On October 10, 2023, the Securities and Exchange Commission (the “Commission”) adopted significant amendments to Regulation 13D-G, governing beneficial ownership reporting. These amendments are designed to shorten the filing deadlines for initial and amended beneficial ownership reports filed on Schedules 13D and 13G, and modernize and enhance the transparency of ownership in public companies. Key changes include accelerated filing deadlines for initial and amended Schedules 13D and 13G filings, an extension of the filing cut-off time to 10 PM ET, and the introduction of a structured, machine-readable data language for submissions. The Commission’s move also aims to ensure more timely information on equity security positions, clarify the Schedule 13D disclosure requirements for derivative securities, and emphasize the importance of disclosure for groups acting in concert.
Background:
Sections 13(d) and 13(g) of the Securities Exchange Act of 1934, along with Regulation 13D-G, require that any person or group beneficially holding over five percent of a public company’s covered class of equity securities must publicly file either a Schedule 13D or a Schedule 13G, as applicable. An investor who has control intent files Schedule 13D, while Exempt Investors[1] and investors who do not have control intent, such as Qualified Institutional Investors (“QIIs”)[2] and Passive Investors[3], file Schedule 13G. Previously, the filing deadline for Schedule 13D was 10 days after acquiring more than 5% beneficial ownership, while Schedule 13G deadlines varied based on the filer’s status. The purpose of these disclosures is to inform shareholders and the public about significant ownership stakes that might influence company control.
Summary of Amendments:
With respect to the Schedule 13D and Schedule 13G filing deadlines, the Commission has amended the following rules:
1. Schedule 13D Amendments:
- The initial filing deadline is shortened to five business days (from ten days, previously) post-acquisition of a 5% ownership stake of a covered class or upon losing eligibility for Schedule 13G filing.
- Amendments to Schedule 13D must now be filed within two business days of a material change.
2. Schedule 13G Amendments:
- Qualified Institutional Investors and Exempt Investors now have a 45-day deadline after the end of the calendar quarter in which beneficial ownership first exceeds five percent of a covered class.
- Passive Investors must file within five business days of exceeding 5% of a covered class.
The table below summarizes the current rule and amendments to the rules for 13D and 13G filings.
| Issue | Schedule 13D (Current) | Schedule 13D (Amended) |
Schedule 13G (Current) |
Schedule 13G (Amended) |
| Initial Filing Deadline |
Within 10 days post-acquisition of a 5% ownership stake of a covered class or upon losing eligibility for Schedule 13G filing. | Within 5 business days post-acquisition of a 5% ownership stake of a covered class or upon losing eligibility for Schedule 13G filing. | QIIS & Exempt Investors: 45 days after calendar year-end in which beneficial ownership exceeds 5%.
QIIs: 10 days after month-end in which beneficial ownership exceeds 10%.
Passive Investors: Within 10 days after acquiring beneficial ownership of more than 5%. |
QIIS & Exempt Investors: 45 days after calendar quarter-end in which beneficial ownership exceeds 5%.
QIIs: 5 business days after month-end in which beneficial ownership exceeds 10%.
Passive Investors: Within 5 business days after acquiring beneficial ownership of more than 5%. |
| Amendment Triggering Event |
“Material change” in the facts set forth in the previous Schedule 13D. | Same as current Schedule 13D. | All Schedule 13G Filers: Any change in the information previously reported on Schedule 13G.
QIIs & Passive Investors: Upon exceeding 10% beneficial ownership on a 5% increase or decrease in beneficial ownership. |
All Schedule 13G Filers: Material change in the information previously reported on Schedule 13G.
QIIs & Passive Investors: Upon exceeding 10% beneficial ownership on a 5% increase or decrease in beneficial ownership. |
| Amendment Filing Deadline |
Promptly after the triggering event. | Within two business days after the triggering event. | All Schedule 13G Filers: 45 days after calendar year-end in which any change occurred.
QIIs: 10 days after month-end in which beneficial ownership exceeded 10% or there was, as of the month-end, a 5% increase or decrease in beneficial ownership.
Passive Investors: Promptly after exceeding 10% beneficial ownership or a 5% increase or decrease in beneficial ownership. |
All Schedule 13G Filers: 45 days after calendar quarter-end in which a material change occurred.
QIIs: Five business days after month-end in which beneficial ownership exceeded 10% or there was, as of the month-end, a 5% increase or decrease in beneficial ownership.
Passive Investors: Two business days after exceeding 10% beneficial ownership or a 5% increase or decrease in beneficial ownership. |
| Filing “Cut-Off” Time |
5:30 p.m. Eastern Time. | 10 p.m. Eastern Time. | All Schedule 13G Filers: 5:30 p.m. Eastern Time. | All Schedule 13G Filers: 10 p.m. Eastern Time. |
Disclosure Requirements related to Derivative Securities:
The Commission has adopted an amendment to Item 6 of Schedule 13D, which currently requires the disclosure of certain contracts, arrangements, understandings, and relationships among the persons named in Item 2 of Schedule 13D, to remove any implication that a person is not required to disclose interests in all derivative securities that use a covered class as a reference security. The purpose of this amendment is to eliminate any ambiguity regarding the scope of the disclosure obligations of Item 6 of Schedule 13D as to derivative securities, including with respect to any derivative not originating with, or offered or sold by, the issuer, such as a cash-settled option or security-based swap positions.
“Group” Definition:
The Commission elected not to adopt the proposed amendments to Rule 13d-5 regarding group formation considerations. However, the Commission reaffirmed its position by issuing guidance on the appropriate legal standard for determining whether a group is formed. Based on the circumstances, two or more individuals taking concerted actions for the purpose of acquiring, holding, or disposing of securities may form a group. In other words, the formation of a group is not solely conditioned upon the presence of an explicit agreement; instead, concerted actions and informal agreements can also result in the formation of a group. The Commission stated that, “the determination as to whether two or more persons are acting as a group does not depend solely on the presence of an express agreement and that, depending on the particular circumstances, concerted actions by two or more persons for the purpose of acquiring, holding or disposing of securities of an issuer are sufficient to constitute a formation of a group.”
Structured Machine-Readable Data Requirements:
The amendments require all non-exhibit disclosures on Schedules 13D and 13G to be filed using structured, machine-readable data language (e.g., an XML-based format or a web-based application).
Key Dates:
- The amendments were officially adopted on October 10, 2023, and published in the Federal Register on November 7, 2023.
- The amendments will take effect on February 5, 2024 (the “Effective Date”), with compliance for structured data requirements starting December 18, 2024, but voluntary compliance may start as of December 18, 2023.
For more details, see the Commission’s Fact Sheet.
To determine whether these new regulations apply to you and for additional information, we recommend contacting Max Riffin and Jay Cho at Prince Lobel Tye LLP via telephone (617-456-8009) or via email ([email protected]; or [email protected]).
[1] Exempt Investors: Persons holding beneficial ownership of more than 5% of a covered class, but not subject to Section 13(d) due to certain conditions. For more details, see the Commission’s Final Rule.
[2] Qualified Institutional Investors: Institutional Investors qualified to report on Schedule 13G under Rule 13(d)-1(b), subject to specific conditions and regulatory schemes. For more details, see the Commission’s Final Rule.
[3] Passive Investors: Beneficial owners of more than 5% but less than 20% of a covered class, meeting certain criteria under Item 10 of Schedule 13G. For more details, see the Commission’s Final Rule.