Public Company SEC Reporting Requirements and 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. Please contact us if you would like guidance regarding the application of Section 13 to securities-based swaps or other derivative contracts. 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. [19] Under Rule 16a-1(f), the officers of a public company which are subject to Section 16 are (a)the president, (b) the principal financial officer, (c) the principal accounting officer or controller, (d) any vice president of the issuer in charge of a principal business unit, division, or function, (e) any other officer who performs a policy-making function, or (f) any other person who performs a similar policy-making function for the public company. 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. As discussed above, a securities firm is deemed to be the beneficial owner of the Section 13(d) Securities in all accounts over which it exercises voting and/or investment power. 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). Shareholder Disclosure Requirements. An insider must report on Form 4 any change that occurs with respect to its beneficial ownership interest in the public companys equity securities. 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%. [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. 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. There will be increased and more complex web-hosting requirements. [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). 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. 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. [6]Southland Corp., SEC No-Action Letter (August 10, 1987). 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). This ruling will eliminate the use of 30e-3 for open-end funds and ETFs, therefore Tailored Shareholder Reports will be mailed to shareholders, unless a . Since the 5% threshold for a Qualified Institution is calculated as of the end of a calendar year, a Qualified Institution that acquires directly or indirectly more than 5% of a class of an issuers Section 13(d) Securities during a calendar year, but as of December 31 has reduced its interest below the 5% threshold, will not be required to file an initial Schedule 13G. 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. These funds also will have 18 months to comply with amendments to rule 30e-3 and Form N-CSR. Registration statements and prospectuses become public shortly after filing with the SEC. 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. 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. A reporting person may use the less burdensome Schedule 13G if it meets certain criteria described below. 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. 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. If your firm beneficially owns more than 10% of a class of Section 13(d) Securities and is not aware of these possible obligations, please contact us. 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. 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. This legal update also includes a summary of certain proposed rules under the Exchange Act that would impose additional reporting requirements if adopted, and concludes with a schedule of the filing deadlines under Sections 13 and 16 for 2023. An insider is prohibited from earning short-swing profits on the equity securities (including derivative equity securities) of a public company or any security-based swap involving the public companys equity securities (the covered securities). Rule 10b5-1, originally enacted in 2000, enables insiders of publicly listed companies to sell a predetermined number of shares at a . [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. [25] Any Form 4 must be filed with the SEC before 10:00 p.m. Eastern Time on the second business day following the day on which the triggering transaction was executed or otherwise deemed to occur (except where the SEC has determined by rule that the two-day period is not feasible).[26]. STAY CONNECTED [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. When a Passive Investor exceeds the 5% threshold, When a reporting person acquires or holds Section 13(d) Securities with an activist intent, When a Passive Investors beneficial ownership equals or exceeds 20%, Within 10 days of the triggering transaction, Any material change in information reported on previous Schedule 13D, Any change in information reported on Schedule 13G, 1. 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. 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. 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. 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). [21] Insiders of a registered closed-end fund are subject to substantially similar requirements under Section 30(h) of the Investment Company Act of 1940, as amended. You may file electronically on EDGAR yourself or have an outside vendor, such as a financial printer, do so on your behalf. For any securities firm that becomes a reporting manager after July 1, 2023, the initial Form N-PX will be due for the 12-month period ending June 30 of the calendar year following the due date of its initial Form 13F filing (e.g., if the reporting managers initial Form 13F is due on February 15, 2025, then the initial Form N-PX will be due by August 31, 2026 to disclose any say-on-pay votes during the period from July 1, 2025 to June 30, 2026). Houston, Texas Area. 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. Reports filed with the SEC can be viewed by the public on the SEC EDGAR website. This summary should include disclosure thresholds, tender . 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. 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"). [16] The SEC publishes a complete list of Section 13(f) Securities on its official website each quarter, which a manager may rely on if there is any question with respect to a particular security. 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. 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). Availability of Filing on Schedule 13G by Control Persons. Please contact us if you need these forms. 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 . A reporting manager will have no reporting obligation with respect to a voting decision that is entirely determined by its client or another party. The time frame depends on whether the issuing company is subject to reporting requirements under the Securities Exchange Act of 1934. 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. Instead, we recommend that you make EDGAR filings through an outside vendor. 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). Small companies would be exempt from disclosing details on pensions and peer groups. 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. 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. [26] For example, Rule 16a-3(g) under the Exchange Act provides that, in the case of a transaction made pursuant to (a) a contract, instruction, or written plan that satisfies the affirmative defense conditions of Exchange Act Rule 10b5-1(c), or (b) an employee benefit plan at the volition of a plan participant, where the insider does not select the date of execution of such transaction, the two-day filing requirement for Form 4 with respect to the transaction is calculated from the earlier of (i) the date a broker-dealer or plan administrator notifies the insider of the execution, and (ii) the third business day after the trade date. 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. view summary on large shareholder reporting requirements in major western european equity markets.docx from bus admin bus 814 at university of lagos. To ensure shareholders can still obtain information about other share classes, funds must . [8] If the reporting persons are eligible to file jointly on Schedule 13G under separate categories (e.g., a private fund as a Passive Investor and its control persons as Qualified Institutions), then the reporting persons must comply with the earliest filing deadlines applicable to the group in filing any joint Schedule 13G. If a reporting person that previously filed a Schedule13G no longer satisfies the conditions to be an Exempt Investor, Qualified Institution, or Passive Investor, the person must switch to reporting its beneficial ownership of a class of an issuers Section 13(d) Securities on a Schedule 13D (assuming that the person continues to exceed the 5% threshold). Loans made in the ordinary course of business at market rates by issuers that are financial institutions or in the business of consumer lending are excepted from the prohibition. In June 2022, the SEC adopted rule and form amendments that require electronic filing of all Forms 144 on EDGAR. [9]We have standard forms of powers of attorney and joint filing agreements for Schedule 13G filings. As an associate, I worked directly with and advised over 15 public companies on corporate and securities law compliance, board and corporate 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. 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. [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. 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. If filed by U.S. domestic companies, the statements are available on the EDGAR database accessible at www.sec.gov. When a person or group of persons acquires beneficial ownership of more than . 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 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. Section 16 requirements also apply to all 10% beneficial owners. [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. The proposed annual shareholder report disclosure requirements would have an 18-month compliance period. Form N-PX: Reporting Say-on-pay Proxy Votes by Investment Managers with More than $100Million in Discretionary Accounts. Key Takeaways. Exemption for non-UK issuers 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. summary on large shareholder reporting Schedule 13D must be amended promptly to reflect any material changes in the information provided. Form3 includes the details of any equity securities of the public company that the insider beneficially owns at the time of becoming an insider. 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. Insiders: Officers, Directors, and 10% Beneficial Owners. 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). All of this information must be filed electronically with the SEC through its EDGAR system, and will immediately become publicly available upon filing. 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. During the cooling off period, the reporting person may not vote or direct the voting of the Section 13(d) Securities or acquire additional beneficial ownership of such securities. 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]. There is currently no filing fee for Schedule 13G or Schedule 13D. [22] For the persons included in the definition of Qualified Institution, see Footnote 5 above and accompanying text. November 2022 The US Securities and Exchange Commission (SEC) recently finalized rule and form amendments (Adopted Rules) that require mutual funds and most exchange-traded funds (ETFs) to provide shareholders with streamlined and "visually engaging" shareholder reports. 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. [25] See Rule 16a-6 under the Exchange Act. 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]. Asset-based fees are not considered performance-based fees or allocations and do not trigger Section 16 concerns. The reporting person will thereafter be subject to the Schedule 13D reporting requirements with respect to the Section13(d) Securities until such time as the former Schedule 13G reporting person once again qualifies as a Qualified Institution or Passive Investor with respect to the Section 13(d) Securities or has reduced its beneficial ownership interest below the 5% threshold. 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. 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. Broadridge has announced the launch of a template and end-to-end process solution for fund companies and fund administrators that simplifies the steps involved in creating and providing the SEC's new Tailored Shareholder Reports.. If you have a pension plan or own a mutual fund, chances are that the plan or mutual fund owns stock in public companies. An annual Form N-PX filing will be due by August 31 of each year thereafter to report the say-on-pay votes during the most recent 12-month period ended June 30. [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. Copyright 2023 Paul Hastings, LLP. Under certain circumstances, a reporting manager can request confidential treatment of the information contained in the Form 13F filing. Any control person (as defined below) of a securities firm, by virtue of its ability to direct the voting and/or investment power exercised by the firm, may be considered an indirect beneficial owner of the Section 13(d) Securities. 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. 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). Separate Shareholder Report Requirements . 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. The initial report would be due within 1 business day of exceeding the notional threshold and an amendment would be due within 1 business day following any material change to the information in a previously filed report (including a change equal to 10% or more of a security-based swap position). [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. Rule 14a-8 governs the eligibility, on substantive and procedural grounds, for a shareholder to have a proposal included in the proxy statement of a public company. On Form N-PX, reporting persons must identify each say-on-pay voting matter using the same language and order of priority as disclosed in the public companys form of SEC proxy card, if any, and disclose (a) the number of securities voted (or instructed to be voted) as well as how those shares were voted (i.e., for, against and/or abstain), and (b) the number of securities loaned, directly or indirectly, by the reporting manager that were not recalled to vote. The three quarterly filings are required even if the aggregate fair market value of the Section 13(f) Securities held in a reporting managers discretionary accounts falls below the $100 million threshold during the calendar year. Form 5 must be filed no later than 45 days after the end of the public companys fiscal year. The SEC has indicated that filing within 10 days will be deemed a prompt filing. Schedules 13D and 13G are commonly referred to as a "beneficial ownership reports.". 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.