Houston, Texas Area. As discussed above, each reporting person has an independent reporting obligation under Section 13 of the Exchange Act. As an associate, I worked directly with and advised over 15 public companies on corporate and securities law compliance, board and corporate governance . 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. 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. 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. 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. SEC amendments to Rule 10b5-1 take effect today. 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. See definition in Footnote 3 above and accompanying text. 34-93784 (Dec. 15, 2021), available at https://www.sec.gov/rules/proposed/2021/34-93784.pdf. [22] For the persons included in the definition of Qualified Institution, see Footnote 5 above and accompanying text. A fund client of an institutional investment manager generally will not have a reporting obligation under Rule 13f-1 even if it holds $100 million or more in Section 13(f) Securities since the obligation is tied to the exercise of investment discretion. Copyright 2023 Paul Hastings, LLP. 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. Form N-PX: Reporting Say-on-pay Proxy Votes by Investment Managers with More than $100Million in Discretionary Accounts. across all major Western European equity markets. Reporting Obligations of Control Persons and Clients. Asset-based fees are not considered performance-based fees or allocations and do not trigger Section 16 concerns. Registration statements and prospectuses become public shortly after filing with the SEC. 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. 13F Holdings Report, on which a reporting manager includes all Section 13(f) Securities over which it or any other reporting manager exercises investment discretion; 13F Notice, on which a reporting manager indicates that all Section 13(f) Securities over which it exercises investment discretion are reported on a Form 13F filed by another reporting manager; and. 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. Schedules 13D and 13G are commonly referred to as a "beneficial ownership reports.". Conclusion All of this information must be filed electronically with the SEC through its EDGAR system, and will immediately become publicly available upon filing. 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"). [12]A person or entity that beneficially owns more than 10% of a class of Section 13(d) Securities may also have filing or other obligations under the Hart-Scott-Rodino Act and/or Section 16 of the Exchange Act. Separate Shareholder Report Requirements . Shareholder Disclosure Requirements. A reporting person is a Passive Investor if it beneficially owns more than 5% but less than 20% of a class of an issuers Section 13(d) Securities and (a) the securities were not acquired or held with an activist intent, and (b) the securities were not acquired in connection with any transaction having an activist intent. A reporting person who is not eligible to use Schedule 13G must file a Schedule13D within 10 days of such reporting persons direct or indirect acquisition of beneficial ownership of more than 5% of a class of an issuers Section 13(d) Securities. On November 2, 2022, the SEC adopted Rule 14Ad-1 under the Exchange Act that will require any manager to annually report its proxy voting record with respect to the securities of any public company over which it exercises voting power[18] regarding the shareholder advisory votes on (a) the compensation paid to the public companys executives, (b) the frequency of the executive compensation approval votes, and (c) any so-called golden parachute arrangements in connection with a merger or acquisition (collectively, say-on-pay votes). 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. Limited exemptions exist for transactions that do not need to be reported on Form 4, including the acquisition of a portfolio companys equity securities not exceeding $10,000, subject to specified conditions (the Small Acquisitions Exemption). [28]Short Position and Short Activity Reporting by Institutional Investment Managers, SEC Release 34-94313 (Feb. 25, 2022), available at https://www.sec.gov/rules/proposed/2022/34-94313.pdf. Unless a securities firm has an activist intent with respect to the issuer of the Section 13(d) Securities, the firm generally will be able to report on Schedule 13G either as a Qualified Institution or as a Passive Investor. Requirements for Schedule 13D Schedule 13D requires that the beneficial owner provide relevant information about several items, which include the following: Item 1: Security and Issuer. [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. Proposed Changes to Filing Deadlines. 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 . 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. [17] A reporting manager may choose to exclude from its Form 13F any small position in an issuers Section 13(f) Securities that (a) amounts to less than 10,000 shares, and (b) has an aggregate fair market value of less than $200,000. The list is available at http://www.sec.gov/divisions/investment/13flists.htm. 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 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. Rule 13h-1 under the Exchange Act requires a Form 13H to be filed with the SEC by any individual or entity (each, a Large Trader) that, directly or indirectly, exercises investment discretion over one or more accounts and effects transactions in NMS Securities (as defined below) for those accounts through one or more registered broker-dealers that, in the aggregate, equal or exceed (a) 2 million shares or $20million in fair market value during any calendar day, or (b) 20 million shares or $200 million in fair market value during any calendar month (each, an identifying activity level). There will be increased and more complex web-hosting requirements. When a person or group of persons acquires beneficial ownership of more than . Accordingly, once an institutional investment managers obligation to report on Form13F is established, the manager must make four quarterly filings with the SEC. FILING DEADLINE (ifdeadline falls on a weekend or holiday, the deadline is extended to the next business day), When a reporting person is not qualified to file a Schedule 13G and exceeds the 5% threshold, 1. The vendor engaged by Paul Hastings charges a service fee for each filing. When a Qualified Institution or Exempt Investor exceeds the 5% threshold (subject to item 2 below), 2. Reports filed with the SEC can be viewed by the public on the SEC EDGAR website. Insiders who serve as trustees for a trust may need to comply with Section 16 if the trust beneficially owns more than 10% of a registered class of the public companys equity 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. [30] Prohibition Against Fraud, Manipulation, or Deception in Connection with Security-Based Swaps; Prohibition against Undue Influence over Chief Compliance Officers; Position Reporting of Large Security-Based Swap Positions, SEC Release No. These obligations are discussed in more detail in Section 16: Reports of Directors, Officers, and Principal Stockholders below. The time frame depends on whether the issuing company is subject to reporting requirements under the Securities Exchange Act of 1934. 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). In addition, Section 16 prohibits short selling by insiders of any class of the company's securities, whether or not that class is registered under the Exchange Act. Whether you use an outside vendor or you make your EDGAR filings yourself, you must first obtain several different identification codes from the SEC before the filings can be submitted. The Section 13 (d) reporting requirement is satisfied by filing Schedule 13D with the SEC. The information about the company required in an Exchange Act registration statement is similar to what is required in a registration statement for a public offering. They play a major role in the savings, investment, and retirement plans of many Americans. 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. 6LinkedIn 8 Email Updates, Compliance Guide: Changes to Exchange Act Registration Requirements to Implement Title V and Title VI of the JOBS Act, Compliance Guide: Interactive Data for Financial Reporting, Press Release: SEC Adopts Amendments to Implement JOBS Act and FAST Act Changes for Exchange Act Registration Requirements, JOBS Act FAQs: Changes to the Requirements for Exchange Act Registration and Deregistration, Sarbanes-Oxley Section 404: A Guide for Small Business. Reporting persons that must report on Schedule 13D are also required to disclose a significant amount of additional information, including certain disciplinary events, the source and amount of funds or other consideration used to purchase the Section 13(d) Securities, the purpose of the acquisition, any plans to change or influence the control of the issuer, and a list of any transactions in the securities effected in the previous 60 days. 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. Short-swing profits may result whenever an insider (a) sells (or is deemed to sell) any covered securities within six months of purchasing any covered securities of the same class at a lower price per share, or (b) purchases (or is deemed to purchase) any covered securities within six months of selling any covered securities of the same class at a higher price per share. These filings contain background information about the shareholders who file them as well as their investment intentions, providing investors and the company with information about accumulations of securities that may potentially change or influence company management and policies.