According to the SEC, funds will be required to provide shareholder reports that highlight key information, such as fund expenses, performance, and portfolio holdings. In addition, the rules adopted under Section 16(b) provide for the matching of purchases and sales of derivative securities with purchases and sales of the securities underlying those derivative securities for the purpose of determining the profits that may be disgorged under Section 16(b). Mandatory Electronic Filing of Form 144. [26] For example, Rule 16a-3(g) under the Exchange Act provides that, in the case of a transaction made pursuant to (a) a contract, instruction, or written plan that satisfies the affirmative defense conditions of Exchange Act Rule 10b5-1(c), or (b) an employee benefit plan at the volition of a plan participant, where the insider does not select the date of execution of such transaction, the two-day filing requirement for Form 4 with respect to the transaction is calculated from the earlier of (i) the date a broker-dealer or plan administrator notifies the insider of the execution, and (ii) the third business day after the trade date. [17] A reporting manager must file Form 13F (i) within 45 days after the last day of each calendar year in which it meets the $100 million threshold, and (ii) within 45 days after the last day of each of the first three calendar quarters of the following calendar year. Schedule 13D must be amended promptly to reflect any material changes in the information provided. Like millions of Americans, you may also invest directly in public companies. Any control person (as defined below) of a securities firm, by virtue of its ability to direct the voting and/or investment power exercised by the firm, may be considered an indirect beneficial owner of the Section 13(d) Securities. Separate Shareholder Report Requirements . Form N-PX also allows reporting managers to request confidential treatment of proxy voting information consistent with the standard for confidential treatment requests under Section 13(f) of the Exchange Act. We respectfully submit this letter in opposition to the Under Regulation NMS, an NMS Security is defined to include any U.S. exchange-listed equity securities and any standardized options, but does not include any exchange-listed debt securities, securities futures, or shares of open-end mutual funds that are not currently reported pursuant to an effective transaction reporting plan under the Exchange Act. Since the 5% threshold for a Qualified Institution is calculated as of the end of a calendar year, a Qualified Institution that acquires directly or indirectly more than 5% of a class of an issuers Section 13(d) Securities during a calendar year, but as of December 31 has reduced its interest below the 5% threshold, will not be required to file an initial Schedule 13G. However, any person who acquires a derivative security or power specified in clauses (a), (b), and (c) above with the purpose or effect of changing or influencing the control of the issuer, or in connection with any transaction having such purpose or effect, will, immediately upon acquisition, be deemed to be the beneficial owner of the securities which may be acquired through the exercise or conversion of such derivative security or power. Unlike the definition of beneficial ownership for the purpose of determining whether a person is a 10% beneficial owner discussed above (i.e., voting and dispositive power), for Section 16 reporting purposes, an insiders beneficial ownership depends on whether the person has the opportunity to profit, directly or indirectly, from a purchase, sale or other transaction in the public companys equity securities (a profit interest). In a 1987 SEC no-action letter, the SEC staff took the position that where investment decisions by an employee benefit plan trust required the approval of three out of five trustees, none of the trustees was the beneficial owner of the trusts portfolio securities for purposes of Section 13(d) of the Exchange Act. We can also provide the names of additional vendors for your consideration. It includes any person who directly or indirectly shares voting power or investment power (the power to sell the security). Small companies would be exempt from disclosing details on pensions and peer groups. [11]This includes a change in the previously reported ownership percentage of a reporting person even if such change results solely from an increase or decrease in the aggregate number of outstanding securities of the issuer. Form 13F: Reporting Equity Positions of Investment Managers with More than $100Million in Discretionary Accounts. Such a change may occur as a result of, among other transactions: (a) any open market or private purchase or sale, or bona fide gift of any equity or convertible securities; (b) a stock option grant or forfeiture; (c) the conversion of a derivative security; (d) the acquisition or vesting of any restricted stock or restricted stock unit; (e) a merger, exchange offer, or a tender offer; and (f) any purchase, sale or exercise of any option, warrant, or right. When a Passive Investor exceeds the 5% threshold, When a reporting person acquires or holds Section 13(d) Securities with an activist intent, When a Passive Investors beneficial ownership equals or exceeds 20%, Within 10 days of the triggering transaction, Any material change in information reported on previous Schedule 13D, Any change in information reported on Schedule 13G, 1. Shares of mutual funds are not Section 13(f) Securities. Under Section 16(b) of Exchange Act, each of these insiders may be liable for any short-swing profits (i.e., profits made from a sale or purchase of the public companys securities made within less than six months of a matching purchase or sale). Whether you use an outside vendor or you make your EDGAR filings yourself, you must first obtain several different identification codes from the SEC before the filings can be submitted. However, only a reporting person that was originally eligible to file a Schedule 13G and was later required to file a Schedule 13D may switch back to reporting on Schedule 13G.[10]. On September 23, 2020, the Securities and Exchange Commission ("SEC") announced that it had adopted amendments to Rule 14a-8 under the Securities Exchange Act of 1934 (the "Amendments"). The template's report composition component automates a multi-step process, resulting in new efficiencies for complying with the SEC rule, the fintech firm stated. If a client of a securities firm (including a private or registered fund or a separate account client) by itself beneficially owns more than 5% of a class of an issuers Section 13(d) Securities, the client has its own independent Section 13 reporting obligation. Obligations of a Firms Clients. Under certain circumstances, a reporting manager can request confidential treatment of the information contained in the Form 13F filing. All rights reserved. summary on large shareholder reporting Certain swaps may be Section 13(f) Securities if the transaction grants the reporting manager investment discretion over an underlying asset that is a Section 13(f) Security. The instructions for the reports will encourage the use of graphics and text features to make them more effective. 1 Twitter 2 Facebook 3RSS 4YouTube In that case, each control person would file a 13F Notice as described above. To avoid a short-swing profits violation, before entering into a transaction involving any covered securities (including any exercise of a derivative security), an insider should look back six months to determine if any prior sale or purchase can be matched with the proposed transaction and would result in the realization of any profit. A reporting person that is required to switch to reporting on a Schedule 13D will be subject to a cooling off period from the date of the event giving rise to a Schedule 13D obligation (such as the change to an activist intent or acquiring 20% of a class of an issuers Section 13(d) Securities) until 10calendar days after the filing of Schedule 13D. The SEC also proposed new Rule 10B-1 under the Exchange Act[30] in December 2021 in order to require any person with large notional positions[31] in credit default swaps, other swaps based on debt securities, or swaps based on equity securities to file reports with the SEC that disclose each security-based swap position and any related position in the reference debt or equity security, loan or narrow-based security index underlying the security-based swap. The three quarterly filings are required even if the aggregate fair market value of the Section 13(f) Securities held in a reporting managers discretionary accounts falls below the $100 million threshold during the calendar year. An annual Form N-PX filing will be due by August 31 of each year thereafter to report the say-on-pay votes during the most recent 12-month period ended June 30. The reporting person will thereafter be subject to the Schedule 13D reporting requirements with respect to the Section13(d) Securities until such time as the former Schedule 13G reporting person once again qualifies as a Qualified Institution or Passive Investor with respect to the Section 13(d) Securities or has reduced its beneficial ownership interest below the 5% threshold. For example, a direct or indirect control person of a securities firm will not qualify as a Qualified Institution if more than 1% of a class of an issuers Section 13(d) Securities is held by a private fund managed by the firm or other affiliate because a private fund is not among the institutions listed as a Qualified Institution under the Exchange Act. Change shareholder reporting requirements (Reporting Requirements) for open-end management investment . The certified financial statement must include a two-year audited. This is among the reasons that board disclosure and accountability have become increasingly critical aspects of good governance. Availability of Joint Filings by Reporting Persons. Examples of an indirect profit interest in a public companys equity securities that will trigger an insiders Section 16 reporting requirement include: (a) the equity securities held by family members in the same household as the insider, (b) a security-based swap involving the equity securities, (c) the right to acquire equity securities through the exercise or conversion of any other derivative security (whether or not exercisable within 60 days), (d) a general partners proportionate interest in the equity securities held by a partnership, and (e) under certain circumstances, receipt of a performance-based fee or allocation from a client with respect to equity securities held in the clients portfolio.[23]. SEC rules require your company to file annual reports on Form 10-K and quarterly reports on Form 10-Q with the SEC on an ongoing basis. If filed by U.S. domestic companies, the statements are available on the EDGAR database accessible at www.sec.gov. Please research the equivalent of the SEC large shareholder reporting requirements (13Ds, etc.) Key Takeaways. An acquisition or disposition of less than 1% may be considered a material change depending on the circumstances. This final short-period filing will be due by March 1 of the immediately following calendar year. While not set out in Section 16 or the rules thereunder, the concept of deputization has been found by the courts where a securities firm is acting as a director of a public company through its deputy and (a) the director shares confidential information with the firm, (b) the director influences the firms investment decisions with respect to the public company, or (c) the directors actions as a director are influenced by the firm. Reporting persons that must report on Schedule 13D are also required to disclose a significant amount of additional information, including certain disciplinary events, the source and amount of funds or other consideration used to purchase the Section 13(d) Securities, the purpose of the acquisition, any plans to change or influence the control of the issuer, and a list of any transactions in the securities effected in the previous 60 days. The Section 13 (d) reporting requirement is satisfied by filing Schedule 13D with the SEC. Previously, companies could file Form 144 in paper format, which many reporting persons elected to use. [5]Under Rule 13d-1, a reporting person also qualifies as a Qualified Institution if it is a bank as defined in Section 3(a)(6) of the Exchange Act, an insurance company as defined in Section 3(a)(19) of the Exchange Act, an investment company registered under the Investment Company Act, or an employee benefit plan, savings association, or church plan. across all major Western European equity markets. Schedules 13D and 13G are commonly referred to as a "beneficial ownership reports.". Houston, Texas Area. Rule 10b5-1, originally enacted in 2000, enables insiders of publicly listed companies to sell a predetermined number of shares at a . Please contact us if you require any assistance in seeking confidential treatment of your Form 13F filing. While the persons subject to the reporting requirements under Section 13 and Section 16 (each, a reporting person) generally include both individuals and entities, this legal update focuses on the application of the reporting requirements to investment advisers and broker-dealers (each, a securities firm). beneficially owns, in the aggregate, more than 5% of a class of the voting, equity securities (the Section 13(d) Securities): issued by any closed-end investment company registered under the Investment Company Act of 1940, as amended (the Investment Company Act), or, issued by any insurance company that would have been required to register its securities under Section 12 of the Exchange Act but for the exemption under Section 12(g)(2)(G) thereof (see, manages discretionary accounts that, in the aggregate, hold equity securities trading on a national securities exchange with an aggregate fair market value of $100 million or more (see, securities and standardized options) in an aggregate amount equal to or greater than (a) 2 million shares or shares with a fair market value of more than $20 million during a day, or (b) 20 million shares or shares with a fair market value of more than $200 million during a calendar month (see, Significant Acquisitions and Ownership Positions, any general partner, managing member, trustee, or controlling shareholder of the firm; and. Conclusion The required reports include an annual Form 10-K, quarterly Form 10Q's and current periodic Form 8-K as well as proxy reports and certain shareholder and affiliate reporting requirements. [25] Any Form 4 must be filed with the SEC before 10:00 p.m. Eastern Time on the second business day following the day on which the triggering transaction was executed or otherwise deemed to occur (except where the SEC has determined by rule that the two-day period is not feasible).[26]. Amendments to Form 13H must be filed (a) annually within 45 days after the end of each full calendar year so long as a securities firm continues to qualify as a Large Trader, and (b) promptly following the end of a calendar quarter if any of the information on the most recent Form 13H becomes inaccurate. In June 2022, the SEC adopted rule and form amendments that require electronic filing of all Forms 144 on EDGAR. Form 13H: Reporting Identifying Information for Large Traders. [30] Prohibition Against Fraud, Manipulation, or Deception in Connection with Security-Based Swaps; Prohibition against Undue Influence over Chief Compliance Officers; Position Reporting of Large Security-Based Swap Positions, SEC Release No. An insider must file a Form 5 to report any equity securities and transactions that were not previously reported on a Form 3, 4 or 5. [6] While the rule of three is frequently relied on by practitioners and has been acknowledged by the SEC staff, it has never been formally approved by the SEC. This legal update summarizes (a) the reporting requirements under Section 13 of the Securities Exchange Act of 1934, as amended (the Exchange Act), which are generally applicable to persons that own, or exercise investment discretion over accounts that own, publicly traded or exchange-listed equity securities,[1] and (b) the reporting requirements under Section 16 of the Exchange Act, which are applicable to persons considered to be insiders of public companies. In February 2022, the SEC proposed amendments to Section 13[13] in order to accelerate the filing deadlines for Schedule 13D and Schedule 13G and to require more frequent amendments to Schedule 13G in lieu of the current annual amendment. Public companies are a key part of the American economy. [25] See Rule 16a-6 under the Exchange Act. A reporting person that is a Passive Investor must file its initial Schedule 13G within 10 days of the date on which it exceeds the 5% threshold. Under DTR 5.8.12R, issuers are required to disclose to the public major shareholding notifications they receive from shareholders and holders of financial instruments falling within DTR 5.3.1R (1), unless the exemption available in DTR 5.11.4R applies. These obligations are discussed in more detail in Section 16: Reports of Directors, Officers, and Principal Stockholders below. Section 12 (g) of the Securities Exchange Act of 1934 calls for issuers of securities to register with the SEC and begin public dissemination of financial information within 120 days of the. The Society for Corporate Governance (the "Society" or "we") appreciates the opportunity to provide comments to the U.S. Securities and Exchange Commission (the "SEC" or the "Commission") on the proposed changes to the reporting threshold for Form 13F reports by institutional investment managers (the "Proposed Rules"). If your firm beneficially owns more than 10% of a class of Section 13(d) Securities and is not aware of these possible obligations, please contact us. Obligations of a Firms Control Persons. There will be increased and more complex web-hosting requirements. Individualized outreach to large holders should be a priority. Form N-PX: Reporting Say-on-pay Proxy Votes by Investment Managers with More than $100Million in Discretionary Accounts. The list is available at http://www.sec.gov/divisions/investment/13flists.htm. Form 3 must be filed within 10 days of any individual or entity first becoming an insider or at the time of the registration of the companys equitysecurities on a national securities exchange. The monthly reports would include detailed information about the institutional investment managers gross short position on an issuer-by-issuer basis, any shares purchased to cover a short position in whole or in part, and any daily activity that increased, decreased or closed a short position during the calendar month (e.g., purchasing or selling options and other derivatives, tendering convertible securities, and engaging in secondary offering transactions). Section 16 requirements apply to the directors and designated officers of a public company, even if such persons do not own any securities of the company. [1] Importantly, with respect to Section 13(d) Securities, a person is deemed to beneficially own the applicable securities if the person has the right to acquire the securities within 60 days of the reporting date, including (a) through the exercise of any option, warrant or right; (b) through the conversion of a security; (c) through the power to revoke a trust, discretionary account, or similar arrangement; or (d) upon the automatic termination of a trust, discretionary account, or similar arrangement. If you have a pension plan or own a mutual fund, chances are that the plan or mutual fund owns stock in public companies. STAY CONNECTED Shareholders could request paper or electronic copies of the information moved to the website at no cost. In lieu of using Form 5, an insider may choose to report a transaction on Form 4; however, the voluntary Form 4 must be timely filed before the end of the second business day following the day on which the transaction that triggered the filing has been executed or otherwise deemed to occur. If there has been any material change to the information in a Schedule 13D previously filed by a reporting person,[11] the person must promptly file an amendment to such Schedule 13D. A profit interest may exist as the result of any contract, arrangement, understanding, or relationship that the insider may have with another person or organization. 13F Combination Report, on which a reporting manager includes some, but not all, of the Section 13(f) Securities over which it exercises investment discretion, and indicates that the remaining securities are reported on a Form 13F filed by another reporting manager. For those considered a "reporting company" for at least 90 . Section 16 requirements also apply to all 10% beneficial owners. [12]A person or entity that beneficially owns more than 10% of a class of Section 13(d) Securities may also have filing or other obligations under the Hart-Scott-Rodino Act and/or Section 16 of the Exchange Act. See definition in Footnote 3 above and accompanying text. Broadridge has announced the launch of a template and end-to-end process solution for fund companies and fund administrators that simplifies the steps involved in creating and providing the SEC's new Tailored Shareholder Reports.. In order for a control person to file a Schedule 13G as a Qualified Institution, however, no more than 1% of a class of an issuers Section 13(d) Securities may be held (a) directly by the control person or (b) directly or indirectly by any of its subsidiaries or affiliates that are not Qualified Institutions. A fund client of an institutional investment manager generally will not have a reporting obligation under Rule 13f-1 even if it holds $100 million or more in Section 13(f) Securities since the obligation is tied to the exercise of investment discretion. When two or more reporting managers share investment discretion over the same Section 13(f) Security (for example, as a result of a sub-advisory arrangement or a direct or indirect control relationship), each manager has an independent reporting obligation under Rule 13f-1 with respect to that security. SEC Issues Guidance on Interim Reporting Requirements to Disclose Changes in Shareholders' Equity. For example, if a private fund that beneficially owns more than 5% of a class of an issuers Section 13(d) Securities is managed by a securities firm that is a limited partnership, the general partner of which is an LLC that in turn is owned in roughly equal proportions by two managing members, then each of the private fund, the securities firm, the firms general partner, and the two managing members of the general partner likely will have an independent Section 13 reporting obligation. A reporting person is an Exempt Investor if the reporting person beneficially owns more than 5% of a class of an issuers Section 13(d) Securities at the end of a calendar year, but its acquisition of the securities is exempt under Section13(d)(6) of the Exchange Act. Copyright 2023 Paul Hastings, LLP. 6LinkedIn 8 Email Updates, Staff Guidance: Exchange Act Sections 13(d) and 13(g) and Regulation 13D-G Beneficial Ownership Reporting, Staff Guidance: Exchange Act Section 16 and Related Rules and Forms. [13] Modernization of Beneficial Ownership Reporting, SEC Release Nos. The time frame depends on whether the issuing company is subject to reporting requirements under the Securities Exchange Act of 1934. Please contact us if you have any questions about including such a disclaimer. Reporting of Shared Investment Discretion. Thereafter, when beneficial ownership of a Passive Investor increases or decreases by 5% or more from the last Schedule 13G filing, When a reporting person has discretion over accounts with $100 million or more of Section 13(f) Securities on the last trading day of any month during the calendar year, After initial Form 13F, filings must continue for at least the next three calendar quarters, Any omitted holdings or errors in information reported on previous Form 13F, When accounts under discretionary management transact in NMS securities in an amount equal to or more than (a) 2 million shares or $20 million during any calendar day, or (b) 20 million shares or $200 million during any calendar month (identifying activity level), Promptly after effecting aggregate transactions at the identifying activity level, Within 45 days after the end of each full calendar year until the filing of an inactive status Form 13H after a full calendar year of effecting transactions below the identifying activity level, Any information on the previous Form 13H becomes inaccurate, Promptly following the end of the calendar quarter in which the information becomes inaccurate, When a reporting person becomes an officer or director of a public company or meets the 10% threshold, Within 10 days of the triggering eventor at the time of the registration of the companys equity securities on a national securities exchange, Any transaction or change in beneficial ownership (e.g., exercise of any option, warrant or right or conversion of a security), Any transaction not reported on Form 4 during the calendar year (not required if all transactions previously reported on Form 4). Instead, we recommend that you make EDGAR filings through an outside vendor. In calculating the number of holders of record for purposes of determining whether Exchange Act registration is required, your company may exclude persons who acquired their securities in an exempt offering: Public float is calculated by multiplying the number of the companys common shares held by non-affiliates by the market price and, in the case of an IPO, adding to that number the product obtained by multiplying the common shares covered by the registration statement by their estimated public offering price. When beneficial ownership of a Passive Investor exceeds 10%, Promptly after the triggering transaction, 2. [10]See Question 103.07 (September 14, 2009), Regulation 13D-G C&DIs. Therefore, a firm will be a reporting person if it directly or indirectly acquires or has beneficial ownership of more than 5% of a class of an issuers Section 13(d) Securities for its own account or any discretionary client account(s). However, it is possible that a reporting obligation may arise if the fund itself actually engages in the investment decision-making process (such as through an internal investment committee whose decisions bind the institutional investment manager). The information about the company required in an Exchange Act registration statement is similar to what is required in a registration statement for a public offering. When a Qualified Institution or Exempt Investor exceeds the 5% threshold (subject to item 2 below), 2. For purposes of Section 16, an insider is (a)adirector of the public company, (b)a designated officer of the public company,[19] or (c) a person who beneficially owns[20] more than 10% of any class of equity security (other than an exempted security) which is registered under Section 12 of the Exchange Act (a 10% beneficial owner). If your company qualifies as a smaller reporting company or an emerging growth company, it will be eligible to rely on scaled disclosure requirements for these reports. Requirements for Schedule 13D Schedule 13D requires that the beneficial owner provide relevant information about several items, which include the following: Item 1: Security and Issuer. Form 4 Statement of Changes of Beneficial Ownership of Securities.

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