On October 10, 2023, the Securities and Exchange Commission (the “SEC”) adopted amendments (the “Amendments”) to certain rules that govern beneficial ownership reporting under the Securities and Exchange Act of 1934 (the “Exchange Act”).1 Sections 13(d) and 13(g) of the Exchange Act and the rules promulgated thereunder require an investor who beneficially owns more than five percent of any voting class of equity securities2 (each, a “Covered Class”) to report such beneficial ownership by publicly filing either a Schedule 13D or a Schedule 13G. In particular, the Amendments: (i) accelerate initial and amendment deadlines for Schedule 13D and 13G filings; (ii) clarify the Schedule 13D disclosure requirements with respect to derivative securities; and (iii) require that Schedule 13D and 13G filings be made using an XML-based language. The SEC’s adopting release for the Amendments (the “Release”) also provides guidance intended to clarify the circumstances under which a person may be deemed to have formed a group with another person or persons, as well as circumstances in which holders of cash-settled derivatives and security-based swaps3 may be deemed to beneficially own shares of the relevant Covered Class used a reference security.
The Amendments will become effective 90 days after publication in the Federal Register; provided, however, that (i) beneficial owners will be required to comply with the accelerated Schedule 13G filing deadlines commencing on September 30, 2024, and (ii) the requirement that Schedules 13D and 13G be made using an XML-based language commences on December 18, 2024.
Accelerated Filing Deadlines
The Amendments accelerate Schedule 13D and 13G filing deadlines as set forth in the following chart.
|Current Initial Filing Deadline
|New Initial Filing Deadline
|Current Amendment Filing Deadline
|New Amendment Filing Deadline
|10 days after acquiring beneficial ownership of more than 5% of a Covered Class or losing eligibility to file on Schedule 13G
|5 business days after acquiring beneficial ownership of more than 5% of a Covered Class or losing eligibility to file on Schedule 13G
|“promptly” if there is any material change4 in the facts set forth in the filer’s current Schedule 13D
|2 business days if a material change4 occurs in the facts set forth in the filer’s current Schedule 13D
|Schedule 13G for Institutional Investors5
|Schedule 13G for Passive Investors7
|10 days after acquiring beneficial ownership of more than 5% of a Covered Class
|5 business days after acquiring beneficial ownership of more than 5% of a Covered Class
|Schedule 13G for Exempt Investors8
|45 days after the end of the year if, as of the end of the year, it beneficially owns more than 5% of the Covered Class
|45 days after the end of any calendar quarter if, as of the end of that calendar quarter, it beneficially owns more than 5% of the Covered Class
|45 days after the end of a year if, as of the end of the year, there are any changes in the information reported in the filer’s current Schedule 13G, except if the change is solely attributable to a change in the number of shares of the Covered Class outstanding
|45 days after the end of a calendar quarter if, as of the end of that calendar quarter, there are any “material”6 changes in the information reported in the filer’s current Schedule 13G, except if the change is solely attributable to a change in the number of shares of the Covered Class outstanding
The SEC also amended Regulation S-T to extend Schedule 13D and 13G filing deadline cut-off times from 5:30 p.m. to 10:00 p.m. Eastern time.
Clarification of the Disclosure Requirements with respect to Derivative Securities
Item 6 of Schedule 13D was also amended to remove any implication that a person is not required to disclose interests in all derivative securities that use a Covered Class as a reference security, including cash-settled derivative securities and security-based swaps. Notably, however, the SEC did not adopt a proposed paragraph (e) to Rule 13d-3 to deem certain holders of cash-settled derivatives as beneficial owners of the reference Covered Class as it determined that existing SEC guidance provides sufficient clarity.
Structured Data Requirements for Scheduled 13D and 13G
The Amendments also require that Schedule 13D and 13G filings be made using an XML-based language, with the exception of Schedule 13D and 13G exhibits.
Section 13 “Group” Status Guidance and Amendments
The Release provides guidance on the operation of existing Rule 13d-5(b) and Sections 13(d)(3) and 13(g)(3) by clarifying that two or more persons who “act as” a group for purposes of acquiring, holding or disposing securities may be treated as a group, and that any such determination “depends on an analysis of all the relevant facts and circumstances and not solely on the presence or absence of an express agreement” given that “two or more persons may take concerted action or agree informally”. In addition, the Release contains questions and the SEC’s responses as to whether certain communications and actions taken with other shareholders would result in the deemed formation of a group.
Finally, the Amendments specify that a group subject to reporting obligations under Section 13D or 13G will be deemed to acquire any additional equity securities acquired by a member of the group after the group’s formation, with the exception of intra-group transfers of equity securities.
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If you have any questions regarding the foregoing, please contact your Investment Management Group attorney at Seward & Kissel LLP.