In the world of SEC reporting, Section 16a compliance is often viewed as a routine administrative task. However, treat it too lightly, and you risk more than just a late filing. Delinquent Section 16a reports serve as a “governance signal” that investors, proxy advisors, and the SEC use to judge the quality of a company’s internal controls.
If your company needs to disclose late filings in a proxy statement or Form 10-K, clarity and accuracy are your best tools for maintaining investor confidence.
What is Regulation S-K Item 405?
Regulation S-K Item 405 requires public companies to disclose any directors, officers, or 10% beneficial owners who failed to file their Forms 3, 4, or 5 on time during the most recent fiscal year.
While many drafting teams still refer to this as “Item 410” due to legacy templates, the current requirement lives under Item 405. The goal of this disclosure is simple: provide near real-time transparency into insider ownership.
Regulatory Alert: New Requirements for Foreign Private Issuers (FPIs)
Historically, Foreign Private Issuers were exempt from Section 16 reporting. However, as of March 2026, the SEC has eliminated this exemption. Directors and officers of FPIs are now required to file Forms 3, 4, and 5, meaning these companies must also now include Section 16 reporting and Item 405 delinquency disclosures in their annual filings. If you are a Foreign Private Issuer, now is the time to audit your internal tracking processes to avoid “red flags” in your first year of compliance.
The Essentials of a “Clean” Disclosure
When a delinquency occurs, the SEC looks for a factual presentation rather than a narrative defense. Your disclosure must include:
- The Name of the Reporting Person: Specifically, those who failed to file on time.
- The Number of Late Reports: A count of the actual forms filed after the deadline.
- The Number of Transactions: The total count of transactions that were not reported timely (note: one late Form 4 could contain multiple late transactions).
- Known Failures to File: This includes missing Form 3s when an individual first becomes an “insider“.
Best Practices for SEC Drafting Teams
To keep your proxy statement professional and minimize “red flags,” follow these three drafting principles:
1. The “Disclose Once” Rule
A late filing should only be disclosed in the year it occurred. Once you have reported a delinquency, it should not reappear in future years. Maintaining an internal log is the easiest way to prevent accidental repeat disclosures.
2. Stick to the Facts
Avoid using “marketing tone” or arguing that a late filing is “immaterial”. If context is necessary, stick to objective facts like administrative delays or a change in counsel. In the world of compliance, “boring” disclosure is effective disclosure.
3. Verify Your Data
The SEC permits companies to rely on a specific scope of information for Item 405:
- A review of Forms 3 and 4 filed electronically during the fiscal year.
- Forms 5 filed with respect to the fiscal year.
- Written representations from insiders stating that no Form 5 was required.
How to Prevent Future Delinquencies
Most late filings are preventable through operational controls. Common pressure points often include onboarding new directors, equity awards tied to board meetings, and open market trades executed without notifying the Section 16 administrator.
To reduce your risk, consider formalizing trade preclearance requirements, using automated transaction reminders, and maintaining a standard intake form for all equity awards.
This securities law blog post is provided as a general informational service. It should not be construed as and does not constitute legal advice. If you have any questions about this article, Hamilton & Associates Law Group, P.A. is ready to help.
Since 1998, our Founder, Brenda Hamilton, has been a leading voice in corporate and securities law, representing both domestic and international clients across diverse industries and jurisdictions.
To speak with a Securities Attorney, please contact Brenda Hamilton at 200 E Palmetto Rd, Suite 103, Boca Raton, Florida, (561) 416-8956, or by email at [email protected].
Hamilton & Associates | Securities Attorneys
Brenda Hamilton, Securities Attorney
200 E Palmetto Rd, Suite 103
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855
www.SecuritiesLawyer101.com