On July 9, 2026, the Division of Corporation Finance of the Securities and Exchange Commission (the “SEC”) published several new Corporation Finance Interpretations (“CFIs”). The CFIs concern (1) the beneficial ownership implications under Sections 13(g) and 13(d) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”) of holding cash-settled total return swap positions relevant to both passive and active investors, as well as (2) the use of special purpose vehicles by activist investors with important implications for their limited partners.
- Cash Settled Total Return Swaps: Further Clarifications but No Real Change
In new CFIs 105.08, 105.09 and 105.10,1 the SEC confirmed that a standard cash-settled total return swap, by itself, does not give the holder beneficial ownership over the securities referenced by the swap contract under Rule 13d-3 so long as the contract cannot be physically settled and it does not by its terms otherwise give the investor voting or investment power over the shares referenced by the contract (including any shares its counterparty may hold as a hedge). It is also important to the determination that the investor does not have these rights outside of the contract and did not enter into the contract for the purpose or effect of indirectly acquiring the power to vote or a future right to acquire the reference equity, which may be deemed to be a plan or scheme to evade the reporting requirements and result in beneficial ownership under Rule 13d-3(b). Accordingly, investors should be cautious and seek advice when taking actions during the life of a swap that could raise questions about whether such rights exist.
Our take: The guidance largely restates positions the SEC has maintained for nearly two decades, beginning with the position it took in 2008 in the landmark case CSX Corp. v. Children’s Inv. Fund Mgmt. (UK) LLP,2 reaffirmed in its 2011 security-based swap release,3 and discussed again in its 2023 beneficial ownership modernization release.4 Regardless of the SEC’s prior statements on this topic, market participants have proceeded with caution given the beneficial ownership implications both with respect to the disclosure requirements under Section 13(g) and (d) as well as the implications under Section 16 of the Exchange Act, which generally imports the same beneficial ownership definition. In addition to investors, the banks that are party to cash settled total return swaps have sought clarification on the implications of these instruments as reflected in a No-Action Letter issued earlier this year.5
- Activist Special Purpose Acquisition Vehicles: Important Schedule 13D and Proxy Implications
In new CFI 110.09, the SEC stated that where (i) an entity is formed for the purpose of raising funds to acquire securities of a specific issuer and engage in an activism campaign at that issuer and (ii) investors in the entity are informed in advance of the specific purpose for which their funds will be used (including the identity of the issuer) a Schedule 13D filed by the entity may be required to report in Item 3 that portion the purchase price was obtained for the purpose of acquiring the reported securities, describe the transaction and disclose the identities of the investors in the entity.
In new CFI 110.10, the staff further made clear that all information under Item 2-6 of Schedule 13D is required to be provided both with respect to each reporting person as well as each person covered by Instruction C to Schedule 13D. The new CFI cites case law which suggested that such information is required even if it also concerns other persons who are neither reporting persons nor Instruction C persons.6
Similarly, with respect to Schedule 14A, in new CFI 155.02,7 the staff stated that investors contributing more than $500 to a vehicle formed specifically to finance an activist campaign against a pre-identified issuer may themselves be “participants” in the activist’s campaign solicitation as defined by the proxy rules.
Our take: Activists that raise capital on a campaign-specific basis and limited partners that invest on that basis will need to take these new CFIs into account. While the guidance may be surprising to the market, it can be viewed as consistent with broader calls for transparency in activist situations and comes as activist-related filings remain an area of regulatory focus and scrutiny.8
