The SEC has proposed Regulation 13D-G amendments to beneficial ownership reporting on Schedules 13D and 13G, to modernize the schedules from their last updates in 1968 and 1977, respectively. The proposed amendments would: (1) accelerate the Schedule 13D and 13G report filing deadlines; (2) expand Regulation 13D-G to certain derivative securities; (3) clarify when two or more persons have formed a “group” subject to beneficial ownership reporting obligations; and (4) require the Schedules’ filings to use a structured, machine-readable data language. By way of introduction, Exchange Act Sections 13(d) and 13(g) and Regulation 13D-G require investors who beneficially own more than five percent of a covered class of equity securities to report their beneficial ownership by publicly filing either Schedule 13D or Schedule 13G.
Accelerated filing deadlines. Schedule 13D. As proposed, the Schedule 13D filing deadline would be shortened from 10 to five days, along with requiring that amendments be filed within one business day.
Schedule 13G. As proposed, qualified institutional and exempt investors would have their initial filing deadline shortened from 45 days after year-end to five business days after the end of the month when the investors beneficially own more than five percent of the covered class. For passive investors, the initial filing deadline would be reduced from 10 to five days, and all Schedule 13G filers would need to file amendments five business days after the month when a material change occurs instead of 45 days after the year in which any change occurred. Furthermore, Schedule 13G filers whose beneficial ownership exceeds 10 percent or whose beneficial ownership of a covered class increases or decreases by five percent would have to file an amendment within five days after the occurrence of the change (if a qualified institutional investor) or one business day after the occurrence of the change (if a passive investor).
Schedules 13D and 13G. As proposed, the Schedule 13D and 13G filing “cut off” times would extend from 5:30 p.m. to 10:00 p.m. Eastern Time to ease the shortened deadline challenges for filers.
Derivatives. As proposed, new Rule 13d-3 (e) would deem holders of cash-settled derivative securities to be the respective beneficial owners of the referenced equity securities if the derivative is held either to: (1) change or influence the issuer’s control of the referenced securities; or (2) participate in any transaction for the purpose in (1). The above proposal, however, would not apply to security-based swaps. Also proposed would be a revised Schedule 13D Item 6 clarifying that a person must disclose all derivative security interests, including cash-settled derivative securities, that use the issuer’s equity security as a reference security.
Two or more persons having formed a “group.” Regarding two or more persons having formed a “group” under the Exchange Act and Regulation 13D-G, a proposed amendment would clarify “tipper-tippee” relationships, namely where a person shares non-public information about an upcoming Schedule 13D filing with another person who then buys the issuer’s securities based on that information. Other proposed amendments would set forth a new exemption pertaining to investor communications with each other or with the issuer but not to control or influence the issuer, and another exemption for when investors and financial institutions enter into agreements governing derivative security terms.
Machine-readable filing structure. As proposed, Schedule 13D or13G would be filed using a structured, machine-readable data language in order to ease investors and the markets’ ability to access, compile, and analyze the disclosed information.
For comprehensive coverage of today’s news, go to the Securities Legal Research & News section of VitalLaw.