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. The mandatory electronic filing of Forms 144 will commence on April 13, 2023. [18] Under Rule 14Ad-1, a reporting manager exercises voting power when it votes or influences a vote. 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). [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. 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. [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. Form 13F requires an institutional investment manager that meets the $100 million threshold (a reporting manager) to report the amount and value of the Section 13(f) Securities held in its discretionary accounts in the aggregate and on an issuer-by-issuer basis. Public Companies | Investor.gov An insider must report on Form 4 any change that occurs with respect to its beneficial ownership interest in the public companys equity securities. 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. STAY CONNECTED Qualified Institutions. As discussed above, each reporting person has an independent reporting obligation under Section 13 of the Exchange Act. 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). 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. Unlike the definition of beneficial ownership for the purpose of determining whether a person is a 10% beneficial owner discussed above (i.e., voting and dispositive power), for Section 16 reporting purposes, an insiders beneficial ownership depends on whether the person has the opportunity to profit, directly or indirectly, from a purchase, sale or other transaction in the public companys equity securities (a profit interest). The instructions for the reports will encourage the use of graphics and text features to make them more effective. 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). SEC Rules and Amendments . Like millions of Americans, you may also invest directly in public companies. 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. Registration statements and prospectuses become public shortly after filing with the SEC. 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 Regulation NMS, an NMS Security is defined to include any U.S. exchange-listed equity securities and any standardized options, but does not include any exchange-listed debt securities, securities futures, or shares of open-end mutual funds that are not currently reported pursuant to an effective transaction reporting plan under the Exchange Act. 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. The Laws That Govern the Securities Industry | Investor.gov Section 16 requires insiders of a public company to report their direct and indirect ownership of the companys equity securities and any transactions in such securities, and to disgorge any short-swing profits, which are discussed below. Availability of Joint Filings by Reporting Persons. 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. The SEC Adopts Rules on Shareholder Reporting, Fund Advertisements This summary should include disclosure thresholds, tender . Copyright 2023 Paul Hastings, LLP. Shareholders could request paper or electronic copies of the information moved to the website at no cost. [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. 13F Holdings Report, on which a reporting manager includes all Section 13(f) Securities over which it or any other reporting manager exercises investment discretion; 13F Notice, on which a reporting manager indicates that all Section 13(f) Securities over which it exercises investment discretion are reported on a Form 13F filed by another reporting manager; and. Insiders: Officers, Directors, and 10% Beneficial Owners. The new SEC Tailored Shareholder Reports Ruling and what it means for you 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. For those considered a "reporting company" for at least 90 . 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). A Large Trader must file an initial Form 13H promptly after effecting aggregate transactions equal to or greater than one of the identifying activity levels. 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. 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). The reports that an insider will file with the SEC[24] under Section 16 are: Form 3 Initial Statement of Beneficial Ownership of Securities. 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. Proposed Changes to Filing Deadlines. Form 13H: Reporting Identifying Information for Large Traders. 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. 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]. [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. 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. Schedules 13D and 13G | Investor.gov 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 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). 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. [6] While the rule of three is frequently relied on by practitioners and has been acknowledged by the SEC staff, it has never been formally approved by the SEC. 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. SEC's proposed disclosure requirements for public companies. Generally, shares of registered closed-end funds and exchange-traded funds (ETFs) are Section 13(f) Securities as well as certain convertible debt securities, equity options, and warrants. Please contact us if you would like further guidance in determining who may constitute a control person of your firm for these purposes. 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. For example, a direct or indirect control person of a securities firm will not qualify as a Qualified Institution if more than 1% of a class of an issuers Section 13(d) Securities is held by a private fund managed by the firm or other affiliate because a private fund is not among the institutions listed as a Qualified Institution under the Exchange Act. 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 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. Shareholder Disclosure Requirements. As a rule of thumb, promptly is generally considered to be within 2 to 5 calendar days of the material change, depending on the facts and circumstances. 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. 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. Obligations of a Firms Clients. Schedule 13D must be amended promptly to reflect any material changes in the information provided. Investment Management Update - February 2023 To ensure shareholders can still obtain information about other share classes, funds must . It includes any person who directly or indirectly shares voting power or investment power (the power to sell the security). 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). See definition in Footnote 3 above and accompanying text. Acquiring more than 5% of a publicly traded company Availability of Filing on Schedule 13G by Control Persons. Schedules 13D and 13G: Reporting Significant Acquisitions and Ownership Positions. Most of the "less retail-focused" information now in prospectuses and shareholder reports would be required to be on mutual funds' websites and also filed with the SEC on Form N-CSR. 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. 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. Registration statements are subject to examination for compliance with disclosure requirements. If filed by U.S. domestic companies, the statements are available on the EDGAR database accessible at www.sec.gov. 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 . 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. According to the SEC, funds will be required to provide shareholder reports that highlight key information, such as fund expenses, performance, and portfolio holdings. 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. 1 Twitter 2 Facebook 3RSS 4YouTube SEC.gov | Exchange Act Reporting and Registration The vendor engaged by Paul Hastings charges a service fee for each filing. The term "beneficial owner" is defined under SEC rules. The template's report composition component automates a multi-step process, resulting in new efficiencies for complying with the SEC rule, the fintech firm stated. There is currently no filing fee for Schedule 13G or Schedule 13D. 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. 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. Rule 144: Sale of Restricted or Control Securities - NerdWallet However, only a reporting person that was originally eligible to file a Schedule 13G and was later required to file a Schedule 13D may switch back to reporting on Schedule 13G.[10]. Form 5 must be filed no later than 45 days after the end of the public companys fiscal year. 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. Switching from Schedule 13G to Schedule 13D. An acquisition or disposition of less than 1% may be considered a material change depending on the circumstances. 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. Inline eXtensible Business Reporting Language (iXBRL) tagging will be required for the Tailored Shareholder Reports. 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. For example, investment advisers (whether or not they are registered), broker-dealers, banks, trustees, and insurance companies are all institutional investment managers. You may file electronically on EDGAR yourself or have an outside vendor, such as a financial printer, do so on your behalf. 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. Section 16: Reports of Directors, Officers, and Principal Shareholders. 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. 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. SEC Adopts New Rules and Form Amendments Relating to Tailored SEC Adopts Amendments to Modernize Fund Shareholder Reports and Disclosures SEC filings are financial statements, periodic reports, and other formal documents that public companies, broker-dealers, and insiders are required to submit to the U.S. Securities and Exchange Commission (SEC). The requirement was adopted in August as part of . SEC Amends Rule 14a-8 to Modernize Shareholder Proposal Requirements 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. Under Section 13 of the Exchange Act, reports made to the U.S. Securities and Exchange Commission (the SEC) are filed on Schedule 13D, Schedule 13G, Form 13F, and Form 13H, each of which is discussed in more detail below. The Firms Obligations. [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). 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. 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. 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. [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. Asset-based fees are not considered performance-based fees or allocations and do not trigger Section 16 concerns. 33-11030 and 34-94211 (Feb. 10, 2022), available at https://www.sec.gov/rules/proposed/2022/33-11030.pdf. [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. This no-action letter has given rise to what practitioners refer to as the rule of three, which provides that, where voting and investment decisions regarding an entitys portfolio are made by three or more persons and a majority of those persons must agree with respect to voting and investment decisions, then none of those persons individually has voting or dispositive power over the securities in the entitys portfolio and, thus, none of those persons will be deemed to have beneficial ownership over those securities. Schedules 13D and 13G are commonly referred to as a "beneficial ownership reports.". Section 13(k) of the Exchange Act prohibits SEC reporting companies from making personal loans to their directors and officers. However, Section 929R of the Dodd-Frank Wall Street Reform and Consumer Protection Act eliminated that obligation. Amendments to Schedule 13D. 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. Any subsequent changes to an insiders position must be disclosed on Form 4 or Form 5. 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. For purposes of Section 16, an insider is (a)adirector of the public company, (b)a designated officer of the public company,[19] or (c) a person who beneficially owns[20] more than 10% of any class of equity security (other than an exempted security) which is registered under Section 12 of the Exchange Act (a 10% beneficial owner). Summary on Large Shareholder Reporting Requirements in Major Western 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. While a persons title is generally indicative, the final determination of whether a person is a director or designated officer of a public company for Section 16 purposes depends on the facts and circumstances, primarily based on the persons function and influence at the public company. 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.