It has been 55 years (!) since the enactment of the Williams Act, which required the filing of beneficial ownership reports on Schedule 13D within 10 days after the acquisition of more than 5% of a class of equity securities registered under the Exchange Act. For much of that 55-year period, issuers, commentators, and others have complained that the 10-day window period was too long and, among other things, enabled hostile parties to accumulate far more than 5% of a class during that period. Until now, it seemed that the SEC had turned a deaf ear to these complaints.
That changed on October 10, 2023, when the SEC adopted new rules requiring accelerated reporting of beneficial ownership positions on Schedule 13D and its cousin, Schedule 13G, a shorter report that can be used by passive investors and others. As an aside, for those of us who have found the SEC’s press releases citing “modernization” and “improvement” of its rules to be perilously close to false advertising, the new rules really do modernize the regulatory framework.
Highlights of the new rules are as follows:
- Initial filings on Schedule 13D will now have to be made within five business days; not as good as five calendar days, but an improvement over the current rules. Amendments to 13D filings will have to be filed within two business days. The current rules call for the filing of amendments “promptly,” although in practice many amendments have been filed within two business days.
- For some Schedule 13G filers – qualified institutional investors and exempt investors – initial filings will now be required 45 days following the end of the calendar quarter in which ownership exceeds 5% of the class, rather than 45 days after the end of the calendar year in which the threshold is exceeded. For other Schedule 13G filers – passive investors – the initial deadline will be reduced from 10 days to five business days. Amendments will now have to be filed within 45 days following the end of the calendar quarter – rather than the calendar year – in which a material change occurs (rather than “any change,” under the current rules).
- The cut-off times for filing Schedule 13D and 13G via EDGAR will be extended from 5:30 p.m. to 10:00 p.m. Eastern time.
- The 13D amendments clarify that filers will be required to disclose interests in all derivative securities – including those settled in cash – using the issuer’s equity security as a reference security.
The amendments also contain guidance on what constitutes the formation of a “group” for purposes of beneficial ownership reporting. Specifically, the determination of whether two or more persons are acting as a group does not depend solely on the presence of an express agreement and, depending on the particular facts and circumstances, concerted actions by two or more persons for the purpose of acquiring, holding, or disposing of securities of an issuer are sufficient to constitute the formation of a group.
The amendments will become effective 90 days following publication in the Federal Register. However, compliance with the revised Schedule 13G filing deadlines will not be required until September 30, 2024.
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This publication is for general information only. It is not legal advice, and legal counsel should be contacted before any action is taken that might be influenced by this publication.
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