November 2022 The US Securities and Exchange Commission (SEC) recently finalized rule and form amendments (Adopted Rules) that require mutual funds and most exchange-traded funds (ETFs) to provide shareholders with streamlined and "visually engaging" shareholder reports. [11]This includes a change in the previously reported ownership percentage of a reporting person even if such change results solely from an increase or decrease in the aggregate number of outstanding securities of the issuer. We respectfully submit this letter in opposition to the The SEC has indicated that filing within 10 days will be deemed a prompt filing. STAY CONNECTED 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. An insider must file a Form 5 to report any equity securities and transactions that were not previously reported on a Form 3, 4 or 5. 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. For example, a person that acquired all of its Section 13(d) Securities prior to the issuers registration of such securities (or class of securities) under the Exchange Act, or acquired no more than 2% of the Section 13(d) Securities within a 12-month period, is considered to be an Exempt Investor and would be eligible to file reports on Schedule13G. entry into and termination of a material definitive agreement (a copy of the agreement must also be publicly filed); completion of an acquisition or disposition of assets, notice of a delisting or failure to satisfy a continued listing rule or standard or transfer of listing, material modifications to rights of security holders, changes in your company's certifying accountant, election of directors, appointment of principal officers, and departure of directors and principal officersand, it has more than $10 million in total assets and a class of equity securities, like common stock, that is held of record by either (1) 2,000 or more persons or (2) 500 or more persons who are not accredited investorsor, it lists the securities on a U.S. exchange, is current in its ongoing annual reports required pursuant to, has total assets as of the end of its last fiscal year not in excess of $25 millionand, has engaged the services of a transfer agent registered with the Commission pursuant to Section 17A of the Exchange Actor, is required to file and is current in filing annual, semiannual and special financial reports under Securities Act Rule 257(b), had a public float of less than $75 million as of the end of its last semiannual period, or if it cannot calculate its public float, had less than $50 million in annual revenue as of the end of its last fiscal year and, engaged a transfer agent registered pursuant to Section 17A of the Exchange Act. The mandatory electronic filing of Forms 144 will commence on April 13, 2023. [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. 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). 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). Exemption for non-UK issuers Sections 13(d) and 13(g) of the Exchange Act require any person or group of persons[2] who directly or indirectly acquires or has beneficial ownership[3] of more than 5% of a class of an issuers Section 13(d) Securities (the 5% threshold) to report such beneficial ownership on Schedule 13D or Schedule 13G, as appropriate. We can also provide the names of additional vendors for your consideration. Obligations of a Firms Clients. Loans made in the ordinary course of business at market rates by issuers that are financial institutions or in the business of consumer lending are excepted from the prohibition. There is currently no filing fee for Schedule 13G or Schedule 13D. Under Section 16(b) of Exchange Act, each of these insiders may be liable for any short-swing profits (i.e., profits made from a sale or purchase of the public companys securities made within less than six months of a matching purchase or sale). Summary of the United States reporting requirements relating to substantial shareholdings, takeovers, sensitive industries, short-selling and issuer requests. Reporting of Shared Investment Discretion. Accordingly, once an institutional investment managers obligation to report on Form13F is established, the manager must make four quarterly filings with the SEC. On Form N-PX, reporting persons must identify each say-on-pay voting matter using the same language and order of priority as disclosed in the public companys form of SEC proxy card, if any, and disclose (a) the number of securities voted (or instructed to be voted) as well as how those shares were voted (i.e., for, against and/or abstain), and (b) the number of securities loaned, directly or indirectly, by the reporting manager that were not recalled to vote. 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. Small companies would be exempt from disclosing details on pensions and peer groups. 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. 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, which are applicable to persons considered to be insiders of public companies. Availability of Filing on Schedule 13G by Control Persons. Form3 includes the details of any equity securities of the public company that the insider beneficially owns at the time of becoming an insider. Please contact us if you would like further guidance in determining who may constitute a control person of your firm for these purposes. The information about the company required in an Exchange Act registration statement is similar to what is required in a registration statement for a public offering. 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. Therefore, a firm will be a reporting person if it directly or indirectly acquires or has beneficial ownership of more than 5% of a class of an issuers Section 13(d) Securities for its own account or any discretionary client account(s). 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. Form 4 Statement of Changes of Beneficial Ownership of Securities. Instead, we recommend that you make EDGAR filings through an outside vendor. This disclaimer is typically inserted as a footnote to the ownership information on the cover page and in the body of the Schedule. An acquisition or disposition of less than 1% may be considered a material change depending on the circumstances. The reporting obligations of a Large Trader continue until it files an amendment to Form 13H showing that it has ceased operations (a terminating filing) or has not effected transactions in NMS Securities at or above the identifying activity level for a full calendar year (an inactive status filing). Public companies are a key part of the American economy. 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). Any control person (as defined below) of a securities firm, by virtue of its ability to direct the voting and/or investment power exercised by the firm, may be considered an indirect beneficial owner of the Section 13(d) Securities. Please research the equivalent of the SEC large shareholder reporting requirements (13Ds, etc.) In that case, each control person would file a 13F Notice as described above. The requirement was adopted in August as part of . [20]For the purpose of determining a persons initial insider status, Section 16 incorporates the definition of beneficial ownership in Section 13(d). This. 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. 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. 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. 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. [17] A reporting manager must file Form 13F (i) within 45 days after the last day of each calendar year in which it meets the $100 million threshold, and (ii) within 45 days after the last day of each of the first three calendar quarters of the following calendar year. All rights reserved. Your company must also file current reports on Form 8-K to report certainspecified events, oftenwithin four business days after occurrence of the event. SEC Issues Guidance on Interim Reporting Requirements to Disclose Changes in Shareholders' Equity. 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. Rule 13f-1 under the Exchange Act requires that a report on Form 13F be filed with the SEC by every so-called institutional investment manager[14] that exercises investment discretion[15] over one or more accounts holding equity securities that (a) are admitted for trading on a national securities exchange (the Section 13(f) Securities),[16] and (b) have an aggregate fair market value as of the last trading day of any month during a calendar year equal to at least $100 million (the $100 million threshold). Any subsequent changes to an insiders position must be disclosed on Form 4 or Form 5. If filed by U.S. domestic companies, the statements are available on the EDGAR database accessible at www.sec.gov. "Material" cybersecurity incident would have to be reported on a Form 8-K within four business days of it being determined to be material. A reporting person that is a Qualified Institution also is required to file its initial Schedule 13G within 45 days of the end of the calendar year in which the person exceeds the 5% threshold. The instructions for the reports will encourage the use of graphics and text features to make them more effective. Thereafter, when beneficial ownership of a Passive Investor increases or decreases by 5% or more from the last Schedule 13G filing, When a reporting person has discretion over accounts with $100 million or more of Section 13(f) Securities on the last trading day of any month during the calendar year, After initial Form 13F, filings must continue for at least the next three calendar quarters, Any omitted holdings or errors in information reported on previous Form 13F, When accounts under discretionary management transact in NMS securities in an amount equal to or more than (a) 2 million shares or $20 million during any calendar day, or (b) 20 million shares or $200 million during any calendar month (identifying activity level), Promptly after effecting aggregate transactions at the identifying activity level, Within 45 days after the end of each full calendar year until the filing of an inactive status Form 13H after a full calendar year of effecting transactions below the identifying activity level, Any information on the previous Form 13H becomes inaccurate, Promptly following the end of the calendar quarter in which the information becomes inaccurate, When a reporting person becomes an officer or director of a public company or meets the 10% threshold, Within 10 days of the triggering eventor at the time of the registration of the companys equity securities on a national securities exchange, Any transaction or change in beneficial ownership (e.g., exercise of any option, warrant or right or conversion of a security), Any transaction not reported on Form 4 during the calendar year (not required if all transactions previously reported on Form 4). Separate Shareholder Report Requirements . 34-93784 (Dec. 15, 2021), available at https://www.sec.gov/rules/proposed/2021/34-93784.pdf. Any control persons that make decisions as to how a reporting manager exercises its investment discretion with respect to the Section 13(f) Securities in its accounts may also have reporting obligations under Rule 13f-1 depending on the facts and circumstances. In general, Schedule 13G is available to any reporting person that falls within one of the following three categories: Exempt Investors. Section 16 of the Exchange Act and the rules thereunder impose certain obligations on insiders of any public company. Disclose, to the extent known to management . 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. 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. Like millions of Americans, you may also invest directly in public companies. In order to avoid duplicative reporting of the same Section 13(f) Security, the reporting managers must arrange to file one of the three different types of Form 13F. SEC rules require your company to file annual reports on Form 10-K and quarterly reports on Form 10-Q with the SEC on an ongoing basis. 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. [18] Under Rule 14Ad-1, a reporting manager exercises voting power when it votes or influences a vote. 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. Houston, Texas Area. [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. Please contact us if you require any assistance in seeking confidential treatment of your Form 13F filing. The reports that an insider will file with the SEC[24] under Section 16 are: Form 3 Initial Statement of Beneficial Ownership of Securities. SEC regulations require that annual reports to stockholders contain certified financial statements and other specific items. A reporting person that is a Passive Investor must file its initial Schedule 13G within 10 days of the date on which it exceeds the 5% threshold. This summary should include disclosure thresholds, tender . 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. [22] For the persons included in the definition of Qualified Institution, see Footnote 5 above and accompanying text. 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. Shares of mutual funds are not Section 13(f) Securities. 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. When a Passive Investor exceeds the 5% threshold, When a reporting person acquires or holds Section 13(d) Securities with an activist intent, When a Passive Investors beneficial ownership equals or exceeds 20%, Within 10 days of the triggering transaction, Any material change in information reported on previous Schedule 13D, Any change in information reported on Schedule 13G, 1. 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. 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. 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. Provide updated disclosure on previously disclosed cybersecurity incidents in 10-Ks and 10-Qs. 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. Filings on Forms 3, 4, and 5 must be submitted to the SEC via EDGAR (unless a hardship exemption of the type specified in Regulation S-T applies).[27]. 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 . 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). 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. 1 Twitter 2 Facebook 3RSS 4YouTube Reports filed with the SEC can be viewed by the public on the SEC EDGAR website. Shareholder Disclosure Requirements. across all major Western European equity markets. Rule 10b5-1, originally enacted in 2000, enables insiders of publicly listed companies to sell a predetermined number of shares at a . According to the SEC, funds will be required to provide shareholder reports that highlight key information, such as fund expenses, performance, and portfolio holdings. 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. 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. 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. SEC Rules and Amendments . This could occur in the case of (a) a reporting person that changes from acquiring or holding Section 13(d) Securities for passive investment to acquiring or holding such securities with an activist intent, (b) a reporting person that is a Qualified Institution that deregisters as an investment adviser pursuant to an exemption under the Investment Advisers Act of 1940, as amended, or applicable state law, or (c) a reporting person that is a Passive Investor that acquires 20% or more of a class of an issuers Section 13(d) Securities. Qualified Institutions. 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. Short-swing profits may result whenever an insider (a) sells (or is deemed to sell) any covered securities within six months of purchasing any covered securities of the same class at a lower price per share, or (b) purchases (or is deemed to purchase) any covered securities within six months of selling any covered securities of the same class at a higher price per share. Schedule 13D must be filed within 10 days of crossing the 5% ownership threshold. The Section 13 (d) reporting requirement is satisfied by filing Schedule 13D with the SEC. These filings contain background information about the shareholders who file them as well as their investment intentions, providing investors and the company with information about accumulations of securities that may potentially change or influence company management and policies. A reporting person is a Passive Investor if it beneficially owns more than 5% but less than 20% of a class of an issuers Section 13(d) Securities and (a) the securities were not acquired or held with an activist intent, and (b) the securities were not acquired in connection with any transaction having an activist intent. 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. When a Qualified Institution or Exempt Investor exceeds the 5% threshold (subject to item 2 below), 2. summary on large shareholder reporting These funds also will have 18 months to comply with amendments to rule 30e-3 and Form N-CSR. Any direct and indirect control person of a securities firm may file a Schedule 13G as an Exempt Investor, a Qualified Institution or as a Passive Investor to the same extent as any other reporting person as described above. A securities firm (and, in some cases, its parent company or other control persons) generally will have a Section 13 reporting obligation if the firm directly or indirectly: Section 16(a) of the Exchange Act requires that directors and officers of a company that has a class of securities registered under Section 12 of the Exchange Act (a public company), as well as persons who beneficially own more than 10% of any class of equity security which is registered under Section 12 of the Exchange Act (other than any exempted security), file reports with the SEC on Forms 3, 4, and 5. As an example, a reporting manager exercises voting power when it votes (or directs another party to vote) in accordance with the reporting managers voting policies or uses its independent judgment or expertise to determine how a clients voting policies should apply to a say-on-pay vote, or when it influences the decision of whether to vote a security, such as determining whether to vote on a say-on-pay matter or whether to recall loaned securities in advance of a vote. Change shareholder reporting requirements (Reporting Requirements) for open-end management investment . In lieu of using Form 5, an insider may choose to report a transaction on Form 4; however, the voluntary Form 4 must be timely filed before the end of the second business day following the day on which the transaction that triggered the filing has been executed or otherwise deemed to occur. 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. An excluded position must meet both of these requirements. 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.
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