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SEC Adopts Amendments to Beneficial Ownership Reporting
Background:
- On October 10th 2023, the U.S. Securities and Exchange Commission (“SEC” or “Commission”) promulgated changes to Regulation 13D-G shortening the filing cycle making certain clarifications. It is important to note that the Commission retained the ‘business day’ counting mechanism for certain triggering events as opposed to the proposed ‘calendar day’ counting mechanism and defined ‘business day’ in the Rule using the ‘any day, other than Saturday, Sunday or Federal Holiday’ and also noted that this definition encompasses the full 24 hour period.
- The new rules become effective 90 days after publication in the Federal Register and will most likely be effective in the first quarter of 2024.
- In addition to changing timelines for certain triggering events, the release clarifies that (1) Schedule 13d-(3)(d)(1) reporting is triggered when a right to acquire the equity share is nominally cash settled or is based on an understanding in connection with the derivative security itself; (2) that two or more persons can be acting as group without the existence of a formal agreement and that such determination will be based the unique facts of a situation.
Key Provisions:
| Current Schedule 13D | New Schedule 13D | Current Schedule 13G | New Schedule 13G | |
|---|---|---|---|---|
| Initial Filing Deadline | Within 10 days after acquiring beneficial ownership of more than 5% or losing eligibility to file on Schedule 13G. | Within 5 business days after acquiring beneficial ownership of more than 5% or losing eligibility to file on Schedule 13G. | QIIs & Exempt Investors: 45 days after calendar year-end in which beneficial ownership exceeds 5%. QIIs: 10 days after month-end in which beneficial ownership exceeds 10%. Passive Investors: Within 10 days after acquiring beneficial ownership of more than 5%. | QIIs & Exempt Investors: 45 days after calendar quarter-end in which beneficial ownership exceeds 5%. QIIs: 5 business days after month-end in which beneficial ownership exceeds 10%. Passive Investors: Within 5 business days after acquiring beneficial ownership of more than 5%. |
| Amendment Triggering Event | Material change in the facts set forth in the previous Schedule 13D. | NO CHANGE | All Schedule 13G Filers: Any change in the information previously reported on Schedule 13G. QIIs & Passive Investors: Upon exceeding 10% beneficial ownership or a 5% increase or decrease in beneficial ownership. | All Schedule 13G Filers: Material change in the information previously reported on Schedule 13G. QIIs & Passive Investors: NO CHANGE |
| Deadline | Promptly after the triggering event. | Within two business days after the triggering event. | All Schedule 13G Filers: 45 days after calendar year-end in which any change occurred. QIIs: 10 days after month-end in which beneficial ownership exceeded 10% or there was, as of the month-end, a 5% increase or decrease in beneficial ownership. Passive Investors: Promptly after exceeding 10% beneficial ownership or a 5% increase or decrease in beneficial ownership. | All Schedule 13G Filers: 45 days after calendar quarter-end in which a material change occurred. QIIs: 5 business days after month-end in which beneficial ownership exceeds 10% or a 5% increase or decrease in beneficial ownership. Passive Investors: 2 business days after exceeding 10% beneficial ownership or a 5% increase or decrease in beneficial ownership. |
| Filing “Cut-Off” Time | 5:30 p.m. eastern time. | 10 p.m. eastern time. | 5:30 p.m. eastern time. | 10 p.m. eastern time. |