SEC Form S-3D

What Is SEC Form S-3D?

SEC Form S-3D is a filing that publicly traded companies must submit to the SEC's EDGAR system when they purchase securities for the benefit of shareholders as a result of a dividend reinvestment plan (DRIP) or interest reinvestment plan.

A company will frequently propose a dividend or interest reinvestment plan as a helpful and practical way for shareholders to purchase extra shares of its common stock by using the interest or potentially dividends they have earned on their existing shares of common stock.

Understanding SEC Form S-3D

Shareholders normally don't need to pay brokerage fees, commissions or service charges when a company makes a dividend or interest reinvestment. Companies may also offer shareholders the opportunity to purchase an extra amount of common shares with cash payment notwithstanding their dividend or interest reinvestment.

Requirements for filing the S-3D forms are covered under rule 462 of the Securities Act of 1933. The Act was made and passed into law to safeguard investors after the stock market crash of 1929.

DRIPs

Dividend reinvestment plans, or DRIPs, permit investors the decision to reinvest the cash dividend and buy extra shares of the company's stock straightforwardly from the company. Many companies offer shareholders the option to reinvest the cash amount of issued dividends into extra shares through a DRIP. Since these shares usually come from the company's own reserve, they are not offered through the stock exchanges.

Fractional Shares

The "dripping" of dividends is not limited to whole shares, which makes these plans somewhat unique. The corporation keeps definite records of share ownership percentages.

For instance, suppose that the TSJ Sports Conglomerate paid a $10 dividend on a stock that traded at $100 per share. Each time there was a dividend payment, investors inside the DRIP plan would receive one-10th of a share.

Special Considerations

It's important to note that the cash dividends that are reinvested into DRIPs are still considered taxable income by the Internal Revenue Service (IRS) and must be reported. Also, when investors who purchased shares by means of a DRIP program need to sell their shares, they must sell them back to the company straightforwardly. At the end of the day, the shares are not sold on the open market by means of a broker. Instead, a request to sell the shares must be made with the company, by which the company will, thusly, reclaim the shares at the overall stock price.

Highlights

• Requirements for filing the S-3D forms are covered under rule 462 of the Securities Act of 1933.
• They are used when companies purchase securities for shareholders as a result of a dividend or interest reinvestment plan.
• SEC Form S-3D is a filing that publicly traded companies must submit to the SEC's EDGAR system.