SEC Permits Aggregate Section 16 Reporting - McDermott Will & Emery - www.mwe.com

A recently issued SEC no-action letter simplifies the
reporting of certain same-day, same-way open market purchases
or sales.

The Staff of the U.S. Securities and Exchange Commission
(SEC) issued a no-action letter dated June 25, 2008, to the
Society of Corporate Secretaries and Governance Professionals
that permits Section 16 reporting persons to report same-day,
same-way open market purchases or sales on an aggregate
basis.  The no-action letter is considered
"global" and thus the relief it provides is available
to all Section 16 reporting persons. 

Previously, the SEC Staff had taken the position that, where
a filer's purchases or sales on a particular day are
executed at different prices, those purchases or sales could
not be aggregated on a single line, but instead must be
reported individually, on separate lines of the Form 4 or Form
5.  Because many brokers execute trade orders in small
increments and report trade prices at prices that are carried
out to as many as four decimal places, this interpretive
position had the effect of requiring filers to report on
multiple lines of Form 4 purchases or sales that occur on a
single day pursuant to a single market order (e.g., an
order to sell 5,000 shares of stock at the market price),
solely because the trade is executed at multiple prices that
may be as little as a fraction of a penny apart.  Often,
this meant that a filer had to separately itemize dozens or
even hundreds of transactions, involving only 100 or fewer
shares each, to report the execution of a single order. 
Because the electronic filing system limits each Form 4 to 30
lines per table, a filer was required to prepare and file
multiple Forms 4 or 5 to report each separately priced
trade. 

This was unduly burdensome to the persons who must prepare
and file the forms.  It was also confusing to investors
because it created a misleading impression that the filer has
placed dozens of sell orders rather than effecting what is
essentially a single trade resulting from a single investment
decision.  Further, investors had to read multiple lines
of multiple Forms 4 or 5 to understand the filer's trading
activity and gather data regarding the total number of shares
involved in the trade.

The no-action letter permits aggregate reporting as
follows:

• The transactions reported on an aggregate basis must be
  effected through a broker-dealer on the open market and must
  occur on the same day.
  
  
  
  


• Purchases may only be aggregated with purchases, and
  sales may only be aggregated with sales.
  
  
  
  


• Each form of ownership must be reported separately, so
  that transactions in direct holdings may not be aggregated
  with transactions in indirect holdings, and each form of
  indirect holdings must be reported separately.
  
  
  
  


• The prices must be within a one dollar range so that if,
  for example, a filer sold 1,000 shares in 20 separate trades
  at prices ranging from $16.50 to $17.49 a share, and another
  500 shares in 10 separate trades at prices ranging from
  $17.50 to $17.75 a share, all of the transactions could be
  reported on two separate lines, showing the weighted average
  price for the transactions in each line.
  
  
  
  


• A footnote to each line must indicate the range of prices
  and include an undertaking to provide on request detailed
  breakouts in order that the SEC Staff, the issuer or any
  security holder of the issuer can receive full information
  regarding the number of shares purchased or sold at each
  separate price.
  
  
  
  


• The filer must maintain copies of the detailed reports of
  all the trades described in the report.
  
  
  
  

A copy of the no-action letter is available here. 

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