SEC Revamping Activist Investor Disclosures
SEC Adopts Final Rules Accelerating Beneficial Ownership Reporting
The newly adopted rules greatly enhance the speed and efficiency of beneficial ownership reporting by activist investors and institutional investors, promoting transparency in a marketplace that has previously allowed certain investors to acquire significant amounts of a company’s stock without proper public disclosure.
“October 10, 2023
The SEC today adopted amendments to modernize Sections 13(d) and 13(g) of the Securities Exchange Act of 1934. Originally proposed in February 2022, the approved amendments shorten the filing deadlines for initial and amended beneficial ownership reports filed on Schedules 13D and 13G.”
What’s the difference between a Schedule 13D and a 13G?
- The Schedule 13D signifies the investor’s intention to control or influence the company’s strategic direction.
- Schedule 13Gs are filed by passive or institutional investors with a primary focus on investment objectives.
New Rules for Activitst Investors (SC 13D)
Filing deadlines. According to the newly adopted final rules, activist investors will now be obligated to disclose any 5% position on Schedule 13D within five (5) business days of reaching the threshold. Furthermore, any amendments to the disclosure (SC 13D/A) must be made within two (2) business days, which is half the time previously allowed.
- Today’s rules also clarify the Schedule 13D disclosure requirements related to derivative securities that large investors have used to obtain effective control over large blocks of company stock without any public disclosure. The new rules provide a framework for determining when an investor’s use of certain cash-settled derivative securities result in the person being treated as a beneficial owner.
- Also, *Item 6 of Schedule 13D requires the investor to disclose interests in all derivative securities, including cash-settled derivative securities, that use the issuer’s equity security as a reference security. (*Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer)
New Rules for Passive, Institutional Investors (SC 13G)
Filing Deadlines. New rules accelerate the Schedule 13G beneficial ownership reports, depending on the type of filer, to 45 days after a calendar QUARTER ENDS providing issuers with a more timely record of institutional investment. New rules also accelerates amendment (SC 13G/A) obligations when the level of beneficial ownership exceeds 10 percent (10%) or increases or decreases by 5 percent ( +/- 5%).
The current filing requirement of 45 days after the end of a calendar year leads to a significant influx of filings in the system between January 15th and February 15th each year, as depicted in the image below. This leaves issuers with limited time to assess the beneficial ownership situation before the publication of the definitive proxy statement (DEF 14A) and the annual shareholders meeting.
(Image courtesty of Kaleidoscope)
Format changes: Good news for data providers, the new amendments require that these filings use a structured, machine-readable data language and that applies to all information disclosed on Schedules 13D and 13G.
Effective Date: 90 days after publication in the Federal Register.
Compliance Dates:
Schedule 13G filing deadlines will be required beginning on Sept. 30, 2024.
The structured data requirement for Schedules 13D and 13G will be required on Dec. 18, 2024.
SEC Resources
Press Release: https://www.sec.gov/news/press-release/2023-219
Fact Sheet: https://www.sec.gov/files/33-11253-fact-sheet.pdf
Final Rule: https://www.sec.gov/files/rules/final/2023/33-11253.pdf
Fact Sheet: https://www.sec.gov/files/33-11253-fact-sheet.pdf
Final Rule: https://www.sec.gov/files/rules/final/2023/33-11253.pdf
For more information about KALEIDOSCOPE’s expanded support for Activist Disclosures, SEC Regulations and Filings Research, email: support@kscope.io