[10]See Question 103.07 (September 14, 2009), Regulation 13D-G C&DIs. Summary on Large Shareholder Reporting Requirements in Major Western November 2022 The US Securities and Exchange Commission (SEC) recently finalized rule and form amendments (Adopted Rules) that require mutual funds and most exchange-traded funds (ETFs) to provide shareholders with streamlined and "visually engaging" shareholder reports. 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"). SEC Rules and Amendments . 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. When beneficial ownership of a Passive Investor exceeds 10%, Promptly after the triggering transaction, 2. A reporting person that is a Qualified Institution also is required to file its initial Schedule 13G within 45 days of the end of the calendar year in which the person exceeds the 5% threshold. As an associate, I worked directly with and advised over 15 public companies on corporate and securities law compliance, board and corporate governance . The proposed annual shareholder report disclosure requirements would have an 18-month compliance period. Filings on Forms 3, 4, and 5 must be submitted to the SEC via EDGAR (unless a hardship exemption of the type specified in Regulation S-T applies).[27]. As a rule of thumb, promptly is generally considered to be within 2 to 5 calendar days of the material change, depending on the facts and circumstances. What are SEC Reporting Requirements? SEC Reporting Requirement 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. [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. [22] For the persons included in the definition of Qualified Institution, see Footnote 5 above and accompanying text. Shareholding notification and disclosure | FCA Form 13F: Reporting Equity Positions of Investment Managers with More than $100Million in Discretionary Accounts. A Large Trader must file an initial Form 13H promptly after effecting aggregate transactions equal to or greater than one of the identifying activity levels. Section 16 requires insiders of a public company to report their direct and indirect ownership of the companys equity securities and any transactions in such securities, and to disgorge any short-swing profits, which are discussed below. SEC Proposes ESG Disclosure Requirements for - Faegre Drinker Generally, shares of registered closed-end funds and exchange-traded funds (ETFs) are Section 13(f) Securities as well as certain convertible debt securities, equity options, and warrants. If filed by U.S. domestic companies, the statements are available on the EDGAR database accessible at www.sec.gov. Rule 13f-1 under the Exchange Act requires that a report on Form 13F be filed with the SEC by every so-called institutional investment manager[14] that exercises investment discretion[15] over one or more accounts holding equity securities that (a) are admitted for trading on a national securities exchange (the Section 13(f) Securities),[16] and (b) have an aggregate fair market value as of the last trading day of any month during a calendar year equal to at least $100 million (the $100 million threshold). 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). The requirement was adopted in August as part of . The reporting obligations of a Large Trader continue until it files an amendment to Form 13H showing that it has ceased operations (a terminating filing) or has not effected transactions in NMS Securities at or above the identifying activity level for a full calendar year (an inactive status filing). 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. A securities firm that has one of its control persons serving on an issuers board of directors may not be eligible to qualify as a Passive Investor with respect to such issuer. This could occur in the case of (a) a reporting person that changes from acquiring or holding Section 13(d) Securities for passive investment to acquiring or holding such securities with an activist intent, (b) a reporting person that is a Qualified Institution that deregisters as an investment adviser pursuant to an exemption under the Investment Advisers Act of 1940, as amended, or applicable state law, or (c) a reporting person that is a Passive Investor that acquires 20% or more of a class of an issuers Section 13(d) Securities. [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. Public companies are a key part of the American economy. SEC Reporting Requirements - Transaction reporting by officers, directors and 10% shareholders Section 16 of the Exchange Act applies to an SEC reporting company's directors and officers, as well as shareholders who own more than 10% of a class of the company's equity securities registered under the Exchange Act. The new SEC Tailored Shareholder Reports Ruling and what it means for you [28]Short Position and Short Activity Reporting by Institutional Investment Managers, SEC Release 34-94313 (Feb. 25, 2022), available at https://www.sec.gov/rules/proposed/2022/34-94313.pdf. Reporting Obligations of Control Persons and Clients. 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. 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. 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). 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 may use the less burdensome Schedule 13G if it meets certain criteria described below. 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). Asset-based fees are not considered performance-based fees or allocations and do not trigger Section 16 concerns. SEC Disclosure Laws and Regulations | Inc.com Small companies would be exempt from disclosing details on pensions and peer groups. 6LinkedIn 8 Email Updates, Compliance Guide: Changes to Exchange Act Registration Requirements to Implement Title V and Title VI of the JOBS Act, Compliance Guide: Interactive Data for Financial Reporting, Press Release: SEC Adopts Amendments to Implement JOBS Act and FAST Act Changes for Exchange Act Registration Requirements, JOBS Act FAQs: Changes to the Requirements for Exchange Act Registration and Deregistration, Sarbanes-Oxley Section 404: A Guide for Small Business. On September 25, 2018, the SEC staff issued guidance on compliance with the new requirement to present changes in shareholders' equity in interim financial statements within Form 10-Q filings. Because EDGAR submissions require the use of specialized software, we do not recommend that you make EDGAR filings yourself unless you fully understand the process. The direct and indirect beneficial owners of the same Section 13(d) Securities may satisfy their reporting obligations by making a joint Schedule13D or Schedule 13G filing, provided that: Initial filings. The instructions for the reports will encourage the use of graphics and text features to make them more effective. Acquiring more than 5% of a publicly traded company The Adopted Rules require a separate annual report prepared for each fund and class of a registrant, so that, according to the SEC, shareholders can more easily navigate and read information that applies to them. These filings contain background information about the shareholders who file them as well as their investment intentions, providing investors and the company with information about accumulations of securities that may potentially change or influence company management and policies. The Laws That Govern the Securities Industry | Investor.gov The reports that an insider will file with the SEC[24] under Section 16 are: Form 3 Initial Statement of Beneficial Ownership of Securities. They play a major role in the savings, investment, and retirement plans of many Americans. In addition, a Passive Investor does not have an obligation to notify discretionary account owners on whose behalf the firm holds more than 5% of such Section 13(d) Securities of such account owners potential reporting obligation. [15]For this purpose, an institutional investment manager has investment discretion over an account if it directly or indirectly (a) has the power to determine which securities are bought or sold for the account, or (b) makes decisions about which securities are bought or sold for the account, even though someone else is responsible for the investment decisions. A fund will be required to provide a table showing the expenses associated with a hypothetical $10,000 investment in the fund during the preceding reporting period in two formats: (1) as a percent of a shareholder's investment in the fund ( i.e., expense ratio), and (2) as a dollar amount. Form 4 Statement of Changes of Beneficial Ownership of Securities. Please research the equivalent of the SEC large shareholder reporting requirements (13Ds, etc.) There is no requirement that a Passive Investor limit its acquisition of Section 13(d) Securities to purchases made in the ordinary course of its business. [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. In June 2022, the SEC adopted rule and form amendments that require electronic filing of all Forms 144 on EDGAR. Shares of mutual funds are not Section 13(f) Securities. In calculating whether a securities firm beneficially owns more than 10% of a public companys equity securities, a firm that is a Qualified Institution[22] need not count any equity securities held for the benefit of any third party or in any customer or fiduciary accounts in the ordinary course of business as long as the equity securities were not acquired with an activist intent. A reporting person is a Passive Investor if it beneficially owns more than 5% but less than 20% of a class of an issuers Section 13(d) Securities and (a) the securities were not acquired or held with an activist intent, and (b) the securities were not acquired in connection with any transaction having an activist intent. 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. Under certain circumstances, a reporting manager can request confidential treatment of the information contained in the Form 13F filing. 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. Form 5 must be filed no later than 45 days after the end of the public companys fiscal year. Consequently, the direct or indirect control persons of a securities firm may also be reporting persons with respect to a class of an issuers Section 13(d) Securities. 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. 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. While a persons title is generally indicative, the final determination of whether a person is a director or designated officer of a public company for Section 16 purposes depends on the facts and circumstances, primarily based on the persons function and influence at the public company. This summary should include disclosure thresholds, tender . SEC Adopts Amendments to Modernize Fund Shareholder Reports and Disclosures In February 2022, the SEC proposed new Rule 13f-2 under the Exchange Act[28] that, if adopted, would require any institutional investment manager with investment discretion over accounts with large short positions[29] to file monthly reports with the SEC on a confidential basis. Form N-PX: Reporting Say-on-pay Proxy Votes by Investment Managers with More than $100Million in Discretionary Accounts. Most of the "less retail-focused" information now in prospectuses and shareholder reports would be required to be on mutual funds' websites and also filed with the SEC on Form N-CSR. 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]. Shareholders could request paper or electronic copies of the information moved to the website at no cost. 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). [19] Under Rule 16a-1(f), the officers of a public company which are subject to Section 16 are (a)the president, (b) the principal financial officer, (c) the principal accounting officer or controller, (d) any vice president of the issuer in charge of a principal business unit, division, or function, (e) any other officer who performs a policy-making function, or (f) any other person who performs a similar policy-making function for the public company. Mandatory Electronic Filing of Form 144. Section 16 of the Exchange Act applies to an SEC reporting company's directors and officers, as well as shareholders who own more than 10% of a class of the company's equity securities registered under the Exchange Act. SEC regulations require that annual reports to stockholders contain certified financial statements and other specific items. Loans made in the ordinary course of business at market rates by issuers that are financial institutions or in the business of consumer lending are excepted from the prohibition. Paul Hastings has an arrangement with an outside vendor to make EDGAR filings for our clients, and would be willing to do so as requested. 34-93784 (Dec. 15, 2021), available at https://www.sec.gov/rules/proposed/2021/34-93784.pdf. Additional risks and uncertainties that could affect our financial results and business are more fully described in our Annual Report on Form 10-K for the period ended December 31, 2022, which is expected to be filed with the SEC on or about February 28, 2023, and our other SEC filings, which are available on the Investor Relations page of our . Schedules 13D and 13G are commonly referred to as a "beneficial ownership reports.". Otherwise, each Large Trader in the organization will be required to file a separate Form 13H. [18] Under Rule 14Ad-1, a reporting manager exercises voting power when it votes or influences a vote. 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. This legal update also includes a summary of certain proposed rules under the Exchange Act that would impose additional reporting requirements if adopted, and concludes with a schedule of the filing deadlines under Sections 13 and 16 for 2023. Both Schedule 13D and Schedule 13G require background information about the reporting persons and the Section 13(d) Securities listed on the schedule, including the name, address, and citizenship or place of organization of each reporting person, the amount of the securities beneficially owned and aggregate beneficial ownership percentage, and whether voting and investment power is held solely by the reporting persons or shared with others. Registration statements are subject to examination for compliance with disclosure requirements. Section 16(c) of the Exchange Act prohibits an insider from engaging in short-sale transactions in covered securities, except that an insider may make short sales-against-the-box if they are made in accordance with Section 16(c).