On October 10, 2023, the Securities and Exchange Commission (SEC) adopted changes to the rules governing the reporting of beneficial ownership set forth in Sections 13(d) and 13(g) of the Securities Exchange Act of 1934. These revisions to Regulation 13D-G are designed to enhance and modernize the reporting practices within the financial markets.
SEC Chair Gary Gensler pointed out that the original rules were enacted over half a century ago, and they no longer align with the fast-paced nature of today’s markets. He believes that the amendments to beneficial owner reporting requirements will better suit the modern financial landscape. These changes aim to ensure investors receive vital information in a timely manner and reduce information disparities.
Key changes introduced by the amendments include:
– Filing Deadlines: The initial filing deadline for Schedule 13D has been shortened from 10 days to five business days. Additionally, Schedule 13D amendments must be filed within two business days.
– Schedule 13G Filing Deadlines: Filing deadlines for Schedule 13G beneficial ownership reports have been generally accelerated, with variations depending on the type of filer.
– Disclosure Requirements for Derivative Securities: The amendments provide further clarification on the disclosure requirements for derivative securities.
– Structured Data Requirement: A mandate has been introduced, requiring Schedule 13D and 13G filings to be submitted in structured, machine-readable data language.
– Guidance on Group Classification: The adopting release offers guidance on how the existing legal standard determines when two or more individuals may be considered a “group” for determining whether the beneficial ownership threshold has been met. It also explains how an investor’s use of certain cash-settled derivative securities may lead to their classification as a beneficial owner of the class of referenced equity securities under the existing beneficial ownership reporting rules.
The adopting release is accessible on SEC.gov and will also be published in the Federal Register. The amendments will come into effect 90 days after their publication. Compliance with the revised Schedule 13G filing deadlines will be required beginning on September 30, 2024, and compliance with the structured data requirement for Schedules 13D and 13G will be mandatory on December 18, 2024. Compliance with other rule amendments will be obligatory upon their effective date.
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