SEC Amends Beneficial Reporting Deadlines under Sections 13(d) and 13(g) of the Securities Exchange Act of 1934
On October 10, 2023, the Securities and Exchange Commission (the “Commission”) announced that it had adopted amendments (the “Amendments”) to its rules for beneficial ownership reporting under Sections 13(d) and 13(g) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The primary objective of the Amendments is to shorten the timeframes for reporting beneficial ownership on Schedules 13D and 13G.
Generally, security owners holding more than 5% of the outstanding securities of a class of securities registered under the Exchange Act (“5% owner”) must report their initial ownership on a Schedule 13D or 13G and must amend the applicable schedule to reflect material changes in ownership. Schedule 13G is a shorter form that can be used by certain exempt, institutional and passive investors. The Amendments effect the following changes in the deadlines for filing Schedules 13D and 13G:
For Schedule 13D:
- The initial filing deadline is shortened from 10 days to five business days after becoming a 5% owner; and
- Amendments to a previously filed Schedule 13D will be required to be filed within two business days after a material change (establishing a definite deadline rather than the current requirement to file an amendment “promptly”).
For Schedule 13G:
- For all Schedule 13G filers, an amendment to a previously filed Schedule 13G will be required to be filed within 45 days after the calendar quarter in which a material change occurred, rather than 45 days after the calendar year in which any change occurred (subject to the exception in the 4th bullet below);
- For qualified institutional investors and exempt investors, the initial filing deadline is shortened from 45 days after the end of a calendar year to 45 days after the end of the calendar quarter, in which the investor becomes a 5% owner;
- For passive investors, the initial filing deadline is shortened from 10 days to five business days after becoming a 5% owner; and
- The deadline for an amendment is shortened to five business days for qualified institutional investors, or two business days for passive investors, whenever their beneficial ownership exceeds 10%, or increases or decreases by 5%.
The Amendments clarify that beneficial owners are required to disclose interests in all derivative securities that use the issuer’s equity security as a reference security.
To facilitate the shortened deadlines, the Amendments extend the filing cut-off times in Regulation S-T for Schedules 13D and 13G from 5:30 p.m. to 10:00 p.m. Eastern time (the same filing cut-off times currently applicable to Section 16 filings). The Amendments require that Schedules 13D and 13G must be filed with structured, machine-readable data language (XBRL).
In the proposing release, the Commission proposed changes to the rules governing when two or more persons may be considered a group for the purposes of determining beneficial ownership. In the adopting release, the Commission declined to adopt the proposed rule changes (in light of a high number of negative comments), and instead provided interpretive guidance regarding the formation of a group. Among other points, the guidance states that a group will not be deemed to be formed due to communications between a shareholder and an activist investor that is seeking support for its proposals, or when two or more shareholders engage in discussions with an issuer’s management, without taking any other actions. However, a group may be formed when one investor communicates to others that it will file a Schedule 13D, with the purpose of causing such persons to make purchases in the same covered class of securities.
The Amendments will become effective 90 days after publication in the Federal Register. Compliance with the revised Schedule 13G filing deadlines will be required beginning on September 30, 2024. Compliance with the structured data requirement for Schedules 13D and 13G will be required on December 18, 2024. Compliance with the other rule amendments will be required upon their effectiveness.
For additional information about any of the above developments, or to discuss any questions that you may have, please contact a member of Maynard Nexsen’s Public Company Advisory Group.
This Client Alert is for information purposes only and should not be construed as legal advice. The information in this Client Alert is not intended to create and does not create an attorney-client relationship.
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