SEC Form S-3D Definition

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Christina Majaski
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Christina Majaski writes and edits finance, credit cards, and travel content. She has 14+ years of experience with print and digital publications.
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Updated June 28, 2022
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Chip Stapleton
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Reviewed by Chip Stapleton
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Chip Stapleton is a Series 7 and Series 66 license holder, CFA Level 1 exam holder, and currently holds a Life, Accident, and Health License in Indiana. He has 8 years experience in finance, from financial planning and wealth management to corporate finance and FP&A.
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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 on behalf of shareholders as a result of a dividend reinvestment plan (DRIP) or interest reinvestment plan.

A company will often propose a dividend or interest reinvestment plan as a convenient and economical way for shareholders to purchase additional shares of its common stock by using the interest and/or dividends they have earned on their existing shares of common stock.

Key Takeaways

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

Understanding SEC Form S-3D

Shareholders typically do not have 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 additional amount of common shares by cash payment in addition to 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 created and passed into law to protect investors after the stock market crash of 1929.

DRIPs

Dividend reinvestment plans, or DRIPs, allow investors the choice to reinvest the cash dividend and buy additional shares of the company's stock directly from the company. Many companies offer shareholders the option to reinvest the cash amount of issued dividends into additional 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 detailed records of share ownership percentages.

For example, let's say that the TSJ Sports Conglomerate paid a $10 dividend on a stock that traded at $100 per share. Every time there was a dividend payment, investors within the DRIP plan would receive one-tenth 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 via a DRIP program want to sell their shares, they must sell them back to the company directly. In other words, the shares are not sold on the open market via a broker. Instead, a request to sell the shares must be made with the company, whereby the company will, in turn, redeem the shares at the prevailing stock price.