In February 2022, the SEC proposed amendments to Section 13[13] in order to accelerate the filing deadlines for Schedule 13D and Schedule 13G and to require more frequent amendments to Schedule 13G in lieu of the current annual amendment. STAY CONNECTED Availability of Joint Filings by Reporting Persons. In the proposed rule release, the SEC directs approximately 200 requests for comment to the investment adviser and fund industry relating to each element of the rule proposal as it looks to finalize the rules. 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. 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). 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. A securities firm (and, in some cases, its parent company or other control persons) generally will have a Section 13 reporting obligation if the firm directly or indirectly: Section 16(a) of the Exchange Act requires that directors and officers of a company that has a class of securities registered under Section 12 of the Exchange Act (a public company), as well as persons who beneficially own more than 10% of any class of equity security which is registered under Section 12 of the Exchange Act (other than any exempted security), file reports with the SEC on Forms 3, 4, and 5. Under the new rule, large companies would be required to disclose details on executive compensation for the past five fiscal years while small companies need to report on the past three fiscal years. The Section 13 (d) reporting requirement is satisfied by filing Schedule 13D with the SEC. [14] Section 13(f)(6)(A) of the Exchange Act defines the term institutional investment manager to include any person (other than a natural person) investing in, or buying and selling, securities for its own account, and any person (including a natural person) exercising investment discretion with respect to the account of any other person (including any private or registered fund). SEC Reporting Requirements - Transaction reporting by officers, directors and 10% shareholders Section 16 of the Exchange Act applies to an SEC reporting company's directors and officers, as well as shareholders who own more than 10% of a class of the company's equity securities registered under the Exchange Act. across all major Western European equity markets. These reports require much of the same information about the company as is required in a registration statement for a public offering. Reports filed with the SEC can be viewed by the public on the SEC EDGAR website. 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. Passive Investors. Shareholders could request paper or electronic copies of the information moved to the website at no cost. They play a major role in the savings, investment, and retirement plans of many Americans. 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. 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. If you have a pension plan or own a mutual fund, chances are that the plan or mutual fund owns stock in public companies. Your companys CEO and CFO must certify the financial and certain other information contained in annual reports on Form 10-K and quarterly reports on Form 10-Q. 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. Key Takeaways. SEC Issues Guidance on Interim Reporting Requirements to Disclose Changes in Shareholders' Equity. [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. The SEC has indicated that filing within 10 days will be deemed a prompt filing. This is among the reasons that board disclosure and accountability have become increasingly critical aspects of good governance. 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. [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. 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. 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. 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%. See definition in Footnote 3 above and accompanying text. In order to receive your filing codes, you must first submit a Form ID to the SEC. 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. [22] For the persons included in the definition of Qualified Institution, see Footnote 5 above and accompanying text. 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). 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. You may file electronically on EDGAR yourself or have an outside vendor, such as a financial printer, do so on your behalf. Section 16 of the Exchange Act and the rules thereunder impose certain obligations on insiders of any public company. In each case, the reporting person must file a Schedule 13D within 10 days of the event that caused it to no longer satisfy the necessary conditions (except that, if a former Qualified Institution is able to qualify as a Passive Investor, such person may simply amend its Schedule 13G within 10 days to switch its status). The determination of who each of the control persons of a firm are for purposes of Section 13 reporting is very fact-specific and also may have important ramifications with respect to such control persons obligations and liabilities under Section 16 of the Exchange Act, particularly relating to insider reporting and short-swing profits. [25] See Rule 16a-6 under the Exchange Act. While not set out in Section 16 or the rules thereunder, the concept of deputization has been found by the courts where a securities firm is acting as a director of a public company through its deputy and (a) the director shares confidential information with the firm, (b) the director influences the firms investment decisions with respect to the public company, or (c) the directors actions as a director are influenced by the firm. Form 13H: Reporting Identifying Information for Large Traders. [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. issued by a Listed Company, etc. 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. Individualized outreach to large holders should be a priority. Provide updated disclosure on previously disclosed cybersecurity incidents in 10-Ks and 10-Qs. Filings on Forms 3, 4, and 5 must be submitted to the SEC via EDGAR (unless a hardship exemption of the type specified in Regulation S-T applies).[27]. 1 Twitter 2 Facebook 3RSS 4YouTube Section 16 also establishes mechanisms for a company to recover "short swing" profits, or profits an insider realizes from a purchase and sale of the companys security that occur within a six-month period. 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. A reporting person that is required to switch to reporting on a Schedule 13D will be subject to a cooling off period from the date of the event giving rise to a Schedule 13D obligation (such as the change to an activist intent or acquiring 20% of a class of an issuers Section 13(d) Securities) until 10calendar days after the filing of Schedule 13D. Thereafter, when beneficial ownership of a Qualified Institution increases or decreases by 5% or more from the last Schedule 13G filing, computed as of the last day of the month, 1. In addition, a securities firm that has a principal or employee on the board of directors of a public company may be deemed to be a director by deputization for Section 16 purposes. Please contact us if you require any assistance in seeking confidential treatment of your Form 13F filing. All rights reserved. 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. Otherwise, each Large Trader in the organization will be required to file a separate Form 13H. The vendor engaged by Paul Hastings charges a service fee for each filing. entry into and termination of a material definitive agreement (a copy of the agreement must also be publicly filed); completion of an acquisition or disposition of assets, notice of a delisting or failure to satisfy a continued listing rule or standard or transfer of listing, material modifications to rights of security holders, changes in your company's certifying accountant, election of directors, appointment of principal officers, and departure of directors and principal officersand, it has more than $10 million in total assets and a class of equity securities, like common stock, that is held of record by either (1) 2,000 or more persons or (2) 500 or more persons who are not accredited investorsor, it lists the securities on a U.S. exchange, is current in its ongoing annual reports required pursuant to, has total assets as of the end of its last fiscal year not in excess of $25 millionand, has engaged the services of a transfer agent registered with the Commission pursuant to Section 17A of the Exchange Actor, is required to file and is current in filing annual, semiannual and special financial reports under Securities Act Rule 257(b), had a public float of less than $75 million as of the end of its last semiannual period, or if it cannot calculate its public float, had less than $50 million in annual revenue as of the end of its last fiscal year and, engaged a transfer agent registered pursuant to Section 17A of the Exchange Act. Asset-based fees are not considered performance-based fees or allocations and do not trigger Section 16 concerns. The Firms Obligations. Consequently, a person should file a Schedule 13D as soon as possible once it is obligated to switch from a Schedule 13G to reduce the duration of the cooling off period. The requirement was adopted in August as part of . If filed by U.S. domestic companies, the statements are available on the EDGAR database accessible at www.sec.gov. 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. The rules under Section 16 require these insiders to report most of their transactions involving the company's equity securities to the SEC within two business days on Forms 3, 4 or 5. For example, if a private fund that beneficially owns more than 5% of a class of an issuers Section 13(d) Securities is managed by a securities firm that is a limited partnership, the general partner of which is an LLC that in turn is owned in roughly equal proportions by two managing members, then each of the private fund, the securities firm, the firms general partner, and the two managing members of the general partner likely will have an independent Section 13 reporting obligation. Small companies would be exempt from disclosing details on pensions and peer groups. Transaction reporting by officers, directors and 10% shareholders Section 16 of the Exchange Act applies to an SEC reporting company's directors and officers, as well as shareholders who own more than 10% of a class of the company's equity securities registered under the Exchange Act. Shareholder Disclosure Requirements. Along with certain other institutions listed under the Exchange Act,[5] a reporting person that is a registered investment adviser or broker-dealer may file a Schedule 13G as a Qualified Institution if it (a) acquired its position in a class of an issuers Section 13(d) Securities in the ordinary course of its business, (b) did not acquire such securities with the purpose or effect of changing or influencing control of the issuer, nor in connection with any transaction with such purpose or effect (such purpose or effect, an activist intent), and (c)promptly notifies any discretionary account owner on whose behalf the firm holds more than 5% of the Section 13(d) Securities of such account owners potential reporting obligation. Under the proposed amendments, if adopted without further comment: In certain circumstances, it may be appropriate for the Schedule 13D or Schedule 13G made by control persons to include a disclaimer of beneficial ownership. Change shareholder reporting requirements (Reporting Requirements) for open-end management investment . [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. Please contact us if you would like further guidance in determining who may constitute a control person of your firm for these purposes. Exemption for non-UK issuers In February 2022, the SEC proposed new Rule 13f-2 under the Exchange Act[28] that, if adopted, would require any institutional investment manager with investment discretion over accounts with large short positions[29] to file monthly reports with the SEC on a confidential basis. For example, a person that acquired all of its Section 13(d) Securities prior to the issuers registration of such securities (or class of securities) under the Exchange Act, or acquired no more than 2% of the Section 13(d) Securities within a 12-month period, is considered to be an Exempt Investor and would be eligible to file reports on Schedule13G. This final short-period filing will be due by March 1 of the immediately following calendar year. 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. 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. For those considered a "reporting company" for at least 90 . 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. As discussed above, each reporting person has an independent reporting obligation under Section 13 of the Exchange Act. [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. SEC's proposed disclosure requirements for public companies. 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. Mandatory Electronic Filing of Form 144. 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. A reporting person that is a Passive Investor must file its initial Schedule 13G within 10 days of the date on which it exceeds the 5% threshold. 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). Section 16(c) of the Exchange Act prohibits an insider from engaging in short-sale transactions in covered securities, except that an insider may make short sales-against-the-box if they are made in accordance with Section 16(c). 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. to disclose the status of shareholding by submitting a Large Shareholding Report within a prescribed period. Under Section 16(b) of Exchange Act, each of these insiders may be liable for any short-swing profits (i.e., profits made from a sale or purchase of the public companys securities made within less than six months of a matching purchase or sale). Consequently, the direct or indirect control persons of a securities firm may also be reporting persons with respect to a class of an issuers Section 13(d) Securities. Form N-PX: Reporting Say-on-pay Proxy Votes by Investment Managers with More than $100Million in Discretionary Accounts. 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]. 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. Separate Shareholder Report Requirements . To ensure shareholders can still obtain information about other share classes, funds must . We respectfully submit this letter in opposition to the Public companies are a key part of the American economy. [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. 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. 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. Houston, Texas Area. the direct or indirect parent company of the firm and any other person that indirectly controls the firm (e.g., a general partner, managing member, trustee, or controlling shareholder of the direct or indirect parent company). If a securities firm has multiple affiliates in its organization that qualify as Large Traders, Rule 13h-1 permits the Large Traders to delegate their reporting obligation to a control person that would file a consolidated Form 13H for all of the Large Traders it controls. 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. This new reporting requirement will be effective on July 1, 2023, and the initial filing of Form N-PX by a current reporting manager will be due by August 31, 2024 and disclose its say-on-pay votes during the period from July 1, 2023 to June 30, 2024. [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. Please contact us if you need these forms. summary on large shareholder reporting If your company qualifies as a smaller reporting company or an emerging growth company, it will be eligible to rely on scaled disclosure requirements for these reports. Instead, we recommend that you make EDGAR filings through an outside vendor. 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.
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