sec large shareholder reporting requirements

Any short sale that takes place, whether prohibited or not, is subject to matching under Section 16(b) with purchases occurring within less than six months. [7]See Question 103.04 (September 14, 2009), Exchange Act Sections 13(d) and 13(g) and Regulation 13D-G Beneficial Ownership Reporting Compliance and Disclosure Interpretations of the Division of Corporation Finance of the SEC (the Regulation 13D-G C&DIs). 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. [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. When beneficial ownership of a Qualified Institution exceeds 10% at end of a month, 2. 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. 34-93784 (Dec. 15, 2021), available at https://www.sec.gov/rules/proposed/2021/34-93784.pdf. 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. In that case, each control person would file a 13F Notice as described above. 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. 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. Proposed Reporting of Short Sales and Securities-based Swaps. 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. 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. 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. Schedule 13D must be amended promptly to reflect any material changes in the information provided. Section 16 requirements also apply to all 10% beneficial owners. Individualized outreach to large holders should be a priority. SEC amendments to Rule 10b5-1 take effect today. The mandatory electronic filing of Forms 144 will commence on April 13, 2023. Section 16 also establishes mechanisms for a company to recover "short swing" profits, or profits an insider realizes from a purchase and sale of the companys security that occur within a six-month period. [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]. 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. For example, the sale of a warrant to purchase common stock of a public company would be matched with any purchase of the common stock of that public company occurring within six months for purposes of determining short-swing profits under Section 16(b). Obligations of a Firms Clients. 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). Positions of Investment Managers with More than $100Million in Discretionary Accounts, Proxy Votes by Investment Managers with More than $100Million in Discretionary Accounts, of Directors, Officers, and Principal Shareholders, at the time of the registration of the companys equity, https://www.filermanagement.edgarfiling.sec.gov, https://www.sec.gov/rules/proposed/2022/33-11030.pdf, http://www.sec.gov/divisions/investment/13flists.htm, https://www.sec.gov/rules/proposed/2022/34-94313.pdf, https://www.sec.gov/rules/proposed/2021/34-93784.pdf, Corporate (Private Equity, Fusions & Acquisitions, Marchs de Capitaux), International Regulatory Enforcement (PHIRE), Consolidated Appropriations Act, 2021(CAA) Machine Readable Files, registered under Section 12 of the Exchange Act, manages discretionary accounts that, in the aggregate, purchase or sell any NMS securities (generally exchange-listed equity. 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. A reporting person that is an Exempt Investor 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. 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. "Material" cybersecurity incident would have to be reported on a Form 8-K within four business days of it being determined to be material. Short-swing profits may result whenever an insider (a) sells (or is deemed to sell) any covered securities within six months of purchasing any covered securities of the same class at a lower price per share, or (b) purchases (or is deemed to purchase) any covered securities within six months of selling any covered securities of the same class at a higher price per share. 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. In the example above, the reporting persons would be required to file a Schedule 13G initially within 10 days of exceeding the 5% threshold and thereafter promptly upon any transaction triggering an amendment (i.e., the filing deadlines applicable to a Passive Investor) and not the later deadlines applicable to a Qualified Institution. A reporting manager will have no reporting obligation with respect to a voting decision that is entirely determined by its client or another party. Under certain circumstances, a reporting manager can request confidential treatment of the information contained in the Form 13F filing. It includes any person who directly or indirectly shares voting power or investment power (the power to sell the security). SEC Rules and Amendments . Form 4 Statement of Changes of Beneficial Ownership of Securities. Passive Investors. The term "beneficial owner" is defined under SEC rules. 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. 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. The rules under Section 16 require these insiders to report most of their transactions involving the company's equity securities to the SEC within two business days on Forms 3, 4 or 5. Please contact us if you require any assistance in seeking confidential treatment of your Form 13F filing. All rights reserved. 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]. Section 16: Reports of Directors, Officers, and Principal Shareholders. [16] The SEC publishes a complete list of Section 13(f) Securities on its official website each quarter, which a manager may rely on if there is any question with respect to a particular security. For example, investment advisers (whether or not they are registered), broker-dealers, banks, trustees, and insurance companies are all institutional investment managers. The initial report would be due within 1 business day of exceeding the notional threshold and an amendment would be due within 1 business day following any material change to the information in a previously filed report (including a change equal to 10% or more of a security-based swap position). Public Company SEC Reporting Requirements and 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. [8] If the reporting persons are eligible to file jointly on Schedule 13G under separate categories (e.g., a private fund as a Passive Investor and its control persons as Qualified Institutions), then the reporting persons must comply with the earliest filing deadlines applicable to the group in filing any joint Schedule 13G. 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]. If filed by U.S. domestic companies, the statements are available on the EDGAR database accessible at www.sec.gov. 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 . Shareholders could request paper or electronic copies of the information moved to the website at no cost. As an associate, I worked directly with and advised over 15 public companies on corporate and securities law compliance, board and corporate governance . 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). An insider must report on Form 4 any change that occurs with respect to its beneficial ownership interest in the public companys equity securities. While an insider is not restricted under Section 16 from purchasing and selling, or selling and purchasing, covered securities within a six-month period, realizing short-swing profits from these transactions is a violation of Section 16. 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. Small companies would be exempt from disclosing details on pensions and peer groups. Houston, Texas Area. In each case, the reporting person must file a Schedule 13D within 10 days of the event that caused it to no longer satisfy the necessary conditions (except that, if a former Qualified Institution is able to qualify as a Passive Investor, such person may simply amend its Schedule 13G within 10 days to switch its status). Under Section 13 of the Exchange Act, reports made to the U.S. Securities and Exchange Commission (the SEC) are filed on Schedule 13D, Schedule 13G, Form 13F, and Form 13H, each of which is discussed in more detail below. As an example, a reporting manager exercises voting power when it votes (or directs another party to vote) in accordance with the reporting managers voting policies or uses its independent judgment or expertise to determine how a clients voting policies should apply to a say-on-pay vote, or when it influences the decision of whether to vote a security, such as determining whether to vote on a say-on-pay matter or whether to recall loaned securities in advance of a vote. Change shareholder reporting requirements (Reporting Requirements) for open-end management investment . If a reporting person that previously filed a Schedule13G no longer satisfies the conditions to be an Exempt Investor, Qualified Institution, or Passive Investor, the person must switch to reporting its beneficial ownership of a class of an issuers Section 13(d) Securities on a Schedule 13D (assuming that the person continues to exceed the 5% threshold). 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. These include securities and transactions that should have been reported during the year but were not and certain transactions that were not required to be reported on Form 4, such as the acquisition of securities pursuant to the Small Acquisitions Exemption. Schedule 13D must be filed within 10 days of crossing the 5% ownership threshold. 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 requirement was adopted in August as part of . 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. [3]Under current SEC rules, a person holding securities-based swaps or other derivative contracts may be deemed to beneficially own the underlying securities if the swap or derivative contract provides the holder with voting or investment power over the underlying securities. Under the new rule, large companies would be required to disclose details on executive compensation for the past five fiscal years while small companies need to report on the past three fiscal years. Sections 13(d) and 13(g) of the Exchange Act require any person or group of persons[2] who directly or indirectly acquires or has beneficial ownership[3] of more than 5% of a class of an issuers Section 13(d) Securities (the 5% threshold) to report such beneficial ownership on Schedule 13D or Schedule 13G, as appropriate. [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. 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 violation is not regarded as a criminal offense, but the liability is strict, which means that an insider may not offer any defenses (reasonable or otherwise) to avoid disgorgement. 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. A reporting person who is not eligible to use Schedule 13G must file a Schedule13D within 10 days of such reporting persons direct or indirect acquisition of beneficial ownership of more than 5% of a class of an issuers Section 13(d) Securities. SEC Issues Guidance on Interim Reporting Requirements to Disclose Changes in Shareholders' Equity. Otherwise, each Large Trader in the organization will be required to file a separate Form 13H.

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