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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. The information is, however, subject to disclosure to Congress and other federal agencies and when ordered by a court. Under Rule 13d-3, beneficial ownership of a security means that a person has or shares the power, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, (a) to vote or direct the voting of a security (voting power), or (b) to dispose of or direct the disposition of a security (investment power). 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. beneficially owns, in the aggregate, more than 5% of a class of the voting, equity securities (the Section 13(d) Securities): issued by any closed-end investment company registered under the Investment Company Act of 1940, as amended (the Investment Company Act), or, issued by any insurance company that would have been required to register its securities under Section 12 of the Exchange Act but for the exemption under Section 12(g)(2)(G) thereof (see, manages discretionary accounts that, in the aggregate, hold equity securities trading on a national securities exchange with an aggregate fair market value of $100 million or more (see, securities and standardized options) in an aggregate amount equal to or greater than (a) 2 million shares or shares with a fair market value of more than $20 million during a day, or (b) 20 million shares or shares with a fair market value of more than $200 million during a calendar month (see, Significant Acquisitions and Ownership Positions, any general partner, managing member, trustee, or controlling shareholder of the firm; and. Disclose, to the extent known to management . Schedules 13D and 13G: Reporting Significant Acquisitions and Ownership Positions. 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. SEC filings are financial statements, periodic reports, and other formal documents that public companies, broker-dealers, and insiders are required to submit to the U.S. Securities and Exchange Commission (SEC). Please contact us if you would like further guidance in determining who may constitute a control person of your firm for these purposes. However, we suggest an amendment in such a circumstance to eliminate the reporting persons filing obligations if the reporting person does not in the near term again expect to increase its ownership above 5%. If filed by U.S. domestic companies, the statements are available on the EDGAR database accessible at www.sec.gov. Houston, Texas Area. This no-action letter has given rise to what practitioners refer to as the rule of three, which provides that, where voting and investment decisions regarding an entitys portfolio are made by three or more persons and a majority of those persons must agree with respect to voting and investment decisions, then none of those persons individually has voting or dispositive power over the securities in the entitys portfolio and, thus, none of those persons will be deemed to have beneficial ownership over those securities. Please contact us if you need these forms. In June 2022, the SEC adopted rule and form amendments that require electronic filing of all Forms 144 on EDGAR. The vendor engaged by Paul Hastings charges a service fee for each filing. However, it is possible that a reporting obligation may arise if the fund itself actually engages in the investment decision-making process (such as through an internal investment committee whose decisions bind the institutional investment manager). 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. 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. 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. Proposed Reporting of Short Sales and Securities-based Swaps. [29] Under proposed Rule 13f-2, an institutional investment manager would be subject to the monthly reporting requirement if it had investment discretion over accounts with (a) gross short positions in the equity securities of public companies with a value of at least $10 million or an average of 2.5% of the issuers outstanding equity securities, or (b) gross short positions in any other equity securities with a value of at least $500,000, in each case, at the close of any settlement date during a calendar month. 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. An insider must file a Form 5 to report any equity securities and transactions that were not previously reported on a Form 3, 4 or 5. The Society for Corporate Governance (the "Society" or "we") appreciates the opportunity to provide comments to the U.S. Securities and Exchange Commission (the "SEC" or the "Commission") on the proposed changes to the reporting threshold for Form 13F reports by institutional investment managers (the "Proposed Rules"). The SEC has indicated that filing within 10 days will be deemed a prompt filing. The Section 13 (d) reporting requirement is satisfied by filing Schedule 13D with the SEC. In order for a control person to file a Schedule 13G as a Qualified Institution, however, no more than 1% of a class of an issuers Section 13(d) Securities may be held (a) directly by the control person or (b) directly or indirectly by any of its subsidiaries or affiliates that are not Qualified Institutions. 1 Twitter 2 Facebook 3RSS 4YouTube This disclaimer is typically inserted as a footnote to the ownership information on the cover page and in the body of the Schedule. The SEC also proposed new Rule 10B-1 under the Exchange Act[30] in December 2021 in order to require any person with large notional positions[31] in credit default swaps, other swaps based on debt securities, or swaps based on equity securities to file reports with the SEC that disclose each security-based swap position and any related position in the reference debt or equity security, loan or narrow-based security index underlying the security-based swap. 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. [17] A reporting manager must file Form 13F (i) within 45 days after the last day of each calendar year in which it meets the $100 million threshold, and (ii) within 45 days after the last day of each of the first three calendar quarters of the following calendar year. Even though the securities firm may not otherwise have an activist intent, the staff of the SEC has stated the fact that officers and directors have the ability to directly or indirectly influence the management and policies of an issuer will generally render officers and directors unable to certify to the requirements necessary to file as a Passive Investor.[7]. Examples of the events that trigger the filing of a current report are: The company also will have to comply with certain rules whenever its management submits proposals to shareholders that will be subject to a shareholder vote, usually at a shareholders meeting, and certain of its shareholders and management become subject to other requirements. Shareholder reports for funds registered on Form N-1A will have to comply with the Form N-1A amendments if they are transmitted to shareholders 18 months or more after the effective date. A profit interest may exist as the result of any contract, arrangement, understanding, or relationship that the insider may have with another person or organization. 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. Schedule 13D must be amended promptly to reflect any material changes in the information provided. Officers of the public companys parent(s) or subsidiary(ies) are deemed officers of the public company if they perform such policy-making functions for the public company. 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. 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. 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. In calculating the amount of the disgorgement, an insider is required to pay the excess of (a) the highest sales price per share, over (b) the lowest purchase price per share, with respect to the covered securities involved in the matching transactions made within the six-month period. Your company must also file current reports on Form 8-K to report certainspecified events, oftenwithin four business days after occurrence of the event. to disclose the status of shareholding by submitting a Large Shareholding Report within a prescribed period. The Form ID must be signed, notarized, and submitted electronically through the SECs Filer Management website, which can be accessed at https://www.filermanagement.edgarfiling.sec.gov. summary on large shareholder reporting 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. 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. [24] Previously, an insider also had an obligation to deliver a copy of any Section 16 filing to the public company and the national exchange on which the public companys equity securities were listed. Form 5 must be filed no later than 45 days after the end of the public companys fiscal year. [21] These requirements seek to discourage insiders from profiting on the basis of the superior information that may be accessible to them because of their influential role in the public company. The requirement was adopted in August as part of . Summary of the United States reporting requirements relating to substantial shareholdings, takeovers, sensitive industries, short-selling and issuer requests. 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). SEC Rules and Amendments . Schedule 13D must be filed within 10 days of crossing the 5% ownership threshold. Please contact us if you would like guidance regarding the application of Section 13 to securities-based swaps or other derivative contracts. Examples of an indirect profit interest in a public companys equity securities that will trigger an insiders Section 16 reporting requirement include: (a) the equity securities held by family members in the same household as the insider, (b) a security-based swap involving the equity securities, (c) the right to acquire equity securities through the exercise or conversion of any other derivative security (whether or not exercisable within 60 days), (d) a general partners proportionate interest in the equity securities held by a partnership, and (e) under certain circumstances, receipt of a performance-based fee or allocation from a client with respect to equity securities held in the clients portfolio.[23]. across all major Western European equity markets. [2]A group is defined in Rule 13d-5 as two or more persons [that] agree to act together for the purpose of acquiring, holding, voting or disposing of equity securities of an issuer. See, for example, the persons described above in Reporting Obligations of Control Persons. STAY CONNECTED The list is available at http://www.sec.gov/divisions/investment/13flists.htm. This is among the reasons that board disclosure and accountability have become increasingly critical aspects of good governance. [5]Under Rule 13d-1, a reporting person also qualifies as a Qualified Institution if it is a bank as defined in Section 3(a)(6) of the Exchange Act, an insurance company as defined in Section 3(a)(19) of the Exchange Act, an investment company registered under the Investment Company Act, or an employee benefit plan, savings association, or church plan. Otherwise, each Large Trader in the organization will be required to file a separate Form 13H. A material change includes, without limitation, a reporting persons acquisition or disposition of 1% or more of a class of the issuers Section 13(d) Securities, including as a result of an issuers repurchase of its securities. 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. 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. SEC rules require your company to file annual reports on Form 10-K and quarterly reports on Form 10-Q with the SEC on an ongoing basis. We respectfully submit this letter in opposition to the It's only reasonable for shareholders to expect that an organization's board will be committed to effective oversight, turning to metrics and more to monitor and assess performance. Amendments to Schedule 13D. [4]In calculating the 5% test, a person is permitted to rely upon the issuers most recent quarterly or annual report for purposes of determining the amount of outstanding voting securities of the issuer, unless the person knows or has reason to believe that such information is inaccurate. 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). These reports require much of the same information about the company as is required in a registration statement for a public offering. Under certain circumstances, a reporting manager can request confidential treatment of the information contained in the Form 13F filing. 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. [18] Under Rule 14Ad-1, a reporting manager exercises voting power when it votes or influences a vote. Form3 includes the details of any equity securities of the public company that the insider beneficially owns at the time of becoming an insider. Shareholder Disclosure Requirements. 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. The mandatory electronic filing of Forms 144 will commence on April 13, 2023. 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. [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. [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 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. They play a major role in the savings, investment, and retirement plans of many Americans. Qualified Institutions. The reports that an insider will file with the SEC[24] under Section 16 are: Form 3 Initial Statement of Beneficial Ownership of Securities. To ensure shareholders can still obtain information about other share classes, funds must . [27]Rule 16a-3(k) also requires each public company that maintains a corporate website to post on its website all Forms 3, 4, and 5 filed with respect to its equity securities by the end of the business day after filing with the SEC. Form 13H requires that a Large Trader, reporting for itself and for any affiliate that exercises investment discretion over NMS securities, list the broker-dealers at which the Large Trader and its affiliates have accounts and designate each broker-dealer as a prime broker, an executing broker, and/or a clearing broker. Form 13H filings with the SEC are confidential and exempt from disclosure under the United States Freedom of Information Act. The term "beneficial owner" is defined under SEC rules. Copyright 2023 Paul Hastings, LLP. Form N-PX will allow reporting managers that have a disclosed policy of not voting proxies and that did not vote during the reporting period to indicate this on the form without providing additional information about each voting matter. [25] See Rule 16a-6 under the Exchange Act. See definition in Footnote 3 above and accompanying text. Form 3 must be filed within 10 days of any individual or entity first becoming an insider or at the time of the registration of the companys equitysecurities on a national securities exchange. 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"). When beneficial ownership of a Qualified Institution with no previous Section 13 filing exceeds 10% at month end, 10th Day after the Month in which the 10% threshold exceeded, 3. Therefore, a firm will be a reporting person if it directly or indirectly acquires or has beneficial ownership of more than 5% of a class of an issuers Section 13(d) Securities for its own account or any discretionary client account(s). 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). 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 . [9]We have standard forms of powers of attorney and joint filing agreements for Schedule 13G filings. Any direct and indirect control person of a securities firm may file a Schedule 13G as an Exempt Investor, a Qualified Institution or as a Passive Investor to the same extent as any other reporting person as described above. 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. Once a securities firm ceases to be a reporting manager, it will be required to file a final Form N-PX for the period from July 1 to September 30 of the calendar year in which its final filing on Form 13F is due. 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. You are required to retain a manually signed hard copy of all EDGAR filings (and related documents like powers of attorney) in your records available for SEC inspection for a period of five years after the date of filing. A reporting person may use the less burdensome Schedule 13G if it meets certain criteria described below. 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. If a client of a securities firm (including a private or registered fund or a separate account client) by itself beneficially owns more than 5% of a class of an issuers Section 13(d) Securities, the client has its own independent Section 13 reporting obligation. When a person or group of persons acquires beneficial ownership of more than . In order to avoid duplicative reporting of the same Section 13(f) Security, the reporting managers must arrange to file one of the three different types of Form 13F. 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. 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. Shares of mutual funds are not Section 13(f) Securities. Public companies are a key part of the American economy. However, a Qualified Institution that acquires direct or indirect beneficial ownership of more than 10% of a class of an issuers Section 13(d) Securities prior to the end of a calendar year must file an initial Schedule 13G within 10 days after the first month in which the person exceeds the 10% threshold. Section 12 (g) of the Securities Exchange Act of 1934 calls for issuers of securities to register with the SEC and begin public dissemination of financial information within 120 days of the. In determining whether a securities firm has crossed the 5% threshold with respect to a class of an issuers Section 13(d) Securities,[4] it must include the positions held in any proprietary accounts and the positions held in all discretionary client accounts that it manages (including any private or registered funds, accounts managed by or for principals and employees, and accounts managed for no compensation), and positions held in any accounts managed by the firms control persons (which may include certain officers and directors) for themselves, their spouses, and dependent children (including IRA and most trust accounts). 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. The required reports include an annual Form 10-K, quarterly Form 10Q's and current periodic Form 8-K as well as proxy reports and certain shareholder and affiliate reporting requirements. 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. Even if your company does not have an effective registration statement for a public offering, it could still be required to file a registration statement and become a reporting company under Section 12 of the Exchange Act if: For banks, bank holding companies and savings and loan holding companies, the threshold is 2,000 or more holders of record; the separate registration trigger for 500 or more non-accredited holders of record does not apply. This summary should include disclosure thresholds, tender . each reporting person is eligible to file on the Schedule used to make the Section 13 report (e.g., each person filing on a Schedule 13G is a Qualified Institution, Exempt Investor, or Passive Investor); each reporting person is responsible for the timely filing of the Schedule 13D or Schedule 13G and for the completeness and accuracy of its own information in such filing; the Schedule 13D or Schedule 13G filed with the SEC (a) contains all of the required information with respect to each reporting person; (b) is signed by each reporting person in his, her, or its individual capacity (including through a power of attorney); and (c) has a joint filing agreement attached. [23] An insider has an indirect profit interest in the equity securities held by a client if it receives a performance-based fee or allocation from the client, unless (a) the fee or allocation is calculated based on the net capital gains or net capital appreciation of the clients portfolio measured over a period of one year or more, and (b) the public companys equity securities held in the clients portfolio do not account for more than 10% of the market value of the portfolio. A disposition that reduces a reporting persons beneficial ownership interest below the 5% threshold, but is less than a 1% reduction, is not necessarily a material change that triggers an amendment to Schedule 13D. [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. 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.
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