SEC Propose Amendments to Schedule 13D & G Reporting
On the 10th February 2022, the Securities and Exchange Commission (SEC) announced proposals amending the rules governing beneficial ownership reporting under Exchange Act Sections 13(d) and 13(g).
The proposed amendments to Regulation 13D-G would:
- Accelerate the filing deadlines for Schedules 13D and 13G beneficial ownership reports;
- Expand the application of Regulation 13D-G to certain derivative securities;
- Clarify the circumstances under which two or more persons have formed a “group” that would be subject to beneficial ownership reporting obligations; and
- Require that Schedules 13D and 13G be filed using a structured, machine-readable data language.
For Schedule 13D, the proposed amendments would shorten the initial filing deadline from 10 days to five days and require that amendments be filed within one business day.
For certain Schedule 13G filers (i.e., qualified institutional investors and exempt investors), the proposed amendments would shorten the initial filing deadline from 45 days after year-end to five business days after the end of the month in which the investor beneficially owns more than 5 percent of the covered class.
For other Schedule 13G filers (i.e., passive investors), the proposed amendments would shorten the initial filing deadline from 10 days to five days.
Finally, for all Schedule 13G filers, the proposed amendments would require that an amendment be filed five business days after the month in which a material change occurred rather than 45 days after the year in which any change occurred.
The proposed amendments also would accelerate the amendment obligations for certain Schedule 13G filers upon exceeding 10 percent beneficial ownership or a 5 percent increase or decrease in beneficial ownership of a covered class, requiring that qualified institutional investors and passive investors file an amendment within five days and one business day, respectively.
The following table summarizes the changes:
| Issue | Current Schedule 13D | Proposed New Schedule 13D | Current Schedule 13G | Proposed New Schedule 13G |
|---|---|---|---|---|
| Initial Filing Deadline | Within 10 days after acquiring beneficial ownership of more than 5% or losing eligibility to file on Schedule 13G. Rules 13d-1(a), (e), (f) and (g). | Within five days after acquiring beneficial ownership of more than 5% or losing eligibility to file on Schedule 13G. Rules 13d-1(a), (e), (f) and (g). | QIIs & Exempt Investors: 45 days after calendar yearend in which beneficial ownership exceeds 5%. Rules 13d-1(b) and (d). Passive Investors: Within 10 days after acquiring beneficial ownership of more than 5%. Rule 13d1(c). | QIIs & Exempt Investors: Five business days after month-end in which beneficial ownership exceeds 5%. Rules 13d1(b) and (d). Passive Investors: Within five days after acquiring beneficial ownership of more than 5%. Rule 13d-1(c). |
| Amendment Triggering Event | Material change in the facts set forth in the previous Schedule 13D. Rule 13d-2(a). | No amendment proposed – material change in the facts set forth in the previous Schedule 13D). Rule 13d-2(a). | All Schedule 13G Filers: Any change in the information previously reported on Schedule 13G. Rule 13d-2(b). QIIs & Passive Investors: Upon exceeding 10% beneficial ownership or a 5% increase or decrease in beneficial ownership. Rules 13d-2(c) and (d). | All Schedule 13G Filers: Material change in the information previously reported on Schedule 13G. Rule 13d-2(b). QIIs & Passive Investors: No amendment proposed – upon exceeding 10% beneficial ownership or a 5% increase or decrease in beneficial ownership. Rules 13d-2(c) and (d). |
| Amendment Filing Deadline | Promptly after the triggering event. Rule 13d-2(a). | Within one business day after the triggering event. Rule 13d-2(a). | All Schedule 13G Filers: 45 days after calendar yearend in which any change occurred. Rule 13d-2(b). QIIs: 10 days after monthend in which beneficial ownership exceeded 10% or there was, as of the monthend, a 5% increase or decrease in beneficial ownership. Rule 13d-2(c). Passive Investors: Promptly after exceeding 10% beneficial ownership or a 5% increase or decrease in beneficial ownership. Rule 13d-2(d). | All Schedule 13G Filers: Five business days after month-end in which a material change occurred. Rule 13d-2(b). QIIs: Five days after exceeding 10% beneficial ownership or a 5% increase or decrease in beneficial ownership. Rule 13d-2(c). Passive Investors: One business day after exceeding 10% beneficial ownership or a 5% increase or decrease in beneficial ownership. Rule 13d-2(d). |
| Filing “CutOff” Time | 5:30 p.m. eastern time. Rule 13(a)(2) of Regulation S-T | 10 p.m. eastern time. Rule 13(a)(4) of Regulation S-T | All Schedule 13G Filers: 5:30 p.m. eastern time. Rule 13(a)(2) of Regulation S-T. | All Schedule 13G Filers: 10 p.m. eastern time. Rule 13(a)(4) of Regulation S-T. |
The proposed amendments would provide that holders of certain cash-settled derivative securities will be “deemed” beneficial owners of the reference equity securities. Specifically, proposed new Rule 13d-3(e) would provide that a holder of a cash-settled derivative security, other than a security-based swap, will be deemed the beneficial owner of the reference equity securities if the derivative is held with the purpose or effect of changing or influencing the control of the issuer of the reference securities, or in connection with or as a participant in any transaction having such purpose or effect.
In addition, the proposed amendments would revise Item 6 of Schedule 13D to clarify that a person is required to disclose interests in all derivative securities (including cash-settled derivative securities) that use the issuer’s equity security as a reference security.
The proposed amendments would clarify the circumstances under which two or more persons have formed a “group” under Regulation 13D-G and the Exchange Act. Those circumstances would include, among other things, “tipper-tippee” relationships in which a person shares non-public information about an upcoming Schedule 13D filing with another person who subsequently purchases the issuer’s securities based on that information.
In addition, the proposed amendments would provide new exemptions to permit investors to communicate and consult with each other, jointly engage with issuers, and execute certain transactions without being subject to regulation as a group. Specifically, those exemptions would address circumstances in which:
- Investors communicate with one another or the issuer without the purpose or effect of changing or influencing control of the issuer; and
- Investors and financial institutions enter into agreements governing the terms of derivative securities.
To make it easier for investors and markets to access, compile and analyze information disclosed on Schedules 13D and 13G, the proposed amendments would require that these filings use a structured, machine-readable data language. This requirement would apply to all information disclosed on Schedules 13D and 13G.
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