October 17, 2023
Who may be interested: Registered Investment Companies, Investment Advisers.
Quick Take: The SEC adopted amendments to the rules governing beneficial ownership reporting under Sections 13(d) and 13(g) of the Exchange Act. The amendments shorten the deadlines for Schedule 13D and 13G filings, clarify the Schedule 13D disclosure requirements with respect to derivative securities, and require that Schedule 13D and 13G filings be made using a structured, machine-readable data language.
Sections 13(d) and 13(g) of the Exchange Act requires an investor who beneficially owns over 5% of a covered class of equity securities to file a Schedule 13D or 13G, depending on whether the investor intends to change or influence the control of the issuer. The amendments modify Exchange Act Rule 13d-1(a), shortening the filing deadline for initial Schedule 13Ds to five business days (instead of 10 calendar days ) after the date on which an investor acquires beneficial ownership of more than 5% of a covered class of an equity security. Rule 13d-2(a) is revised to require Schedule 13D amendments be filed within two business days after the date on which a material change occurs.
Rule 13d-1(b) and (d) is amended to shorten the deadline for initial Schedule 13G filings by “Qualified Institutional Investors” and “Exempt Investors” to be within 45 days after the end of the calendar quarter in which beneficial ownership first exceeds 5% of a covered class of equity securities. For “Passive Investors” filing Schedule 13G, amendments to Rule 13d-1(c) will shorten the initial filing deadline to 5 business days (instead of 10 calendar days) after the date on which they acquire beneficial ownership of more than 5% of a covered class. Filing deadlines for amendments made by all Schedule 13G filers will also be shortened under the amended Rule, generally requiring an amendment be filed 45 days after the calendar quarter (instead of year-end) in which a material change occurred. Further, the Rule changes accelerate the Schedule 13G amendment obligations for Qualified Institutional Investors and Passive Investors when their beneficial ownership subsequently exceeds 10 percent or increases or decreases by more than 5%.
The SEC’s adopting release also provided guidance, in lieu of adopting certain other proposed rules, concerning (i) the circumstances under which certain cash-settled derivative securities count toward the 5% reporting threshold and are deemed to be beneficially owned for purposes of Exchange Act Rule 13d-3 and (ii) the determination as to the formation of a “group” for purposes of beneficial ownership reporting under Exchange Act Section 13(d)(3) and (g)(3).
The amendments will become effective 90 days after publication in the Federal Register; provided, however, that (i) beneficial owners will be required to comply with the accelerated Schedule 13G filing deadlines commencing on September 30, 2024, and (ii) the requirement that Schedules 13D and 13G be made using an XML-based language commences on December 18, 2024.
For a more detailed discussion of the SEC's amendments to Regulation 13-D, see S&K's client alert here.
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The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm or its clients, or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
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