In 2023, the Securities and Exchange Commission (SEC) adopted wide-ranging rule changes applicable to beneficial ownership reporting under Sections 13(d) and 13(g) of the Securities Exchange Act. These rule changes are described in this October 30, 2023 Cooley alert. While certain of the rule changes became effective in February 2024, the most significant changes –those related to deadlines for the filing of initial and amended Schedule 13Gs – go into effect on September 30, 2024.
As a reminder, under Sections 13(d) and 13(g), funds that beneficially own in excess of 5% of an outstanding registered class of public equity securities are required to file beneficial ownership reports on either Schedule 13G or Schedule 13D. Schedule 13G generally requires relatively limited information regarding the funds’ ownership of such securities, whereas Schedule 13D requires additional information regarding the funds’ interests and intentions with respect to the portfolio company. SEC rules also require funds to file amendments to these schedules from time to time.
Initial Schedule 13G deadlines
The rule changes going into effect on September 30, 2024, accelerate the deadlines for initial Schedule 13Gs. Under current rules, the initial Schedule 13G filing is generally due within 45 days following the end of the calendar year of the portfolio company’s initial public offering (IPO) – although different rules often apply to funds that purchase shares in the issuer’s IPO, a follow-on offering or the open market. Under the new rules, these initial Schedule 13G filings will be due within 45 days following the end of the calendar quarter, with the first of such filings due on November 14, 2024.
Schedule 13G amendment deadlines
Similarly, under current rules, most funds that report their beneficial ownership on Schedule 13Gs have historically been required to evaluate their beneficial ownership positions annually, at calendar year-end, and to amend their Schedule 13G filings within 45 days following year-end to report any changes in the information required by the filing. Under the amended rules, funds will now be required to make this evaluation on a quarterly basis following each calendar quarter. However, under the amended rules, funds will only be required to amend their Schedule 13Gs to report material changes in the information required by the filing, with such amendments due within 45 days following the end of the quarter if there has been a material change from the information in the most recent filing.
The determination of whether a change in information is “material” for this purpose will require an assessment of the particular facts. However, the rules specifically provide that no amendment will be required if the only change in the information is a change in the beneficial ownership percentage resulting solely from a change in the outstanding shares of the class of equity securities.
Additional deadline changes
Additionally, the rules going into effect on September 30, 2024, also accelerate other filing deadlines for initial and amended Schedule 13Gs:
- Acceleration of the deadline for initial Schedule 13G for funds that qualify as “passive investors” under SEC rules – from 10 calendar days to five business days following the acquisition of beneficial ownership in excess of 5% of a registered class of equity securities.
- Modification of the deadlines for passive investors to file amended Schedule 13Gs to report beneficial ownership increasing above 10% (and subsequent 5% increases or decreases in beneficial ownership) to two business days following the event, rather than the current, more subjective “prompt” requirement.
- Acceleration of the deadlines for initial Schedule 13Gs and amended Schedule 13Gs for entities that meet the definition of “qualified institutional investor” under SEC rules.
Closing thoughts
In preparation for the effectiveness of the amended rules, funds should begin reviewing their public company portfolios to evaluate whether there have been any changes in the information previously reported in their Schedule 13G filings and assess the materiality of such changes. Additionally, funds should prepare for the related increase in the compliance burden associated with the November 14, 2024 deadline.
The SEC’s beneficial ownership reporting requirements can be quite complex – including determination of whether a fund is required to file a Schedule 13D or is permitted to file a Schedule 13G, and whether and when such filings are required to be amended. Funds are encouraged to confer with counsel on their particular situations to ensure that they remain in compliance with these requirements.
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