Readers of these alerts are aware – or should be – that, beginning on April 13, 2023, Form 144 filings will have to be submitted electronically. Aside from some of the challenges discussed in our earlier alert, companies should be aware of another unintended consequence of this requirement.
Specifically, given the difficulty of tracking paper filings, few people follow Form 144 filings; as a result, they get little or no publicity. Sales are therefore generally reported only as they actually occur and are reported on Form 4. However, once Form 144 filings are made electronically, the media and others will likely be able to track Form 144 filings more easily and to report anticipated insider sales, rather than reporting sales only as they occur.
It is not unusual for Form 144 filings to show the maximum number of shares to be sold under Rule 144 so that, if market conditions permit, an insider can dispose of as many shares as possible. The number of shares actually sold under Rule 144 can be lower than the number appearing on the Form 144 filing – and in some cases substantially lower, or none at all.
Due to the requirements of Rule 144, many brokers (and insiders) may continue the practice of reporting the maximum number of shares that may be sold. At a minimum, those insiders and their companies should be prepared to get questions on Form 144 filings and, more importantly, to answer those questions.
Please direct any questions or observations to Gunster securities law and corporate governance practice leader Bob Lamm.
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This publication is for general information only. It is not legal advice, and legal counsel should be contacted before any action is taken that might be influenced by this publication.
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