SEC Adopts Amendments to Rules Governing Beneficial Ownership Reporting
The SEC recently adopted rule amendments regarding beneficial ownership reporting under Sections 13(d) and 13(g) of the SecuritiesExchangeAct of 1934. To the benefit of clients and investors, these amendments update Regulation 13D-Gand now require market participants to provide more timely information on their positions. The goal of these amendments is to better meet the needs of investors in today's financial markets. Let's break down these amendments and what they mean for you.
Overview of Beneficial Ownership Reporting Amendments
These new amendments make a few changes to the current rules for beneficial ownership reporting. Among other items, these amendments:
- Shorten the deadline for initial Schedule 13D filings from 10 days to five business days and require that Schedule 13D amendments be filed within two business days.
- Shorten filing deadlines for Schedule 13G beneficial ownership reports – though filing deadlines still differ based on the type of filer.
- Clarify the Schedule 13D disclosure requirements regarding derivatives.
- Require Schedule 13D and 13G filings to be created using a structured, machine-readable data language.
Along with these amendments, the SEC's changes provide guidance on:
- The application of the current beneficial ownership reporting rules to an investor's use of certain cash-settled derivative securities.
- The application of the current legal standard found in Sections 13(d)(3) and 13(g)(3) of the Securities Exchange Act of 1934 to certain common types of share holder engagement activities.
For certain Schedule 13G filers (i.e., qualified institutional investors, exempt investors, etc.), the initial filing deadline has now been shortened from 45 days after the end of a calendar year to 45 days after the end of a calendar quarter in which an investor beneficially owns more than 5% of the covered class.
For other Schedule 13G filers (i.e., passive investors) the initial filing deadline has been shortened from 10 business days to five business days.
Affecting all Schedule 13G filers, these amendments generally require that an amendment be filed 45 days after the calendar quarter in which a change occurred, rather than 45 days after the calendar year of the change(s).
The amendment accelerates Schedule 13G amendment obligations for both qualified institutional investors and passive investors when their own beneficial ownership exceeds 10% or increases/decreases by 5%.
Derivatives Clarification
To increase clarification on the scope of Schedule 13D's disclosure requirements regarding derivative securities, the amendments 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 .”
Beneficial Ownership Reporting Compliance Dates
These amendments become effective 90 days after publication in the Federal Register.
Specific compliance dates for these amendments are as follows:
- Sept. 30, 2024 – Begin compliance with revised Schedule 13G filing deadlines.
- Dec. 18, 2024 – Begin compliance with structured data requirement for Schedules 13D and 13G.
Compliance with other rule amendments will be required upon their effectiveness.
If you or your firm have any questions or concerns regarding the new amendments to beneficial ownership reporting, don't hesitate to reach out to the FinTech Law team for guidance.