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. 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. 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. 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. These funds also will have 18 months to comply with amendments to rule 30e-3 and Form N-CSR. The following persons are likely to be considered control persons of a firm: If a securities firm (or parent company) is directly or indirectly owned by two partners, members, trustees, or shareholders, generally each such partner, member, trustee, or shareholder is deemed to be a control person. Section 16 of the Exchange Act and the rules thereunder impose certain obligations on insiders of any public company. 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. See definition in Footnote 3 above and accompanying text. Section 16: Reports of Directors, Officers, and Principal Shareholders. [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. [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. 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. Once a securities firm ceases to be a reporting manager, it will be required to file a final Form N-PX for the period from July 1 to September 30 of the calendar year in which its final filing on Form 13F is due. Obligations of a Firms Control Persons. summary on large shareholder reporting 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. 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). [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. For those considered a "reporting company" for at least 90 . In addition, the rules adopted under Section 16(b) provide for the matching of purchases and sales of derivative securities with purchases and sales of the securities underlying those derivative securities for the purpose of determining the profits that may be disgorged under Section 16(b). 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). 6LinkedIn 8 Email Updates, Staff Guidance: Exchange Act Sections 13(d) and 13(g) and Regulation 13D-G Beneficial Ownership Reporting, Staff Guidance: Exchange Act Section 16 and Related Rules and Forms. Schedule 13D must be amended promptly to reflect any material changes in the information provided. 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. beneficially owns, in the aggregate, more than 5% of a class of the voting, equity securities (the Section 13(d) Securities): issued by any closed-end investment company registered under the Investment Company Act of 1940, as amended (the Investment Company Act), or, issued by any insurance company that would have been required to register its securities under Section 12 of the Exchange Act but for the exemption under Section 12(g)(2)(G) thereof (see, manages discretionary accounts that, in the aggregate, hold equity securities trading on a national securities exchange with an aggregate fair market value of $100 million or more (see, securities and standardized options) in an aggregate amount equal to or greater than (a) 2 million shares or shares with a fair market value of more than $20 million during a day, or (b) 20 million shares or shares with a fair market value of more than $200 million during a calendar month (see, Significant Acquisitions and Ownership Positions, any general partner, managing member, trustee, or controlling shareholder of the firm; and. Profit Interest Is Reported Under Section 16, Insiders of a public company are required to report their beneficial ownership of the companys equity securities and any transactions involving the equity securities. 1 Twitter 2 Facebook 3RSS 4YouTube Form N-PX also allows reporting managers to request confidential treatment of proxy voting information consistent with the standard for confidential treatment requests under Section 13(f) of 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. If you have a pension plan or own a mutual fund, chances are that the plan or mutual fund owns stock in public companies. 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. [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. These three types of Form 13F are: Any reporting manager that files a 13F Notice or 13F Combination Report must identify each other reporting manager that is responsible for a Form 13F filing that reports any Section 13(f) Securities over which such reporting manager shares investment discretion. [1] Importantly, with respect to Section 13(d) Securities, a person is deemed to beneficially own the applicable securities if the person has the right to acquire the securities within 60 days of the reporting date, including (a) through the exercise of any option, warrant or right; (b) through the conversion of a security; (c) through the power to revoke a trust, discretionary account, or similar arrangement; or (d) upon the automatic termination of a trust, discretionary account, or similar arrangement. Your company must also file current reports on Form 8-K to report certainspecified events, oftenwithin four business days after occurrence of the event. 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. In a 1987 SEC no-action letter, the SEC staff took the position that where investment decisions by an employee benefit plan trust required the approval of three out of five trustees, none of the trustees was the beneficial owner of the trusts portfolio securities for purposes of Section 13(d) of the Exchange Act. The vendor engaged by Paul Hastings charges a service fee for each filing. 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. Section 16 requirements also apply to all 10% beneficial owners. [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. Form 13H requires that a Large Trader, reporting for itself and for any affiliate that exercises investment discretion over NMS securities, list the broker-dealers at which the Large Trader and its affiliates have accounts and designate each broker-dealer as a prime broker, an executing broker, and/or a clearing broker. Form 13H filings with the SEC are confidential and exempt from disclosure under the United States Freedom of Information Act. A reporting person is an Exempt Investor if the reporting person beneficially owns more than 5% of a class of an issuers Section 13(d) Securities at the end of a calendar year, but its acquisition of the securities is exempt under Section13(d)(6) of the Exchange Act. To ensure shareholders can still obtain information about other share classes, funds must . Produce a simple summary of these requirements so that our group can ensure we comply with these statutory requirements on our investments. According to the SEC, funds will be required to provide shareholder reports that highlight key information, such as fund expenses, performance, and portfolio holdings. to disclose the status of shareholding by submitting a Large Shareholding Report within a prescribed period. As discussed above, each reporting person has an independent reporting obligation under Section 13 of the Exchange Act. Both Schedule 13D and Schedule 13G require background information about the reporting persons and the Section 13(d) Securities listed on the schedule, including the name, address, and citizenship or place of organization of each reporting person, the amount of the securities beneficially owned and aggregate beneficial ownership percentage, and whether voting and investment power is held solely by the reporting persons or shared with others. This disclaimer is typically inserted as a footnote to the ownership information on the cover page and in the body of the Schedule. 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. 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). Amendments to Form 13H must be filed (a) annually within 45 days after the end of each full calendar year so long as a securities firm continues to qualify as a Large Trader, and (b) promptly following the end of a calendar quarter if any of the information on the most recent Form 13H becomes inaccurate. In calculating the number of holders of record for purposes of determining whether Exchange Act registration is required, your company may exclude persons who acquired their securities in an exempt offering: Public float is calculated by multiplying the number of the companys common shares held by non-affiliates by the market price and, in the case of an IPO, adding to that number the product obtained by multiplying the common shares covered by the registration statement by their estimated public offering price. To avoid a short-swing profits violation, before entering into a transaction involving any covered securities (including any exercise of a derivative security), an insider should look back six months to determine if any prior sale or purchase can be matched with the proposed transaction and would result in the realization of any profit. [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). [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. Please contact us if you require any assistance in seeking confidential treatment of your Form 13F filing. 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. SEC Issues Guidance on Interim Reporting Requirements to Disclose Changes in Shareholders' Equity. 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. Accordingly, once an institutional investment managers obligation to report on Form13F is established, the manager must make four quarterly filings with the SEC. All rights reserved. While an insider is not restricted under Section 16 from purchasing and selling, or selling and purchasing, covered securities within a six-month period, realizing short-swing profits from these transactions is a violation of Section 16. Individualized outreach to large holders should be a priority. In order for a control person to file a Schedule 13G as a Qualified Institution, however, no more than 1% of a class of an issuers Section 13(d) Securities may be held (a) directly by the control person or (b) directly or indirectly by any of its subsidiaries or affiliates that are not Qualified Institutions. 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). 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. Additional risks and uncertainties that could affect our financial results and business are more fully described in our Annual Report on Form 10-K for the period ended December 31, 2022, which is expected to be filed with the SEC on or about February 28, 2023, and our other SEC filings, which are available on the Investor Relations page of our . 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. 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). [9]We have standard forms of powers of attorney and joint filing agreements for Schedule 13G filings. 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. [20]For the purpose of determining a persons initial insider status, Section 16 incorporates the definition of beneficial ownership in Section 13(d). [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. Key Takeaways. The term Qualified Institution also includes a non-U.S. institution that is the functional equivalent of any of the foregoing entities and the control persons and parent holding companies of an entity that qualifies as a Qualified Institution. Provide updated disclosure on previously disclosed cybersecurity incidents in 10-Ks and 10-Qs. 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. 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 . Form N-PX: Reporting Say-on-pay Proxy Votes by Investment Managers with More than $100Million in Discretionary Accounts. 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). Form 5 Annual Statement of Beneficial Ownership of Securities. [27]Rule 16a-3(k) also requires each public company that maintains a corporate website to post on its website all Forms 3, 4, and 5 filed with respect to its equity securities by the end of the business day after filing with the SEC. SEC amendments to Rule 10b5-1 take effect today. 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). Copyright 2023 Paul Hastings, LLP. 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. [10]See Question 103.07 (September 14, 2009), Regulation 13D-G C&DIs. In determining whether a securities firm has crossed the 5% threshold with respect to a class of an issuers Section 13(d) Securities,[4] it must include the positions held in any proprietary accounts and the positions held in all discretionary client accounts that it manages (including any private or registered funds, accounts managed by or for principals and employees, and accounts managed for no compensation), and positions held in any accounts managed by the firms control persons (which may include certain officers and directors) for themselves, their spouses, and dependent children (including IRA and most trust accounts). [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. Shareholders could request paper or electronic copies of the information moved to the website at no cost. An agreement to act together does not need to be in writing and may be inferred by the SEC or a court from the concerted actions or common objective of the group members. 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. Registration statements are subject to examination for compliance with disclosure requirements. Instead, we recommend that you make EDGAR filings through an outside vendor. 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. 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. 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. 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. A material change includes, without limitation, a reporting persons acquisition or disposition of 1% or more of a class of the issuers Section 13(d) Securities, including as a result of an issuers repurchase of its securities. 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. Switching from Schedule 13G to Schedule 13D. Proposed Reporting of Short Sales and Securities-based Swaps. 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. [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. 1 Twitter 2 Facebook 3RSS 4YouTube The certified financial statement must include a two-year audited. 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. This. [31] Under proposed Rule 10B-1, a person would be subject to the reporting requirement if any of its security-based swap positions exceed any of the following thresholds: (a) for credit default swaps (CDS), the lesser of: (i) a long notional amount of $150 million, after taking into account the notional amount of any long positions in the debt security underlying the CDS, (ii) a short notional amount of $150 million, or (iii) a gross notional amount of $300 million; (b) for swap positions based on debt securities that are not CDS, a gross notional amount of $300 million; and (c) for swap positions based on equity securities (an equity swap position), the lesser of: (i) a gross notional amount of $300 million, but if the gross notional amount of the equity swap position exceeds $150 million, the calculation of the gross notional amount would also include the value of the reporting persons position in the equity securities underlying the swaps (based on the most recent closing price of shares), plus the delta-adjusted notional amount of any options, security futures, or any other derivative instruments based on the same class of equity securities, or (ii) an equity swap position that represents more than 5% of a class of equity securities, but if the equity swap position represents more than 2.5% of a class of equity securities, the calculation would also include in the numerator all of the underlying equity securities owned by the reporting person as well as the number of shares attributable to any options, security futures, or any other derivative instruments based on the same class of equity securities.