INTRODUCTION
We are amending certain rules within 17 CFR 240.13d-1 through 240.13f-1 (“Regulation 13D-G”)3 and Regulation S-T to modernize the beneficial ownership reporting requirements and improve their operation and efficacy. Some4 of these amendments are based on the amendments that the Commission proposed in 2022 (“Proposed Amendments”).5 Specifically, we are adopting revisions to the deadlines for Schedule 13D and Schedule 13G filings. We also are adopting certain related technical changes to Regulation S-T that the Commission proposed in connection with these amendments. Further, we are requiring that Schedule 13D and 13G filings be submitted using a structured, machine-readable data language.
In response to the comments we received on the Proposed Amendments,6 however, we are making certain adjustments from the proposal. For example, we are not adopting proposed 17 CFR 240.13d-3(e) (“Rule 13d-3(e)”) to deem certain holders of cash-settled derivative securities7 as beneficial owners of the reference covered class.8 Instead, we discuss how, under current Rule 13d-3, persons using these types of derivative securities may already be subject to regulation as beneficial owners. We also are not adopting many of the proposed amendments to Rules 13d-59 and 13d-6. Instead, we are issuing guidance on the application of the current legal standard found in sections 13(d)(3) and 13(g)(3) to certain common types of shareholder engagement activities.
With respect to the Schedule 13D and Schedule 13G filing deadlines, we are amending the following rules:
- 17 CFR 240.13d-1(a) (“Rule 13d-1(a)”): Shortening the filing deadline for the initial Schedule 13D to within five business days10 after the date on which a person acquires beneficial ownership of more than five percent of a covered class;11
- 17 CFR 240.13d-1(e), (f), and (g) (“Rule 13d-1(e), (f), and (g)”): Shortening the filing deadline for the initial Schedule 13D required to be filed by certain persons who become ineligible to report on Schedule 13G in lieu of Schedule 13D to five business days after the event that causes the ineligibility;
- 17 CFR 240.13d-1(b) and (d) (“Rule 13d-1(b) and (d)”): Shortening the deadline for the initial Schedule 13G filing for Qualified Institutional Investors (“QIIs”)12 and Exempt Investors13 to within 45 days14 after the end of the calendar quarter in which beneficial ownership first exceeds five percent of a covered class;15
- 17 CFR 240.13d-1(c) (“Rule 13d-1(c)”): Shortening the deadline for Passive Investors16 to file an initial Schedule 13G in lieu of Schedule 13D to within five business days after the date on which they acquire beneficial ownership of more than five percent of a covered class;
- 17 CFR 240.13d-2(a) (“Rule 13d-2(a)”): Revising the deadline for filing amendments to Schedule 13D to two business days after the date on which a material change occurs;
- 17 CFR 240.13d-2(b) (“Rule 13d-2(b)”): Shortening the deadline for Schedule 13G amendments filed pursuant to that provision to 45 days after the end of the calendar quarter in which a reportable change occurs;
- 17 CFR 240.13d-2(c) (“Rule 13d-2(c)”): Shortening the filing deadline for Schedule 13G amendments filed pursuant to that provision to five business days after the end of the month in which beneficial ownership first exceeds 10 percent of a covered class, and thereafter upon any deviation by more than five percent of the covered class, with these requirements applying if the thresholds were crossed at any time during a month; and
- 17 CFR 13d-2(d) (“Rule 13d-2(d)”): Revising the deadline for Schedule 13G amendments filed pursuant to that provision to two business days after the date on which beneficial ownership exceeds 10 percent of a covered class, and thereafter upon any deviation by more than five percent of the covered class.
In addition, we are amending Rule 13d-2(b) to require that an amendment to a Schedule 13G be filed only if a “material change” occurs (replacing the current rule text that requires an amendment upon the occurrence of “any change” in the facts previously reported). Further, we are amending 17 CFR 232.13(a) (“Rule 13(a) of Regulation S-T”) to permit Schedules 13D and 13G, and any amendments thereto, that are submitted by direct transmission commencing on or before 10 p.m. Eastern Time17 on a given business day to be deemed to have been filed on the same business day.18 This amendment should provide additional time for beneficial owners to prepare and submit their Schedule 13D or 13G filings.19 The following table summarizes the changes we are adopting with respect to Schedule 13D and 13G filings, as described more fully in section II.A:
Issue | Current Schedule 13D | New Schedule 13D |
|---|---|---|
| Initial Filing Deadline | Within 10 days after acquiring beneficial ownership of more than 5% or losing eligibility to file on Schedule 13G. Rule 13d-1(a), (e), (f), and (g). | Within five business days after acquiring beneficial ownership of more than 5% or losing eligibility to file on Schedule 13G. Rule 13d-1(a), (e), (f), and (g). |
| Amendment Triggering Event | Material change in the facts set forth in the previous Schedule 13D. Rule 13d-2(a). | Same as current Schedule 13D: Material change in the facts set forth in the previous Schedule 13D. Rule 13d-2(a). |
| Amendment Filing Deadline | Promptly after the triggering event. Rule 13d-2(a). | Within two business days after the triggering event. Rule 13d-2(a). |
| Filing “Cut- Off” Time | 5:30 p.m. Eastern Time. Rule 13(a)(2) of Regulation S-T. | 10 p.m. Eastern Time. Rule 13(a)(4) of Regulation S-T. |
As noted above, we are not adopting proposed Rule 13d-3(e). Instead, we discuss the circumstances in which a holder of a cash-settled derivative security, excluding SBS, may be deemed the beneficial owner of the reference covered class under Rule 13d-3. We also are not adopting the proposed exemption in 17 CFR 240.13d-6(d) (“Rule 13d-6(d)”), which the Commission proposed to enable certain persons to transact in derivative securities in the ordinary course of business without concern that they had formed a group under section 13(d)(3) or 13(g)(3), in part because we are not adopting proposed Rule 13d-3(e).
To further clarify the disclosure requirements with respect to derivative securities, particularly cash-settled derivative securities, held by a person required to report on Schedule 13D, the Commission is adopting an amendment to Schedule 13D. Specifically, we are amending Item 6 of Schedule 13D, codified at Rule 13d-101, to remove any implication that a person is not required to disclose interests in all derivative securities that use a covered class as a reference security. This amendment is intended to eliminate any ambiguity regarding the scope of the disclosure obligations of Item 6 of Schedule 13D as to derivative securities, including with respect to any derivative not originating with, or offered or sold by, the issuer, such as a cash-settled option or SBS.
As noted above, we are not adopting most of the proposed substantive amendments to Rule 13d-5.20 We also are not adopting proposed 17 CFR 240.13d-6(c) (“Rule 13d-6(c)”), which would have specified certain circumstances under which two or more persons may coordinate and consult with one another and engage with an issuer without being subject to regulation as a group. Instead, we are issuing guidance regarding the appropriate legal standard for determining whether a group is formed. This guidance is intended to provide clarity on the circumstances under which a person may be deemed to have formed a group with another person or persons within the meaning of sections 13(d)(3) and 13(g)(3).
We are adopting the proposed requirement that Schedules 13D and 13G be filed using a structured, machine-readable data language. We are, therefore, now requiring that all disclosures, including quantitative disclosures, textual narratives, and identification checkboxes, on Schedules 13D and 13G be filed using an XML-based language.21 This requirement is intended to make it easier for investors and other market participants to access, compile, and analyze information that is disclosed on Schedules 13D and 13G.
Finally, we also are adopting certain technical revisions, some of which were not included among the Proposed Amendments.22