SEC Proposes Rule Amendments to Modernize Beneficial Ownership Reporting

Author

Cody Kraski, Hayden Moyer, and Greg Anslow

Publish Date

Type

Compliance Alert

Topics

  • Compliance

On February 10, 2022, the SEC voted to propose amendments regarding beneficial ownership reporting under Exchange Act Sections 13(d) and 13(g). The proposed rules would accelerate the filings deadline of Schedule 13D and 13G filings. Chairman Gensler stated, "These amendments would update our reporting requirements for modern markets, reduce information asymmetries, and address the timeliness of Schedule 13D and 13G filings.”

Potential impacts of the proposal

New filing requirement deadlines

For Schedule 13D, the proposed amendment would reduce the initial filing deadline from 10 days to 5 days, after month-end. Additionally, it would require that amendments be filed within one business day. For qualified institutional investors and exempt investors filing Schedule 13G, the proposed amendments would shorten the initial filing deadline from 45 days after year-end to 5 business days after month-end in which the investor beneficially owns more than 5% of the covered class. For passive investors filing Schedule 13G, the proposed amendment would shorten the initial filing from 10 days to 5 days. Finally, for all Schedule 13G filers, the proposed amendment would require an amendment to be filed 5 business days after the month in which a material change occurs, rather than 45 days after year-end. For qualified institutional investors and passive investors filing a Schedule 13G for exceeding 10% beneficial ownership, or a change in 5% or more, the proposed amendment would require an amendment be filed within 5 business days and 1 business day, respectively. The proposed amendment would also extend the filing “cut-off” time for Schedules 13D and 13G from 5:30pm ET to 10:00pm ET, to relieve resulting filing challenges.

Regulation of certain derivative securities

Holders of certain derivative securities will be “deemed” beneficial owners of the reference equity securities under the proposed amendment. Item 6 of Schedule 13D would be revised, requiring a person to disclose interests in derivative securities that use the issuer’s equity security as a reference security.

Clarification of Group Formation and Related Exemptions

Certain circumstances of reported “groups” would be clarified under the proposed amendment.

In addition, it would provide new exemptions, allowing investors to communicate and discuss activities with other investors and issuers without being subject to regulation as a “group.”

Where the proposal stands

The public comment period will remain open for 60 days following publication of the proposing release on the SEC's website or 30 days following publication of the proposing release in the Federal Register, whichever period is longer. Comments may be submitted electronically via www.sec.gov/rules/submitcomments.htm or via paper comments sent in Vanessa A. Countryman, Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090. All comments should refer to File Number S7-06-22.

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