New Rules Significantly Improve Timely Ownership Reporting by Activist Investors
The SEC today adopted amendments to modernize Sections 13(d) and 13(g) of the Securities Exchange Act of 1934. Originally proposed in February 2022, the approved amendments shorten the filing deadlines for initial and amended beneficial ownership reports filed on Schedules 13D and 13G. NIRI has worked to achieve improved shareholder transparency for more than a decade.
Under the new final rules, activist investors will be required to disclose a 5% position on Schedule 13D within five business days of reaching that threshold and file any amendments within two business days. Under the previous 55-year-old rules, hedge funds and other activists were permitted a 10-day period before having to make a public filing with the SEC disclosing a 5% equity position in the shares of a public company.
Today’s rules also clarify the Schedule 13D disclosure requirements related to derivative securities that large investors have used to obtain effective control over large blocks of company stock without any public disclosure. The new rules provide a framework for determining when an investor’s use of certain cash-settled derivative securities result in the person being treated as a beneficial owner.
The final rules also address the filing deadlines for Schedule 13G beneficial ownership reports, generally accelerating the 13G filing deadline (depending on the type of filer) to 45 days after a calendar quarter ends from the current requirement of 45 days after the end of a calendar year.
The rule also provides guidance regarding when two or more persons may be considered a group for the purposes of determining whether the beneficial ownership threshold has been met.
Today’s rulemaking is an important step forward in bringing more transparency to a marketplace that has historically allowed certain investors to amass large positions in company stock without adequate public disclosure.
The new rules will become effective 90 days after publication in the Federal Register.
Resources
- Press Release: https://www.sec.gov/news/press-release/2023-219
- Fact Sheet: https://www.sec.gov/files/33-11253-fact-sheet.pdf
- Final Rule: https://www.sec.gov/files/rules/final/2023/33-11253.pdf
About NIRI: The Association for Investor Relations
Founded in 1969, NIRI is the professional association of corporate officers and investor relations consultants responsible for communication among corporate management, shareholders, securities analysts, and other financial community constituents. NIRI is the largest professional investor relations association in the world with members representing over 1,500 publicly held companies and $12 trillion in stock market capitalization.