Advisories October 26, 2023

Securities Law Advisory: The SEC Issues Final Rules Amending Sections 13(d) and 13(g) to Modernize Beneficial Ownership Reporting

Executive Summary
Minute Read

The Securities and Exchange Commission has shortened filing deadlines for Schedules 13D and 13G, finalizing rules proposed more than a year ago. Our Securities Group breaks down these changes and final rules on cash-settled derivative securities and group formation.

  • The final rules cover beneficial ownership reporting required by Sections 13(d) and 13(g) of the Securities Exchange Act
  • Filers will have as little as two business days to report material changes to ownership
  • Filing deadlines for Schedule 13G go into effect September 2024; structure date requirements begin December 2024

On October 10, 2023, the U.S. Securities and Exchange Commission (SEC) adopted final amendments to the rules governing beneficial ownership reporting under Sections 13(d) and 13(g) of the Securities Exchange Act of 1934, which were proposed over a year ago. The proposed rules generated extensive commentary. For further discussion of the proposed rule amendments, please see our previous advisory, “The SEC Proposes Section 13(d) and 13(g) Rule Amendments to Modernize Beneficial Ownership Reporting.” The final rules are intended to modernize Schedule 13D and 13G filings by improving their operation and efficacy

Schedule 13D Filing Deadlines

In a departure from the proposed rules, initial Schedule 13D filings must be made within five business days of when the investor acquires beneficial ownership of more than 5% of a covered class of equity securities or loses eligibility to continue to report on Schedule 13G.

The amendments also require Schedule 13D filers to file amended Schedule 13Ds within two business days after the occurrence of a material change.

Schedule 13G Filing Deadlines

Qualified institutional investors

For qualified institutional investors (QIIs) and exempt investors, the final rules require an initial Schedule 13G filing within 45 calendar days of the end of the calendar quarter in which the QII or exempt investor exceeds the 5% threshold.

If the QII acquires more than 10% initially, its Schedule 13G filing will be due within five business days after the month-end.

If the QII later increases its ownership above 10% or fluctuates over 5% more than its initial beneficial ownership, it is then required to file an amended Schedule 13G within five business days after month-end.

Passive investors

For passive investors, the final rules require an initial Schedule 13G filing within five business days of the date it acquires more than 5% of the covered class. Passive investors then must file an amendment within two business days if they acquire over 10% or later have an increase or decrease in their beneficial ownership that exceeds 5%.

For all other amendments to a Schedule 13G, the final rules require filers to file within 45 calendar days from the calendar quarter-end in which a material change occurred.

Filing Cutoff Time Change

The final rules extend the filing deadline for Schedules 13D and 13G made on the EDGAR system from 5:30 pm to 10 pm ET.

Disclosure of Cash-Settled Derivative Securities

The final rules clarify that cash-settled derivative securities, including total return swaps and other derivatives settled exclusively in cash, must be disclosed in Item 6 of Schedule 13D, including when the reporting person does not beneficially own the reference equity securities underlying the derivatives.

The SEC also provided guidance on when investors in cash-settled derivative securities are beneficial owners of the reference equity securities. The SEC said the investor in a cash-settled derivative security will beneficially own the reference equity security if the derivative security: (1) confers voting and/or investment power; (2) is used to divest beneficial ownership in an attempt to evade reporting requirements; or (3) grants a right to acquire an equity security.

Group Formation and Exemptions

The SEC did not adopt the proposed amendments to Rule 13d-5 regarding “group” formation determinations. Rather, it provided guidance on Sections 13(d)(3) and 13(g)(3) and clarified that these statutes do not require an express agreement to create a “group.” Depending on the circumstances, two or more individuals taking concerted actions for the purpose of acquiring, holding, or disposing of securities may form a group. Additionally, the SEC recognizes that when determining whether a group is formed, there must be at least an informal arrangement in furtherance of a common motive. Two people acting similarly is not conclusive on its own. Finally, the SEC provided guidance on group formation considerations relating to shareholder engagement activities.

Structured Data Requirements

The amendments require all non-exhibit disclosures on Schedules 13D and 13G to be filed using a Schedule 13D/G-specific XML via EDGAR or a web-based application.

Compliance Timeline

The adopted rules will become effective 90 days after publication in the Federal Register. Filers will have until September 30, 2024 to comply with the filing deadlines for Schedule 13G and until December 18, 2024 to comply with the structure data requirements for Schedules 13D and 13G.

Media Contact
Alex Wolfe
Communications Director

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