SEC Release Clarifies Two Insider Trading Exemptions and Eliminates Timely Filing Presumption

On August 3, 2005, the Securities and Exchange Commission adopted amendments to Rules 16b-3 and 16b-7 to clarify the scope of those exemptions from short swing trading liability (SEC Rel. Nos. 33-8600; 34-52202; 35-28013; IC-27025; File No. S7-27-04; Aug. 3, 2005) (the "Release"). In light of the accelerated electronic filing deadlines applicable to Section 16 filings, the SEC also eliminated the presumption of timely filing provision in Rule 405 of Reg. S-K for purposes of disclosing delinquent filings.

The amendments to the Section 16(b) rules were intended to clarify what the SEC considered as its long-standing interpretations of the scope of the exemptions under Rule 16b-3 (transactions between an issuer of securities and its officers and directors) and Rule 16b-7 (securities exchanged in a transaction that does not represent a significant economic or business change by the issuer, such as reincorporation or reorganization).