now required to disclose delinquent Section 16 reports in the proxy statement under a separate caption reading "Section 16(a) Beneficial Ownership Reporting Compliance." Previously, such disclosure was not required to be handled in this manner. In addition, the proxy statement must disclose non-receipt of: (1) a Form 3 from a new Insider or (2) a Form 5 from an Insider, unless the issuer receives a written representation from the Insider indicating that no Form 5 is required. Previously, no written representation was required.
Insiders no longer have to file manually signed copies of Forms 3, 4 and 5. The SEC will now accept typed, faxed or photocopied signature pages, as long as a manually signed copy of the form is retained by the filer for at least five years.
The definition of equity swaps that must be reported has been expanded to include numerous additional transactions.
Note that transactions that took place prior to the August 15, 1996 effective date of these new rules are subject to reporting under the old rules. For instance, cash-only rights (such as SARs) granted prior to August 15, 1996 will remain exempt from reporting.
Other Reporting Matters
Under the new rules, the three reporting forms used under Rule 16a — Form 3 (initial reporting), Form 4 (month-end reporting) and Form 5 (year-end reporting) — have been significantly revised. These new forms, which include changes to the transaction codes used to describe the exemptions that apply, must be used after August 15, 1996 for all reporting purposes
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