3. Rule 13d-2(a) and (b)

Rule 13d-2(b), however, does specify a deadline and provides that for all persons who report beneficial ownership on Schedule 13G, an amendment shall be filed “within forty-five days after the end of each calendar year if, as of the end of the calendar year, there are any changes in the information reported in the previous filing on that Schedule [13G].”²⁹⁵

a. Proposed Amendments

In the Proposing Release, the Commission proposed to amend Rule 13d-2(a) to require that all amendments to Schedule 13D be filed within one business day after the date of the material change that triggers the amendment obligation. The Commission proposed this change from the “promptly” standard to establish a specified filing deadline, remove any uncertainty as to the date on which an amendment is due, and help ensure that beneficial owners amend their filings in a more uniform and consistent manner.²⁹⁶ The Commission stated that it did not believe that requiring Schedule 13D amendments to be filed within one business day after the date on which a material change occurs would place those filers at a disadvantage.²⁹⁷ The Commission also stated that because an amendment to a Schedule 13D only requires that the material change be reported and not a complete set of new narrative responses to each of the disclosure form’s individual line items,²⁹⁸ it expected that those amendments should present a lower administrative burden than the initial Schedule 13D filing.²⁹⁹ In addition, the Commission noted that that the proposed amendment would be consistent with its existing view that, under the current “promptly” standard in Rule 13d-2(a), “[a]ny delay beyond the date the filing reasonably can be filed may not be prompt” and that an amendment to a Schedule 13D reasonably could be filed in as little as one day following the material change.³⁰⁰

The Commission also proposed to amend Rule 13d-2(b) to require that a Schedule 13G be amended within five business days of the end of the month in which a material change occurs in the information previously reported. The Commission stated that accelerating the deadline for amendments from the current standard of 45 days after the end of the calendar year would help ensure that the information reported would be timely and useful.³⁰¹ The Commission also noted that this proposed deadline would be consistent with the proposed five-business day deadline from the end of the month applicable to QIIs’ and Exempt Investors’ initial Schedule 13G filing obligations arising under Rule 13d-1(b) and (d).³⁰² In addition, the Commission proposed a “business day” standard for the proposed deadline to partially mitigate the time pressures resulting from the reduction of the current 45-day deadline.³⁰³

The Commission further proposed to amend Rule 13d-2(b) to substitute the term “material” in place of the term “any” to serve as the standard for determining the type of change that will trigger an amendment obligation under Rule 13d-2(b). The Commission noted that, unlike sections 13(d)(2) and 13(g)(2), Rule 13d-2(b) does not include an express materiality qualifier for Schedule 13G amendments and simply requires an amendment for “any change.”³⁰⁴ At the time Rule 13d-2(b) was adopted, however, the Commission stated that there is a materiality standard inherent in the provisions governing Schedule 13G filings.³⁰⁵ This inherent materiality standard is based on the fact that any disclosure provided by a Schedule 13G filer, in light of the infrequency of the reports and comparatively minimal statements required to be made, is effectively material.³⁰⁶ The Commission’s proposed change, therefore, was intended to merely codify this view in the text of Rule 13d-2(b).

b. Comments Received

The Commission received a variety of comments on the proposed amendments to Rule 13d-2(a) and (b). Several commenters supported the proposed amendments.³⁰⁷ Some of those commenters supported revising the Schedule 13D and 13G amendment deadlines for many of the same reasons they supported accelerating the initial Schedule 13D and 13G filing deadlines.³⁰⁸

In addition, several commenters supported the proposed amendments to Rule 13d-2(a) and (b) based on changes in technology and developments in the financial markets.³⁰⁹ One commenter agreed with the concern in the Proposing Release that material information about potential change of control transactions is not being disseminated to the public in a manner that would be considered timely in today’s financial markets.³¹⁰ Other commenters asserted that the proposed amendments would not impose significant costs or burdens on beneficial owners of more than five percent of a covered class³¹¹ and that the proposed amendments would be consistent in balancing the need for adequate disclosures to investors with burdens placed on filers to accurately prepare required disclosures.³¹²

A number of commenters opposed the proposed amendments to Rule 13d-2(a) and (b).³¹³ Several commenters disagreed with the Commission’s technological advancement-based justifications for the proposed acceleration of the beneficial ownership reporting deadlines,³¹⁴ some of whom raised many of the same concerns that they expressed with respect to the proposed acceleration of the initial Schedule 13D and 13G filing deadlines.³¹⁵ One commenter stated that filing a Schedule 13D amendment is not just a question of technology, but often a question of marshalling complex and evolving facts and making difficult disclosure judgments.³¹⁶

Some commenters focused solely on the proposed amendment to Rule 13d-2(a), expressing concern that a one-business day deadline would be unduly burdensome and may not be enough time to prepare a Schedule 13D amendment in all circumstances.³¹⁷ For example, one commenter stated that in its experience, it generally takes two to three business days, and in some cases longer, to compile and file such amendments.³¹⁸ One commenter noted that if the Commission adopts the proposed structured data requirements,³¹⁹ this will add more time to the process of preparing a Schedule 13D amendment and may make the proposed one-business day deadline impractical.³²⁰ Another commenter asserted that the proposed extension of the filing “cut-off” time to 10 p.m.³²¹ would not be sufficient to offset the burden associated with meeting the proposed one-business day deadline for a Schedule 13D amendment.³²²

Further, several commenters expressed concerns regarding the effect of the proposed amendment to Rule 13d-2(a) on the accuracy of Schedule 13D amendments.³²³ For example, one of those commenters asserted that the proposed amendment would make filing accurate amendments nearly impossible.³²⁴ Some commenters expressed concern that by providing Schedule 13D filers with insufficient time to prepare and file amendments, the proposed amendment would increase the likelihood of errors and risk of liability.³²⁵ Another commenter noted that the proposed amendment to Rule 13d-2(a) could decrease transparency by increasing the risk of errors in Schedule 13D amendments.³²⁶

Commenters also expressed concerns about other potential downsides associated with the proposed amendment to Rule 13d-2(a). For example, some commenters expressed concern that the proposed amendment could negatively impact the ability of investors and their advisors to draft meaningful disclosures and engage in thoughtful analysis.³²⁷ Some commenters noted that the proposed amendment to Rule 13d-2(a) may not leave adequate time to prepare the filing in the event of unforeseen circumstances, including the possibility that a necessary approver or signer may not be available.³²⁸ And, one commenter stated that there have been very few, if any, abuses associated with the current “promptly” regime and asserted that it has worked well and effectively.³²⁹

In addition, some commenters questioned the basis for the proposed amendment to Rule 13d-2(a). For example, some commenters noted that a one-business day deadline for Schedule 13D amendments would be more restrictive than the filing deadline for a Form 8-K.³³⁰ Similarly, some commenters noted that Form 8-K and section 16 filings do not have as restrictive filing deadlines as proposed under Rule 13d-2(a).³³¹ One commenter asserted that the “promptly” standard under Rule 13d-2(a) has “generally been understood” to mean within two business days and disagreed with the Proposing Release that Commission precedent supports a one-business day interpretation of that standard.³³²

Further, one commenter stated that the proposed amendment to Rule 13d-2(a) would “unnecessarily sacrifice” the flexibility that the current version of the rule provides.³³³ Other commenters noted that the promptness of a Schedule 13D amendment filing obligation under Rule 13d-2(a) currently is determined by considering the facts and circumstances related to such filing and urged the Commission to continue to consider the variation in circumstances that can lead to an amendment obligation rather than applying the same standard in all circumstances.³³⁴ One commenter asserted that the proposed amendment to Rule 13d-2(a) could lead to a large increase in the number of late Schedule 13D amendment filings.³³⁵

In addition, some commenters expressed concern about the costs of the proposed amendment to Rule 13d-2(a) relative to its benefits. For example, one commenter stated that the proposed amendment to Rule 13d-2(a) does not appropriately balance the need for prompt disclosure of important, market-moving events with the need to avoid imposing an undue, impracticable burden on investors making more routine filings.³³⁶ Another commenter asserted that the burdens and risks of the proposed amendment to Rule 13d-2(a) associated with venture capital funds that make Schedule 13D filings exceed its benefits.³³⁷

Several commenters³³⁸ opposed the proposed amendment to Rule 13d-2(b) for many of the same reasons that they opposed the proposed acceleration of the initial Schedule 13G filing deadlines for QIIs and Exempt Investors.³³⁹ In addition, one commenter broadly asserted that the costs of the proposed amendment to Rule 13d-2(b) “far outweigh any perceived benefits.”³⁴⁰ Another commenter noted that many Schedule 13G filers have filing obligations with respect to multiple issuers and that the proposed amendment may require “hundreds of filings on a monthly basis, as their investments fluctuate perpetually.”³⁴¹ And, other commenters expressed the same concerns about the proposed amendments to Rule 13d-2(a) and (b) that they expressed with respect to the proposed acceleration of the initial Schedule 13D and 13G filing deadlines.³⁴²

Finally, some commenters made recommendations to the Commission regarding the proposed amendments to Rule 13d-2(a) and (b). For example, some commenters that generally supported the proposed amendments recommended that the Commission consider further shortening the filing deadlines.³⁴³ Further, specifically with respect to the proposed amendment to Rule 13d-2(a), one supporting commenter recommended that the Commission include an assets under management-based threshold for the proposed accelerated Schedule 13D filing deadlines.³⁴⁴ Another commenter that generally supported revising the Schedule 13D amendment deadline recommended that the Commission require that Schedule 13D amendments be filed within three business days.³⁴⁵

Conversely, several opposing commenters recommended that the Commission retain the requirement that Schedule 13D amendments be filed promptly, but require that they be filed within no more than a specified number of days after the relevant triggering event (with recommendations varying between two and four business days).³⁴⁶ One opposing commenter suggested that the Commission require that Schedule 13D amendments be filed within five business days.³⁴⁷ Other commenters, which either generally opposed or neither clearly supported nor opposed the proposed amendment to Rule 13d-2(a), recommended that the Commission require that Schedule 13D amendments be filed within two business days.³⁴⁸

In addition to focusing on the Schedule 13D filing deadline, some opposing commenters made other recommendations with respect to the proposed amendment to Rule 13d-2(a). For example, one opposing commenter asserted that a Schedule 13D amendment should not be required for involuntary changes in circumstances caused by the issuer because such

amendments do not relate to the Schedule 13D filer’s action or intent and are already disclosed to the market by the issuer.³⁴⁹ Another opposing commenter recommended that if the Commission believes that a one-business day interpretation of “promptly” is not being properly observed, it should clarify that in situations involving acquisition of corporate control, “promptly” means one business day.³⁵⁰ One commenter, which neither clearly supported nor opposed the proposed amendment to Rule 13d-2(a), recommended that the Commission define the percentage ownership change that is deemed a “material change” as the specified percentage only, and that it omit the subjective “facts and circumstances” part of the standard.³⁵¹

Further, a number of opposing commenters made recommendations regarding the proposed amendment to Rule 13d-2(b). For example, several commenters recommended that the Commission require Schedule 13G amendments to be filed within 45 days after the end of a quarter in which a material change occurred, consistent with the amendment frequency for Form 13F.³⁵² One commenter recommended that QIIs be required to file an amended Schedule 13G within 20 business days after the end of a quarter in which a material change has occurred.³⁵³ One commenter, which neither clearly supported nor opposed the proposed amendment to Rule 13d-2(b), recommended that the Commission require that Schedule 13G amendments be filed within 10 days after the end of the month in which a material change occurs.³⁵⁴

In addition to focusing on the Schedule 13G amendment deadline, some commenters made other recommendations with respect to Rule 13d-2(b). For example, one opposing commenter suggested that the Commission conduct further study and analysis to understand what percentage of Schedule 13G filers are involved in change in control scenarios.³⁵⁵ A number of commenters, which either generally opposed or neither clearly supported nor opposed the proposed amendment to Rule 13d-2(b), also requested that the Commission clarify what constitutes a “material change” for Schedule 13G filers.³⁵⁶ One commenter recommended that the Commission carve out QIIs from the accelerated filing deadline, including because QIIs must certify that they do not have a control intent.³⁵⁷ And, one commenter recommended that the Schedule 13G amendment filing deadline be expressed in business days.³⁵⁸

c. Final Amendments

We are amending Rule 13d-2(a) and (b) to revise the Schedule 13D and 13G amendment filing deadlines under those rules. In response to commenter concerns, however, we are making some changes to the proposed deadlines. Specifically, we are adopting a Schedule 13D amendment filing deadline of two business days³⁵⁹ after the date of a material change and a Schedule 13G amendment filing deadline of 45 days after calendar quarter-end. We also are amending Rule 13d-2(b) to require an amendment to a Schedule 13G be filed only if a “material change” occurs.

As noted above, Rule 13d-2(a) currently requires that an amendment be filed promptly if a material change occurs in the facts set forth in a Schedule 13D. Although the Commission proposed to amend Rule 13d-2(a) to replace the “promptly” standard with a one-business day deadline, we are instead adopting a two-business day deadline in light of the comments received. As noted in the Proposing Release, establishing a specified filing deadline for Schedule 13D amendments should remove any uncertainty as to the date on which an amendment is due and help ensure that beneficial owners amend their filings in a more uniform and consistent manner.³⁶⁰ We note, however, that several commenters disagreed with the Commission’s expectation that the proposed one-business day deadline would impose minimal incremental burdens on Schedule 13D filers.³⁶¹ To the contrary, those commenters expressed concerns about the workability of a one-business day deadline for filing Schedule 13D amendments and described the burdens that beneficial owners would incur trying to meet that deadline.³⁶²

We believe that shifting from the proposed one-business day deadline to a two-business day deadline will address those concerns and provide beneficial owners with adequate time to prepare and file a Schedule 13D amendment. Relevantly, several commenters, including some that generally opposed the proposed amendment, recommended that the Commission adopt a two-business day deadline under Rule 13d-2(a).³⁶³ We agree with those commenters that a two-business day deadline, as compared to a one-business day deadline, would be less onerous for beneficial owners while at the same time ensuring that investors and markets are provided with material information disclosed in Schedule 13D amendments in a sufficiently prompt manner. We also believe that giving beneficial owners additional time, as compared to the proposed deadline, to prepare their Schedule 13D amendments will reduce the risk of erroneous or incomplete filings, addressing a concern that some commenters expressed with respect to the proposed one-business day deadline and helping to preserve the utility of those filings.³⁶⁴

Further, as discussed above, Rule 13d-2(b) currently requires that an amendment be filed within 45 days of calendar year-end if there were any changes to the information previously reported on Schedule 13G during that year. Similar to our amendments to the initial Schedule 13G filing deadlines under Rule 13d-1(b) and (d), we are revising Rule 13d-2(b) to require that a Schedule 13G amendment pursuant to that rule be filed within 45 days after calendar quarter-end if, during that quarter, there were any material changes to the information previously reported (rather than five business days after the end of the month in which a material change occurred, as proposed). Thus, there are two components to our amendment to Rule 13d-2(b): we are both shortening the deadline for the filing of a Schedule 13G amendment and adding an express qualifier to require an amendment only if there is a material change to the information previously reported.

We believe that accelerating the Schedule 13G amendment deadline will help ensure the information reported is timely and useful.³⁶⁵ Numerous supporting commenters also echoed this point.³⁶⁶ We note, however, that several commenters asserted that the proposed month-end-based deadline would be unduly burdensome for Schedule 13G filers and that such burdens are not sufficiently mitigated by any technological advancements to justify adopting the proposed deadline,³⁶⁷ reiterating many of the concerns that were expressed about the proposed amendments to Rule 13d-1(b) and (d).³⁶⁸

To mitigate those concerns, and to conform to the initial Schedule 13G filing deadlines applicable to QIIs and Exempt Investors under Rule 13d-1(b) and (d),³⁶⁹ we are instead adopting a quarter-end-based deadline for Schedule 13G amendments under Rule 13d-2(b). This change from the proposal comports with the recommendations that several commenters that opposed the proposed amendment to Rule 13d-2(b) made to the Commission.³⁷⁰ Consistent with the comments provided on the proposed amendments to Rule 13d-1(b) and (d), we note that those commenters that suggested a quarter-end-based Schedule 13G amendment deadline recommended various different numbers of days after quarter-end for the deadline.³⁷¹ Taking into consideration those various recommendations, as we noted in the context of our amendments to Rule 13d-1(b) and (d),³⁷² we believe that 45 days is the appropriate length of time because it aligns with the filing deadline for Form 13F, and many institutional investment managers who file a Schedule 13G are already reviewing and assessing their holdings on a quarterly basis in order to prepare Form 13F filings. In addition, although most of the other amended Schedule 13D and 13G filing deadlines will be expressed in “business days,” we believe the potential compliance benefits of aligning the Schedule 13G amendment deadline with the Form 13F filing deadline justify using calendar days rather than business days.³⁷³

Even for those Schedule 13G filers that are not Form 13F filers, the 45-day period after calendar quarter-end deadline will be familiar given that they currently must file their Schedule 13G amendment 45 days after calendar year-end.³⁷⁴ As such, we believe that many of those beneficial owners are well-positioned to submit their Schedule 13G filings 45 days after calendar quarter-end, and we expect that this change from the proposal will produce the same benefits and mitigate opposing commenters’ concerns to the same degree as our amendments to Rule 13d-1(b) and (d).³⁷⁵

Finally, we also are revising the text of Rule 13d-2(b), as proposed, to substitute the term “material” in place of the term “any” to serve as the standard for determining the type of change that will trigger an amendment obligation under Rule 13d-2(b). As discussed in the Proposing Release, this change is merely intended to codify the Commission’s previously stated view that there is an inherent materiality standard in the provisions governing Schedule 13G filings.³⁷⁶ We note that several commenters requested that the Commission clarify what constitutes a “material change,” with some of those commenters recommending that the Commission deem a change in beneficial ownership of less than five percent to not be “material” for purposes of Rule 13d-2(b).³⁷⁷ The term “material,” however, already is defined in Rule 12b-2³⁷⁸ and is a familiar, established concept in the Federal securities laws.³⁷⁹ As such, we do not believe it is necessary or advisable to adopt a new materiality standard for purposes of Schedule 13G amendments under Rule 13d-2(b) or to provide an express safe harbor from the application of Rule 13d-2(b) for certain specified de minimis changes in beneficial ownership.

We recognize that Rule 13d-2(a) provides that a “material change” for purposes of that rule includes “any material increase or decrease in the percentage of the class beneficially owned” and provides that “[a]n acquisition or disposition of beneficial ownership of securities in an amount equal to one percent or more of the class of securities shall be deemed ‘material’ for purposes of this section.”³⁸⁰ We also note, however, that these are non-exclusive circumstances in which an amendment obligation has been triggered.³⁸¹ Thus, although this language in Rule 13d-2(a) provides guidance for beneficial owners to determine when a Schedule 13D amendment obligation arises under that rule, it is fundamentally different from the express safe harbor that some commenters requested with respect to the Schedule 13G amendment obligation under Rule 13d-2(b). Further, because both Rule 13d-2(a) and (b) will now share the same materiality standard for determining when an amendment is due, the language in Rule 13d-2(a), including the statement that “[a]n acquisition or disposition of beneficial ownership of securities in an amount equal to one percent or more of the class of securities shall be deemed ‘material,’” is equally instructive for purposes of determining what changes are material under Rule 13d-2(b).