June 27, 2022

Volume XII, Number 178

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June 27, 2022

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SEC Proposes Significant Changes to Beneficial Ownership Reporting Requirements

On February 10, 2022, the SEC proposed significant amendments to the rules governing beneficial ownership reporting. The SEC’s proposed changes seek to modernize reporting on Schedules 13D and 13G by updating filing deadlines, expanding the rule’s application to derivative securities, clarifying aggregation concepts and requiring use of structured, machine-readable data language.

Proposed Schedules 13D and 13G Filing Deadlines

The following table compares the current and proposed filing deadlines for initial and amendment filings, as well as proposed adjustments to the SEC’s “cut-off” time each business day.

 

 

The proposed amendments also provide that only material changes—instead of any change—to the information previously reported on Schedule 13G will require an amendment.

Reporting of Certain Derivative Securities

The proposed amendments would provide that a holder of a cash-settled derivative security (other than a security-based swap) will be deemed the beneficial owner of the reference equity securities for the purposes of Schedule 13D and 13G filings, provided that the derivative is held with the purpose or effect of changing or influencing the control of the issuer of the reference security. In addition, Item 6 of Schedule 13D would require disclosure of interests in all derivative securities (including cash-settled derivative securities) that use the issuer’s security as a reference security.

Clarification of Aggregation Rules

The proposed amendments would outline circumstances under which two or more persons have formed a “group” such that beneficial ownership must be aggregated for the purpose of Schedule 13D or 13G filings, including “tippertippee” relationships where non-public information concerning upcoming Schedule 13D filings precedes the purchase of the issuer’s security by another person. The proposed amendments also would expand on exemptions from deemed “group” formation where (i) investors communicate with one another or the issuer without the purpose or effect of influencing control of the issuer and (ii) investors enter into derivative security agreements with financial institutions.

Structured Data Requirement

The proposed amendments would require that Schedule 13D and 13G filings use structured, machine-readable data language.

Comments on the proposed changes to beneficial ownership reporting are due by April 11, 2022. The SEC’s proposing release is available here.

© 2022 Vedder PriceNational Law Review, Volume XII, Number 104
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About this Author

Adam Goldman Investment Attorney Vedder Price
Associate

Adam S. Goldman is an Associate in the Chicago office of Vedder Price and a member of the firm’s Investment Services practice group.

Prior to joining Vedder Price, Mr. Goldman practiced at a boutique financial services firm, representing broker-dealers, investment advisers, commodity pool operators, private equity funds, and other investment services clients in transactional, litigation, and compliance matters. Mr. Goldman also counseled public companies on required filings under the 1933 and 1934 Acts and other regulatory issues.

While in law school, Mr. Goldman competed in...

312 609 7731
John Marten Investment Attorney Vedder Price Law FIrm
Shareholder

John S. Marten, a Shareholder in the Chicago office of Vedder Price, has substantial experience representing clients in the investment management industry.

As a member of the firm’s Investment Services group, Mr. Marten counsels clients on a wide variety of matters involving the application of the federal securities laws to investment companies, investment advisers and broker-dealers. He has significant experience counseling investment company clients with respect to new products and was recently involved in the creation of two mutual funds...

(312) 609 7753
Nathaniel Segal Investment Attorney Vedder Price Law Firm
Counsel

Nathaniel Segal is counsel at Vedder Price and a member of the Investment Services group. He focuses his practice on investment companies and investment advisers in connection with the organization and operation of investment products and services, including traditional mutual funds, closed-end investment companies (including interval funds and listed closed-end funds), variable insurance products and registered hedge funds, as well as mutual funds utilizing complex hedging and absolute return strategies. Mr. Segal has experience in conducting transactional due diligence...

(312) 609 7747
Jacob Tiedt,Vedder Price law firm investment services attorney
Shareholder

Jacob C. Tiedt is a Shareholder at Vedder Price and a member of the Investment Services group.

Mr. Tiedt’s practice includes the representation of registered mutual funds, closed-end funds and exchange-traded funds; private funds; investment advisers; and other financial institutions on a broad range of regulatory, governance and compliance matters. Mr. Tiedt regularly counsels clients on matters relating to SEC registration, disclosure and compliance; shareholder solicitation; NYSE, Nasdaq and FINRA regulation; corporate governance; and board administration. Mr....

312-609-7697
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