SEC Alert! SEC Reopening of Comment Period for Modernization of Beneficial Ownership Reporting. The Proposed Amendments also would deem holders of certain cash settled derivative securities as beneficial owners of the reference equity securities

Source: https://public-inspection.federalregister.gov/2023-09454.pdf

As described more fully in the Proposing Release, the Commission proposed to amend certain rules to modernize the beneficial ownership reporting requirements. 4 The Proposed Amendments would, among other things:

1. Revise the Rule 13d-1(a) filing deadline for the initial Schedule 13D to five days after the date on which a person acquires more than 5% of a covered class of equity securities;5 and amend Rules 13d-1(e), (f), and (g) to shorten the filing deadline for the initial Schedule 13D required to be filed by certain persons who forfeit their eligibility to report on Schedule 13G in lieu of Schedule 13D to five days after the event that causes the ineligibility.
2. Revise the filing deadline under Rule 13d-2(a) for amendments to Schedule 13D to one business day after the date on which a material change occurs.
3. Amend Rules 13d-1(b) and (d) to shorten the deadline for the initial Schedule 13G filing for Qualified Institutional Investors6 and Exempt Investors to within five business days after the last day of the month in which beneficial ownership first exceeds 5% of a covered class; and amend the deadline in Rule 13d-1(c), which permits Passive Investors to file an initial Schedule 13G in lieu of Schedule 13D within 10 days after acquiring beneficial ownership of more than 5% of a covered class, to five days after the date of such an acquisition.
4. Revise the filing deadline for amendments to Schedule 13G in Rule 13d-2(b) to five business days after the end of the month in which a reportable change occurs;7 and amend Rule 13d-2(c) to shorten the filing deadline for Schedule 13G amendments filed pursuant to that provision to five days after the date on which beneficial ownership first exceeds 10% of a covered class, and thereafter upon any deviation by more than 5% of the covered class, with these requirements applying if the thresholds were crossed at any time during a month.
5. Add new paragraph (e) to Rule 13d-3 to deem holders of certain cash-settled derivative securities as beneficial owners of the reference covered class and amend Item 6 to 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.
6. Amend Rule 13d-5 to align the text of that rule, as applicable to two or more persons who act as a group, with the statutory language in Sections 13(d)(3) and (g)(3) of the Exchange Act and add a new provision in Rule 13d-5 that would affirm that if a person, in advance of filing a Schedule 13D, discloses to any other person that such filing will be made with the purpose of causing that other person to acquire securities in the covered class for which the Schedule 13D will be filed and such other person acquires securities in the covered class, then those persons are deemed to have formed a group within the meaning of Section 13(d)(3).
7. Add new Rule 13d-6(c), which would set forth the circumstances under which two or more persons may communicate and consult with one another and engage with an issuer without concern that they will be subject to regulation as a group with respect to the issuer’s equity securities
8. Require that Schedules 13D and 13G be filed using a structured, machine readable data language.

Additional Materials:

• Rule
• Fact Sheet

• Memorandum from the Division of Economic and Risk Analysis

Comments may be submitted by any of the following methods:

• Use the Commission’s internet comment form (https://www.sec.gov/rules/submitcomments.htm)
• Send paper comments to Vanessa A. Countryman, Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
• All submissions should refer to File Number S7-06-22.
• Do not include personal identifiable information in submissions; you should submit only information that you wish to make available publicly.
• They may redact in part or withhold entirely from publication submitted material that is obscene or subject to copyright protection.
• The comment period for the Proposing Release published March 10, 2022, at 87 FR 13846, is reopened. Comments should be received on or before June 27, 2023.

TLDRS:

• The Proposed Amendments would modernize the filing deadlines for initial and amended beneficial ownership reports filed on Schedules 13D and 13G.
• The Proposed Amendments also would deem holders of certain cash settled derivative securities as beneficial owners of the reference equity securities and clarify the disclosure requirements of Schedule 13D with respect to derivative securities.
• In addition, the Proposed Amendments would clarify and affirm the operation of the beneficial ownership reporting rules as applied to two or more persons that form a group under the Securities Exchange Act of 1934, and provide new exemptions to permit such persons to communicate and consult with each other, jointly engage issuers, and execute certain transactions without being subject to regulation as a group.
• Finally, the Proposed Amendments would require that Schedules 13D and 13G be filed using a structured, machine-readable data language.

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