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What Is Section 16 (Forms 3, 4, 5)?

Section 16 of The Securities Exchange Act of 1934 requires corporate insiders to publicly disclose their company affiliations, material changes in their holdings or unreported insider transactions through various regulatory filings with the US Securities and Exchange Commission (SEC).

Specifically, Section 16 mandates that Forms 3, 4 and 5 be filed by insiders—in other words, company investors who are directly or indirectly beneficial owners of more than 10% of stock in a company or directors and officers of the issuer of the securities.

An insider of a first-time securities issuer or a new insider at an already-registered securities issuer must carry out the initial filing, Form 3. Form 4 is used to report material changes in insiders’ holdings. Form 5 reports any transactions that should have been included on a previous Form 4 or were eligible for deferred reporting such as gifts of shares or multiple small transactions.

Section 16 reporting must be submitted electronically through the SEC’s EDGAR (Electronic Data Gathering, Analysis and Retrieval) system, where it becomes public record. The SEC also requires companies to post the forms on their websites by the end of the next business day after filing them.

Section 16 reporting deadlines were accelerated due to provisions of the Sarbanes-Oxley Act of 2002 (SOX).

How Can Merrill Help?

The process of filing Section 16 forms can be time-consuming and daunting—particularly if your company manages large volumes of filings. Ongoing reforms and refinements by the SEC present additional challenges—most notably, staying on top of regulatory changes. Merrill’s Section 16 Direct makes it extremely easy to file Forms 3, 4 or 5 electronically. It’s a secure, web-based, self-service platform that streamlines filings in compliance with Section 16. With Merrill, you can manage regulated disclosure with absolute security, precision and accuracy.

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