21 Sep 5 Ownership Rule
Schedule 13D is a form that must be filed with the U.S. Securities and Exchange Commission (SEC) if a person or group acquires more than 5% of any class of shares of a company. Several relevant pieces of information must be disclosed within 10 days of the transaction. Annex 13D is also known as the Beneficial Ownership Report. Section 13(d)(3) of the Stock Exchanges Act provides that “if two or more persons act as a partnership, limited partnership, syndicate or other group for the purpose of acquiring, holding or selling the securities of an issuer, that syndicate or group is deemed to be a `person` within the meaning of [section 13(d)”. Since a group is considered a “person” for the purposes of paragraph 13(d), it has its own beneficial ownership reporting obligations, which would include disclosure of all shares that are beneficially owned by the group members. Rule 13d-5(b)(1) expands the list of objectives to explicitly include voting and includes language that persons “shall agree to act together” and not just “act” as provided for in Article 13(d)(3). The proposed amendments to the rules described below are intended to clarify the circumstances in which two or more persons have formed a group. The proposed amendments also aim to clarify when investors act as a group in terms of beneficial ownership reporting. Sections 13(d)(3) and 13(g)(3) of the Foreign Exchange Act provide that “two or more persons than one.
a group for the purpose of acquiring, holding or selling securities of an issuer, that syndicate or group is deemed to be a “person”. Neither provision defines the term “group” and is currently a question of fact that has not been applied uniformly. Commentators have expressed concern that the current rules do not explicitly address the circumstances in which an investor in a cash-settled derivative may influence or control an issuer by pressuring a counterparty to make certain decisions regarding the voting and disposal of a significant set of shares held by an issuer. The use of cash-settled derivatives in the context of the change of control can also contribute to a change in corporate control. While holders of cash-settled derivatives do not lack the explicit legal power to vote or directly dispose of a security, these holders may have economic power that can be used to achieve desired results and influence the price of the reference asset. QII: 10 days after the end of the month in which the beneficial owner exceeded 10% or there was a 5% increase or decrease in beneficial ownership at the end of the month. Article 13d-2(c). Most of the Filings in Appendix 13D can be viewed in the SEC`s EDGAR database.
The database presents the Form 13D under the heading “SC 13D – General Declaration on the Acquisition of Beneficial Ownership”. Any modified shape is called SC 13D/A. The proposed amendments also address the requirements associated with the submission of amendments to Annex 13D and Annex 13G. For investors on the 13D list, the proposed changes do not alter the event that triggers a change (i.e., it remains a material change in fact). However, the time requirement would change to require submission within one business day of the triggering event. For 13G investors, the proposed amendments modify the change that triggers the event from “any change” to a “material change”. The date of submission of the amendment under a significant change would be accelerated to five business days after the end of the month in which the material change occurs. In addition, for qualified institutional investors and passive investors who exceed a stake of more than ten per cent or a 5% increase or decrease in beneficial ownership, the deadline for submission for qualified institutional investors would be increased to five calendar days after such an event and for passive investors to one business day.  Communication No.
33-11030; 34-94211, Beneficial Ownership Reporting Modernization (February 10, 2022) (the “Offer Release”), available at www.sec.gov/rules/proposed/2022/33-11030.pdf. The reporting requirement of Section 13(d) is met by filing Schedule 13D with the SEC. Schedule 13D must be submitted within 10 days of exceeding the 5% ownership threshold. Annex 13D should be amended without delay to reflect significant changes to the information provided. The term “prompt” is not defined in the 1934 Act, but is generally interpreted to mean less than two working days. The proposed rules also shorten the deadlines for the initial filing and modification of notifications by beneficial owners who have the right to file the shorter Annex 13G. The current timelines for Schedule 13G depend on whether a person presents himself or herself as a qualified institutional investor (pursuant to Rule 13d-1(b)), a passive investor (pursuant to Rule 13d-1(c)) or an exempt investor (pursuant to Rule 13d-1(d)). The table in Appendix 1 at the end of this call summarizes the current Filing Deadlines for Schedule 13G and the amendments proposed by the SEC. Under paragraphs 13(d) and 13(g) of the Stock Exchange Act, an investor who acquires or beneficially owns more than 5% of an issuer`s class of securities must report that ownership in Schedule 13D or Schedule 13G. These annexes have a common basis; However, Annex 13G is the abbreviated alternative to Annex 13D. Under the current rules, investors who apply to Schedule 13D must declare the acquisition of beneficial ownership of more than five per cent of a class of securities of a listed company (including a listed investment company) no later than 10 calendar days after that acquisition (or the loss of eligibility for filing in Schedule 13G).
For investors who are permitted to file an application under Annex 13G2, the notification requirement may vary. Qualified institutional investors and exempt investors must submit an application within forty-five days of the calendar year in which the beneficial ownership of that investor exceeds five per cent; while passive investors must submit more than five percent within ten days of acquiring beneficial ownership. The SEC`s proposed amendments also clarify the circumstances in which two or more individuals have formed a “group” to include, among other things, tipper-tippee relationships in which a person shares non-public information about an upcoming Schedule 13D filing with another person who subsequently purchases the issuer`s securities based on that information. The proposed amendments also explicitly state that “acquisitions by a group member after the date of incorporation of the group […] to the group as soon as the collective beneficial ownership among the members of the group exceeds [5 %] of a covered category. Sections 13(d)(3) and 13(g)(3) of the Exchange Act and Rule 13d-5 of the Exchange Act provide that two persons or organizations or more persons or organizations holding shares of registered securities may be considered a “group” acting as a “person” for the purposes of reporting beneficial ownership. However, as the SEC stated, “determining whether the coordinated efforts” between these “individuals constitute a regulated group as an individual `person`” was largely a “question of fact.” The proposed amendments would also amend the rules applicable to certain cash-settled derivative securities to treat the holders of those derivatives as the beneficial owners of the security concerned. The SEC noted that neither the Foreign Exchange Act nor Regulation 13D-G defines the term “beneficial ownership.” The SEC has adopted Rule 13d-3 to establish standards for determining whether a person is a beneficial owner subject to section 13(d) of the Foreign Exchange Act. Under current Rule 13d-3, only derivatives that would be settled “in kind” or that would otherwise transfer a right to acquire the security within sixty days will trigger beneficial ownership. Derivatives that allow their holder only at economic risk have not been considered sufficient in the past to establish beneficial ownership. QII & Exempt Investors: 45 days after the end of the calendar year when beneficial ownership exceeds 5%.
Article 13d-1(b) and (d). Passive investors: Within 10 days of acquiring beneficial ownership of more than 5%. Article 13d(c). If a person or group of persons acquires a significant interest in a company marked as more than 5% of a voting class of its publicly traded securities, the SEC requires that it disclose the purchase on a Schedule 13D form. In some cases, they may be able to use a simpler form called Annex 13G. Beneficial owners are also required to submit changes during the year. In particular, Applicants to Schedule 13D must file an amendment if the facts set out in the previously filed Schedule 13D change materially, including the acquisition or disposal of securities of a class of one per cent. Such an amendment must be submitted “immediately” after such an amendment (which practitioners generally consider to be two working days). For all Schedule 13G registrants, for each change in the information previously reported in Schedule 13G, an amendment must be submitted within forty-five days of the end of the calendar year in which the change occurred. In addition, qualified institutional and passive investors must also submit a change if they exceed 10% of beneficial ownership or increase or decrease beneficial ownership by 5% (10 calendar days after the end of the month for qualified institutional buyers and immediately for passive investors). Within 10 days of acquiring beneficial ownership of more than 5% or loss of eligibility to file on Schedule 13G.