On February 10, 2022, in a move that does not appear to have been anticipated, the SEC proposed amendments to the rules governing Schedules 13D and 13G, filings that must be made by acquirors of more than 5% of a covered class of equity securities. Specifically:
- 13D filings would now have to be made within five days after the 5% threshold is crossed, versus the current standard of 10 days; and
- amendments would have to be filed within one business day, as compared to the current standard, which requires that amendments be filed “promptly.”
The filing deadlines for shorter and less complicated 13G filings would depend upon the nature of the filer:
- “qualified institutional investors and exempt investors” would be required to file within five days following the end of the month in which the 5% threshold is crossed (versus 45 days after year-end);
- non-exempt “passive investors” would have to file within five, rather than the current 10, days; and
- for all 13G filers, amendments would now be due within five business days following the end of the month in which a “material change” occurs, rather than 45 days after year-end.
The amendments would also accelerate the amendment obligations for certain Schedule 13G filers upon exceeding 10% beneficial ownership or a 5% increase or decrease in beneficial ownership of a covered class, requiring that qualified institutional investors and passive investors file an amendment within five days and one business day, respectively.
In addition, the proposals would:
- expand the application of Regulation 13D-G to certain derivative securities;
- clarify the circumstances under which two or more persons have formed a “group” that would be subject to beneficial ownership reporting obligations; and
- require that Schedules 13D and 13G be filed using a structured, machine-readable data language.
The 10-day window for 13D filings has been in place for more than 50 years, despite ongoing demands to shorten the window, including a rulemaking petition submitted to the SEC in 2011. A major concern with regard to the 10-day window has been that it permits an activist or other investor to continue to accumulate shares for the 10-day period after the 5% threshold has been crossed, sometimes enabling the acquiror to establish effective control before having to file any ownership reports.
The proposals are subject to public comment 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.
Please direct any questions or observations to Gunster securities law and corporate governance practice leader Bob Lamm.
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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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