SEC Updates Beneficial Owner Rules

On October 10, 2023, the Securities and Exchange Commission (SEC) adopted amendments to Regulation 13D–G updating the rules governing beneficial ownership reporting under Sections 13(d) and 13(g) of the Securities Exchange Act of 1934. The amendments are intended to provide more timely and accurate information to investors about the beneficial ownership of public companies’ securities. This is the first material change in beneficial reporting in almost 50 years.

Schedule 13D filings are for investors with control intent while Schedule 13G filings are for passive investors without control intent. 

Key changes in the highlighted in the SEC Fact Sheet about the new rules include:

• Shortened filing deadlines. The deadline for filing an initial Schedule 13D, which is required when an acquirer crosses the 5% ownership threshold, will be shortened from 10 days to five business days. Schedule 13D amendments will also be required to be filed within two business days, rather than 10 days. The filing deadlines for Schedule 13G, which is required when an acquirer crosses the 5% ownership threshold but does not have the intent to change control of the issuer, will also be generally accelerated.
• Clarified disclosure requirements for derivative securities. The amendments clarify the disclosure requirements for derivative securities in Schedule 13D. This includes requiring filers to disclose interests in all derivative securities (including cash settled derivative securities) that use the issuer’s equity security as a reference security.
• Machine-readable data language Schedule 13D and 13G filings will be required to be made using a structured, machine-readable data language. This is intended to make it easier for investors and other market participants to access and analyze beneficial ownership data.

In the SEC’s press release announcing the new rules, Chairman Gary Gensler said, “I am pleased to support this adoption because it updates Schedules 13D and 13G reporting requirements for modern markets, ensures investors receive material information in a timely way, and reduces information asymmetries.

In response to public comments noting the potential for increased cost and administration to meet the new deadlines, the final rules were less restrictive than the proposed amendments. The rule extended the filing “cut-off” times from 5:30 p.m. to 10:00 p.m. Eastern time to align with Section 16 filings.

The SEC’s amendments to the beneficial ownership reporting rules are expected to take effect 90 days after publication in the Federal Register. Compliance with the revised Schedule 13G filing deadlines will be required beginning on September 30, 2024. Compliance with the structured data requirement for Schedules 13D and 13G will be required on December 18, 2024.

For additional information about the new rules, contact us. We are here to help.

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