October 18, 2023
What happened?
On Tuesday, October 10, 2023, the Securities and Exchange Commission (“SEC”) published amendments to the Securities Exchange Act of 1934 (the “Act”) under Sections 13(d) and 13(g).[1] These amendments now require market participants to provide more timely reporting on beneficial ownership positions using new technical reporting requirements to better meet the needs of investors. These amendments will be effective 90 days after the date of publication to the Federal Register. This report details the adopted rules from the proposed rule, as well as the guidance provided in lieu of certain amendments not being adopted into the final rule.
Adopted Amendments
There are several updates to the Act under this rule. First, the amendments shorten the filing deadlines for both initial and amended beneficial ownership reports that are filed on Schedules 13D and 13G. For Schedule 13D, the deadline has been shortened from ten days to five business days. This timeline has been updated from the proposed rule which originally had the deadline shortened to five calendar days rather than five business days. Business day has been defined in this rule to mean “any day, other than Saturday, Sunday, or a Federal holiday, from 12:00 a.m. to 11:59 p.m. eastern time.”[2] The use of business days instead of calendar days will allow for more flexibility for investors to comply with the new timeline. Further, the SEC has updated the filing deadline cut-off time for Schedule 13D and Schedule 13G from 5:30 PM EST to 10:00 PM EST.
In addition to the above changes applicable to both Schedules 13D and 13G, the SEC has adopted an amendment regarding derivative securities disclosure requirements; specifically stating that “derivative contracts, arrangements, understandings, and relationships with respect to an issuer’s securities, including cash-settled SBS and other derivatives which are settled exclusively in cash, would need to be disclosed under Item 6 of Schedule 13D in order to comply with Section 13(d)(1) and Rule 13d-1(a).”[3] The table below summarizes the changes to Schedule 13D:[4]
| Issue | Current Schedule 13D | New Schedule 13D |
| 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. |
| Amendment Triggering Event | Material change in the facts set forth in the previous Schedule 13D. | Same as current Schedule 13D. |
| Amendment Filing Deadline | Promptly after the triggering event. | Within 2 business days after the triggering event. |
| Filing “Cut-Off” Time | 5:30 PM EST | 10 PM EST |
| XML Format Compliance Date | December 18, 2024 | December 18, 2024 |
| Item 6 Disclosure Requirements | Any contracts, arrangements, understandings or relationships (legal or otherwise) among the persons named in Item 2 and between such persons and any person with respect to any securities of the issuer, including but not limited to transfer or voting of any of the securities, finder’s fees, joint ventures, loan or option arrangements, puts or calls, guarantees of profits, division of profits or loss, or the giving or withholding of proxies, naming the persons with whom such contracts, arrangements, understandings or relationships have been entered into. | Derivative contracts, arrangements, understandings, and relationships with respect to an issuer’s securities, including cash-settled SBS and other derivatives which are settled exclusively in cash. |
For Schedule 13G reporting, the SEC has adopted an initial Schedule 13G filing deadline of 45 days after calendar quarter end for Qualified Institutional Investors (“QIIs”) and Exempt Investors. Exempt Investors include “persons holding beneficial ownership of more than 5% of a covered class, but who have not made an acquisition of beneficial ownership subject to Section 13(d)” of the Act.[5] Passive Investors will be required to file their initial Schedule 13G within five business days after the date that the Passive Investor acquired beneficial ownership of more than five percent of a covered class. Passive Investors include “beneficial owners of more than 5% but less than 20% of a covered class who can certify under Item 10 of Schedule 13G that the subject securities were not acquired and are not held for the purpose or effect of changing or influencing the control of the issuer of such securities and were not acquired in connection with or as a participant in any transaction having such purpose or effect.”[6] As with the updates to Schedule 13D reporting, the timelines for Schedule 13G reporting have been softened from the proposed rule from calendar days to business days, as well as extending the cut-off time from 5:30 PM EST to 10:00 PM EST, which will provide investors more flexibility in adapting to these amended timelines. The table below summarizes the changes to Schedule 13G:[7]
| Issue | Current Schedule 13G | New Schedule 13G |
| Initial Filing Deadline | 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 | 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: Same as current Schedule 13G. |
| Amendment Filing Deadline | 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 PM EST | 10:00 PM EST |
| Filing Deadline Compliance Date | September 30, 2024 | September 30, 2024 |
| XML Format Compliance Date | December 18, 2024 | December 18, 2024 |
In addition to the updates to the timing requirements for Schedule 13D and 13G reporting discussed above, the SEC is now requiring the Schedule 13D and 13G filings be made using “structured, machine-readable data language.”[8] As amended by this rule, Schedule 13D and 13G filings will all be required to be filed using an XML-based language. This has been updated from the previous requirement which required investors to file Schedules 13D and 13G in HTML or ASCII in the EDGAR Filer Manual. The SEC has provided an extended transition period for these technical requirements, and compliance with these technical requirements will not be required until December 18, 2024. If investors wish to begin complying with this requirement ahead of time, they may begin to submit 13D and 13G filings in XML language beginning on December 18, 2023.
SEC Guidance
The SEC chose not to adopt the amendment to Rule 13d-3 regarding cash-settled derivative securities, instead opting to provide guidance on the applicability of the existing Rule 13d-3 to these cash-settled derivative securities. In the Commission Guidance, the SEC explains that determining whether an owner of a cash-settled derivative security should be deemed to be a beneficial owner of a covered class will ultimately depend on certain facts and circumstances, similar to that included in the Security-Based Swaps Release.
The SEC also chose to not adopt proposed rules 13d-5(b)(1)(i), (b)(1)(ii), and (b)(2)(i), instead choosing to provide guidance on what it means to act as a group for purposes of Sections 13(d)(3) and 13(g)(3) of the Act. Similar to the determination of cash-settled derivative securities, the determination of whether two or more persons have formed a group will ultimately depend on the relevant facts and circumstances for the purpose of the group’s actions. To determine if two or more people acted together, investors should look to see if the group took concerted actions in furtherance of “’acquiring,’ ‘holding,’ or ‘disposing of’ securities of an issuer.”[9]
What does this mean for me?
Firms should keep an eye on publication to the Federal Register, as many requirements become effective 90 days after publication to the Federal Register. These amendments will implement stricter filing requirements and deadlines for beneficial ownership reporting.
FilePoint can assist firms in determining their eligibility under these new amendments and help formulate a process to properly file Schedules 13D and 13G in the shorter timeframe under the new data language requirements. Contact us to learn more.
