SEC Adopts Amendments to 13D/G Beneficial Ownership Requirements

On October 10, 2023, the SEC adopted amendments to shorten the filing deadlines for initial and amended beneficial ownership reports on Schedules 13D and 13G. The amendments will generally take effect no earlier than January 2024 (90 days after publication in the Federal Register, an unpredictable process that can take several weeks), while revised filing deadlines for certain 13G filers will not take effect until September 30, 2024.

Key points to note:

Shortened Initial Filing Deadlines

  • Initial Schedule 13D filings must be made within five business days instead of ten calendar days. Schedule 13D filers must report their beneficial ownership within five business days after acquiring more than 5% of a class of voting equity securities registered under the Exchange Act, rather than the current ten calendar day deadline for these filers. The term business day in this context means any day other than a Saturday, Sunday, or Federal holiday, from 12:00 a.m. to 11:59 p.m. Eastern time.
  • Initial Schedule 13G filings for Passive Investors must also be filed within five business days instead of ten calendar days. Investors that own less than 20% and do not hold with the purpose or effect of changing or influencing control of the issuer filing under Rule 13d-1(c) (Passive Investors) must report their beneficial ownership on an initial Schedule 13G within five business days after acquiring more than 5%. 
  • Initial Schedule 13G filings for Qualified Institutional Investors and Exempt Investors move to a quarter-end based deadline. Certain qualified institutional investors filing under Rule 13d-1(b), such as registered broker-dealers, registered investment advisers, registered investment companies, and insurance companies (QIIs), and investors filing under Rule 13d-1(d) because they own more than 5% but have not made an acquisition subject to Section 13(d), such as founders and other pre-IPO investors (Exempt Investors), must file an initial Schedule 13G no later than 45 calendar days after the calendar quarter in which they beneficially own more than 5%, shortened from 45 calendar days after the end of a calendar year. 
    • These filers will no longer have the ability to beneficially own greater than 5% throughout a calendar year without incurring a 13G filing obligation. 
    • QIIs whose beneficial ownership exceeds 10% as of the last day of any month must file an initial Schedule 13G even sooner, i.e., within five business days after the end of that month, replacing the existing ten calendar day deadline for these filers. 

Shortened Amendment Filing Deadlines

  • Amended Schedule 13D filings must be filed to disclose material changes within two business days. This new deadline replaces the existing undefined standard to “promptly” file Schedule 13D amendments.
  • All Schedule 13G filers must amend to disclose material changes no later than 45 calendar days after each calendar quarter.  
    • This requirement to file Schedule 13G amendments is triggered by any material changes in the information previously reported rather than the existing requirement to annually report “any” changes. 
    • The new quarter-end based deadline aligns with the initial reporting deadline for QIIs and Exempt Investors and extends it to Passive Investors. Also, this deadline is consistent with the filing deadline for Form 13F, another reporting form filed by institutional investment managers, many of which also file reports on Schedule 13G.
  • Passive Investors and QIIs also will need to amend their Schedule 13G filings sooner if their beneficial ownership exceeds 10%. Passive Investors must file an amendment within two business days of acquiring more than 10%. QIIs must amend within five business days after the end of the month in which they cross the 10% threshold.  

Clarification of When a Section 13(d) or 13(g) Group Has Been Formed

  • Group formation does not solely depend on the presence of an express agreement; concerted actions and informal agreements are sufficient. The SEC declined to adopted proposed rule changes and instead provided guidance for determining whether two or more persons have formed a “group” based on existing concepts, such as informal arrangements or coordination in furtherance of a common purpose to acquire, hold, or dispose of an issuer’s securities. 
  • Shareholder engagement activities that merely involve engaging in discussions and exchanging views, without more, will not result in the formation of a group. As examples, the SEC’s guidance clarifies that discussions among shareholders without committing to a course of action, jointly engaging with management without attempting to convince the board to change existing board membership, and jointly submitting a non-binding shareholder proposal will not form a group. On the other hand, shareholders involved in a “tipper-tippee” relationship, where one person intentionally shares non-public information that it will soon be filing a Schedule 13D with the purpose of causing others to make purchases of the same class of securities, would potentially result in the formation of a group.

Reporting Obligations Relating to Cash-Settled Derivative Securities

  • A holder of a cash-settled derivative will be deemed to beneficially own the reference equity securities based on existing notions of beneficial ownership under Rule 13d-3. Rather than adopt the proposed changes to the standards for determining beneficial ownership, the SEC provided guidance for determining whether a holder of a cash-settled derivative beneficially owns the reference equity security (i.e., the cash-settled derivative provides a holder with voting or investment power over the reference security, the derivative is part of a plan or scheme to evade the Section 13(d) or 13(g) reporting requirements, or the holder has the right to acquire beneficial ownership of the equity security within 60 days or with the purpose or effect of changing or influencing control of the issuer). 
    • Interestingly, the SEC has not yet adopted proposed Rule 10B-1 to require disclosure of security-based swap positions, and it remains unclear whether it will do so.
  • Persons already required to report beneficial ownership on Schedule 13D must also disclose any interests in derivative securities. Item 6 of Schedule 13D, which requires disclosure of any contracts, arrangements, understandings or relationships relating to the issuer’s securities, has been amended to clarify that filers must include disclosure about interests in all derivative securities, including cash-settled derivatives, that use the issuer’s equity security as a reference security. Previously, the Item 6 disclosure obligations were uncertain and compliance was inconsistent.

Compliance Dates

  • 13D filers must comply with the new requirements beginning beginning February 5, 2024. 
  • 13G filers will have until September 30, 2024, to comply with the new deadlines. 
  • The SEC’s guidance relating to cash-settled derivatives and group formation became effective on November 7, 2024.

Filing Issues and XML 

  • To facilitate compliance with the shortened filing deadlines, the EDGAR filing cut-off deadlines in Regulation S-T for Schedules 13D and 13G will be extended from 5:30 p.m. to 10:00 p.m. Eastern time.
  • Starting December 18, 2024, all filers must comply with a new XML structured data requirement for disclosures reported on Schedules 13D and 13G, with the exception of exhibits.

You May Also Be Interested In