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On October 10, 2023, the U.S. Securities and Exchange Commission (the “SEC”), with the intention of improving transparency and improving timeliness of the market, has adopted rule amendments that center around beneficial ownership under Sections 13(d) and 13(g) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These rule amendments, among other things, have (i) accelerated the timing of required filings, (ii) required the beneficial ownership reports to be using a structured, machine-readable data language, (iii) clarified the disclosure requirements of Schedule 13D with respect to derivative securities, and (iv) provide guidance on the current legal standard that governs when two or more persons may be considered a group for the purposes of determining whether the beneficial ownership threshold has been met.

Companies will be expected to comply with the revised beneficial ownership schedule filing deadlines for Schedule 13G on September 30, 2024. These amendments become effective 90 days after the publication of the final rule in the Federal Register. Filers must become compliant with the structured data requirements on Schedules 13D and 13G on December 18, 2024.

Schedule 13D and Schedule 13G Revised Timelines

The Schedule 13D and Schedule 13G reporting pursuant to the Exchange Act Sections 13(d) and 13(g), along with Regulation 13D-G, require that those investors with beneficial ownership of over 5% of a covered class of equity securities in a public company file a beneficial ownership report publicly on either a Schedule 13D, or Schedule 13G, whichever is applicable. Generally, those investors who have control intent file a Schedule 13D, while Passive Investors, Qualified Institutional Investors, and Exempt Investors file a Schedule 13G.

Currently, the Schedule 13D filing deadline is 10 days after acquiring greater than 5% beneficial ownership of a company, and the new rules will shorten the requirement to file to only five business days after acquiring the threshold 5% beneficial ownership. For any amendments, those must now be filed within two business days instead of promptly following any such changes.

For specific Schedule 13G filers, such as qualified institutional investors and exempt investors, the current deadline to file a beneficial ownership report is 45 days after the end of a calendar year in which the investor beneficially owns more than 5% of the covered class. Starting in September 2024, the Schedule 13G deadline will be shortened to 45 days after the calendar quarter in which the investor beneficially owns more than 5% of a covered class of securities. In the event that a qualified institutional investor has greater than 10% beneficial ownership, the filing requirement on Schedule 13G now shifts from 10 calendar days after the end of the month where the investor acquired such ownership to 5 business days after the end of a month where an investor acquired such ownership.

Similarly, for other Schedule 13G filers, such as passive investors, the new amendments will shorten the filing deadline from 10 days to five business days after their ownership crosses the 5% beneficial ownership threshold.

For Schedule 13G, the rule to trigger an amendment has been modified: filers only need to file an amendment if a “material change” occurs – such change replacing the current language in Rule 13d-2(b) that previously stated that an amendment must have been made if there was “any change” in the facts previously reported. The timing for the Schedule 13G amendments has also been accelerated. Schedule 13G amendments for all filers were generally due no more than 45 days after the calendar year in which a change occurred, but pursuant to these new rule changes, such amendments will now be due no more than 45 days after the calendar quarter in which a material change occurred. These amendments also accelerate the Schedule 13G amendment obligations for qualified institutional investors and passive investors when their beneficial ownership exceeds 10% or increases or decreases by 5%, as shown below.

Finally, on an administrative timing note, such filing cut-off times, pursuant to the effectiveness of the amendment, are now extended to 10:00pm Eastern time.

Please see chart demonstrating such new deadlines below:

*Compliance with the Schedule 13G filing deadlines will be required beginning on September 30, 2024.

Disclosure of Derivative Security Interests on Schedule 13D

Additionally, within Schedule 13D, there is now an amendment to their disclosure requirements with respect to holding derivative securities. Under Item 6 of Schedule 13D, investors now must disclose their interests in all derivative securities (including those cash-settled derivative securities) that will use the issuer’s equity security as a reference security.

Machine-Readable Data Language Requirement for Schedules 13D and Schedule 13G

To help investors and other market participants review, compile, analyze, and access the disclosures reported on Schedules 13D and 13G, the SEC proposed the use of a structured data language. Apparently, comments “largely supported” such a change, and resultingly, the SEC adopted a rule that each of the Schedule 13D and Schedule 13G must use a machine-readable data language. This new rule will apply to all information disclosed in such reports, with an exception for their exhibits.

Guidance on Groups for Beneficial Ownership

Significantly, the adopting release also provides guidance regarding the application of the existing legal standard under Exchange Action Sections 13(d)(3) and 13(g)(3) for the definition of a legal formation of a group. In this release, it was clarified that the SEC’s position is not that there must be an express agreement for a group to be formed, and that, the concerted actions by two or more people acting together for the purpose of acquiring, holding, or disposing of securities of an issuer are sufficient to constitute a formation of a group, depending on the facts and circumstances.

Please do not hesitate to contact me at mmendel@bevilacquapllc.com or (202) 869-0888 (ext. 119) if you need help evaluating or preparing your current beneficial ownership reports or amending any such reports on Schedules 13D or 13G.