Disgorgement applies on strict liability basis even if an insider can show that his, her, or its trades were not made using any inside information.  See Rule 16a-6 under the Exchange Act. Under Rule 13d-1, a reporting person also qualifies as a Qualified Institution if it is a bank as defined in Section 3(a)(6) of the Exchange Act, an insurance company as defined in Section 3(a)(19) of the Exchange Act, an investment company registered under the Investment Company Act, or an employee benefit plan, savings association, or church plan. According to the SEC, funds will be required to provide shareholder reports that highlight key information, such as fund expenses, performance, and portfolio holdings.  Under proposed Rule 10B-1, a person would be subject to the reporting requirement if any of its security-based swap positions exceed any of the following thresholds: (a) for credit default swaps (CDS), the lesser of: (i) a long notional amount of $150 million, after taking into account the notional amount of any long positions in the debt security underlying the CDS, (ii) a short notional amount of $150 million, or (iii) a gross notional amount of $300 million; (b) for swap positions based on debt securities that are not CDS, a gross notional amount of $300 million; and (c) for swap positions based on equity securities (an equity swap position), the lesser of: (i) a gross notional amount of $300 million, but if the gross notional amount of the equity swap position exceeds $150 million, the calculation of the gross notional amount would also include the value of the reporting persons position in the equity securities underlying the swaps (based on the most recent closing price of shares), plus the delta-adjusted notional amount of any options, security futures, or any other derivative instruments based on the same class of equity securities, or (ii) an equity swap position that represents more than 5% of a class of equity securities, but if the equity swap position represents more than 2.5% of a class of equity securities, the calculation would also include in the numerator all of the underlying equity securities owned by the reporting person as well as the number of shares attributable to any options, security futures, or any other derivative instruments based on the same class of equity securities. 2001 - 20065 years. Examples of an indirect profit interest in a public companys equity securities that will trigger an insiders Section 16 reporting requirement include: (a) the equity securities held by family members in the same household as the insider, (b) a security-based swap involving the equity securities, (c) the right to acquire equity securities through the exercise or conversion of any other derivative security (whether or not exercisable within 60 days), (d) a general partners proportionate interest in the equity securities held by a partnership, and (e) under certain circumstances, receipt of a performance-based fee or allocation from a client with respect to equity securities held in the clients portfolio.. the direct or indirect parent company of the firm and any other person that indirectly controls the firm (e.g., a general partner, managing member, trustee, or controlling shareholder of the direct or indirect parent company). See definition in Footnote 3 above and accompanying text. The Section 13 (d) reporting requirement is satisfied by filing Schedule 13D with the SEC. The vendor engaged by Paul Hastings charges a service fee for each filing. 6LinkedIn 8 Email Updates, Staff Guidance: Exchange Act Sections 13(d) and 13(g) and Regulation 13D-G Beneficial Ownership Reporting, Staff Guidance: Exchange Act Section 16 and Related Rules and Forms. For example, the sale of a warrant to purchase common stock of a public company would be matched with any purchase of the common stock of that public company occurring within six months for purposes of determining short-swing profits under Section 16(b). The large shareholding reporting system requires a person who has become a Large Shareholder of Share Certificates, etc. In February 2022, the SEC proposed new Rule 13f-2 under the Exchange Act that, if adopted, would require any institutional investment manager with investment discretion over accounts with large short positions to file monthly reports with the SEC on a confidential basis. Reporting Obligations of Control Persons and Clients. For those considered a "reporting company" for at least 90 . Reports filed with the SEC can be viewed by the public on the SEC EDGAR website. This new reporting requirement will be effective on July 1, 2023, and the initial filing of Form N-PX by a current reporting manager will be due by August 31, 2024 and disclose its say-on-pay votes during the period from July 1, 2023 to June 30, 2024. A profit interest may exist as the result of any contract, arrangement, understanding, or relationship that the insider may have with another person or organization.  Under Rule 16a-1(f), the officers of a public company which are subject to Section 16 are (a)the president, (b) the principal financial officer, (c) the principal accounting officer or controller, (d) any vice president of the issuer in charge of a principal business unit, division, or function, (e) any other officer who performs a policy-making function, or (f) any other person who performs a similar policy-making function for the public company. "Material" cybersecurity incident would have to be reported on a Form 8-K within four business days of it being determined to be material. Such a change may occur as a result of, among other transactions: (a) any open market or private purchase or sale, or bona fide gift of any equity or convertible securities; (b) a stock option grant or forfeiture; (c) the conversion of a derivative security; (d) the acquisition or vesting of any restricted stock or restricted stock unit; (e) a merger, exchange offer, or a tender offer; and (f) any purchase, sale or exercise of any option, warrant, or right. Shareholder reports for funds registered on Form N-1A will have to comply with the Form N-1A amendments if they are transmitted to shareholders 18 months or more after the effective date. A disposition that reduces a reporting persons beneficial ownership interest below the 5% threshold, but is less than a 1% reduction, is not necessarily a material change that triggers an amendment to Schedule 13D. Rule 13f-1 under the Exchange Act requires that a report on Form 13F be filed with the SEC by every so-called institutional investment manager that exercises investment discretion over one or more accounts holding equity securities that (a) are admitted for trading on a national securities exchange (the Section 13(f) Securities), and (b) have an aggregate fair market value as of the last trading day of any month during a calendar year equal to at least $100 million (the $100 million threshold). These filings contain background information about the shareholders who file them as well as their investment intentions, providing investors and the company with information about accumulations of securities that may potentially change or influence company management and policies. However, a Qualified Institution that acquires direct or indirect beneficial ownership of more than 10% of a class of an issuers Section 13(d) Securities prior to the end of a calendar year must file an initial Schedule 13G within 10 days after the first month in which the person exceeds the 10% threshold. These include securities and transactions that should have been reported during the year but were not and certain transactions that were not required to be reported on Form 4, such as the acquisition of securities pursuant to the Small Acquisitions Exemption. Please contact us if you would like guidance regarding the application of Section 13 to securities-based swaps or other derivative contracts. When a person or group of persons acquires beneficial ownership of more than . Shares of mutual funds are not Section 13(f) Securities. When two or more reporting managers share investment discretion over the same Section 13(f) Security (for example, as a result of a sub-advisory arrangement or a direct or indirect control relationship), each manager has an independent reporting obligation under Rule 13f-1 with respect to that security. This disclaimer is typically inserted as a footnote to the ownership information on the cover page and in the body of the Schedule. Southland Corp., SEC No-Action Letter (August 10, 1987). We have standard forms of powers of attorney and joint filing agreements for Schedule 13G filings. SEC regulations require that annual reports to stockholders contain certified financial statements and other specific items. Additional risks and uncertainties that could affect our financial results and business are more fully described in our Annual Report on Form 10-K for the period ended December 31, 2022, which is expected to be filed with the SEC on or about February 28, 2023, and our other SEC filings, which are available on the Investor Relations page of our . To ensure shareholders can still obtain information about other share classes, funds must . Registration statements and prospectuses become public shortly after filing with the SEC. If filed by U.S. domestic companies, the statements are available on the EDGAR database accessible at www.sec.gov. Disclose, to the extent known to management . Availability of Joint Filings by Reporting Persons. In a 1987 SEC no-action letter, the SEC staff took the position that where investment decisions by an employee benefit plan trust required the approval of three out of five trustees, none of the trustees was the beneficial owner of the trusts portfolio securities for purposes of Section 13(d) of the Exchange Act. Exemption for non-UK issuers Unless a securities firm has an activist intent with respect to the issuer of the Section 13(d) Securities, the firm generally will be able to report on Schedule 13G either as a Qualified Institution or as a Passive Investor. The time frame depends on whether the issuing company is subject to reporting requirements under the Securities Exchange Act of 1934. Any subsequent changes to an insiders position must be disclosed on Form 4 or Form 5. In the example above, the reporting persons would be required to file a Schedule 13G initially within 10 days of exceeding the 5% threshold and thereafter promptly upon any transaction triggering an amendment (i.e., the filing deadlines applicable to a Passive Investor) and not the later deadlines applicable to a Qualified Institution. See Question 103.07 (September 14, 2009), Regulation 13D-G C&DIs. The Form ID must be signed, notarized, and submitted electronically through the SECs Filer Management website, which can be accessed at https://www.filermanagement.edgarfiling.sec.gov. For example, a direct or indirect control person of a securities firm will not qualify as a Qualified Institution if more than 1% of a class of an issuers Section 13(d) Securities is held by a private fund managed by the firm or other affiliate because a private fund is not among the institutions listed as a Qualified Institution under the Exchange Act. A reporting person that is required to switch to reporting on a Schedule 13D will be subject to a cooling off period from the date of the event giving rise to a Schedule 13D obligation (such as the change to an activist intent or acquiring 20% of a class of an issuers Section 13(d) Securities) until 10calendar days after the filing of Schedule 13D. The reporting obligations of a Large Trader continue until it files an amendment to Form 13H showing that it has ceased operations (a terminating filing) or has not effected transactions in NMS Securities at or above the identifying activity level for a full calendar year (an inactive status filing). The proposed annual shareholder report disclosure requirements would have an 18-month compliance period. beneficially owns, in the aggregate, more than 5% of a class of the voting, equity securities (the Section 13(d) Securities): issued by any closed-end investment company registered under the Investment Company Act of 1940, as amended (the Investment Company Act), or, issued by any insurance company that would have been required to register its securities under Section 12 of the Exchange Act but for the exemption under Section 12(g)(2)(G) thereof (see, manages discretionary accounts that, in the aggregate, hold equity securities trading on a national securities exchange with an aggregate fair market value of $100 million or more (see, securities and standardized options) in an aggregate amount equal to or greater than (a) 2 million shares or shares with a fair market value of more than $20 million during a day, or (b) 20 million shares or shares with a fair market value of more than $200 million during a calendar month (see, Significant Acquisitions and Ownership Positions, any general partner, managing member, trustee, or controlling shareholder of the firm; and. Any short sale that takes place, whether prohibited or not, is subject to matching under Section 16(b) with purchases occurring within less than six months. In addition, a Passive Investor does not have an obligation to notify discretionary account owners on whose behalf the firm holds more than 5% of such Section 13(d) Securities of such account owners potential reporting obligation. This summary should include disclosure thresholds, tender . An insider must file a Form 5 to report any equity securities and transactions that were not previously reported on a Form 3, 4 or 5.  If the reporting persons are eligible to file jointly on Schedule 13G under separate categories (e.g., a private fund as a Passive Investor and its control persons as Qualified Institutions), then the reporting persons must comply with the earliest filing deadlines applicable to the group in filing any joint Schedule 13G. A reporting person is a Passive Investor if it beneficially owns more than 5% but less than 20% of a class of an issuers Section 13(d) Securities and (a) the securities were not acquired or held with an activist intent, and (b) the securities were not acquired in connection with any transaction having an activist intent. Section 16 also establishes mechanisms for a company to recover "short swing" profits, or profits an insider realizes from a purchase and sale of the companys security that occur within a six-month period. Since the 5% threshold for a Qualified Institution is calculated as of the end of a calendar year, a Qualified Institution that acquires directly or indirectly more than 5% of a class of an issuers Section 13(d) Securities during a calendar year, but as of December 31 has reduced its interest below the 5% threshold, will not be required to file an initial Schedule 13G. 13F Holdings Report, on which a reporting manager includes all Section 13(f) Securities over which it or any other reporting manager exercises investment discretion; 13F Notice, on which a reporting manager indicates that all Section 13(f) Securities over which it exercises investment discretion are reported on a Form 13F filed by another reporting manager; and. issued by a Listed Company, etc. STAY CONNECTED Most of the "less retail-focused" information now in prospectuses and shareholder reports would be required to be on mutual funds' websites and also filed with the SEC on Form N-CSR. There is currently no filing fee for Schedule 13G or Schedule 13D. If a client of a securities firm (including a private or registered fund or a separate account client) by itself beneficially owns more than 5% of a class of an issuers Section 13(d) Securities, the client has its own independent Section 13 reporting obligation. Rule 10b5-1, originally enacted in 2000, enables insiders of publicly listed companies to sell a predetermined number of shares at a . The rules under Section 16 require these insiders to report most of their transactions involving the company's equity securities to the SEC within two business days on Forms 3, 4 or 5. to disclose the status of shareholding by submitting a Large Shareholding Report within a prescribed period. A reporting person that is an Exempt Investor is required to file its initial Schedule 13G within 45 days of the end of the calendar year in which the person exceeds the 5% threshold. Form 13F: Reporting Equity Positions of Investment Managers with More than $100Million in Discretionary Accounts. An insider is prohibited from earning short-swing profits on the equity securities (including derivative equity securities) of a public company or any security-based swap involving the public companys equity securities (the covered securities). Under DTR 5.8.12R, issuers are required to disclose to the public major shareholding notifications they receive from shareholders and holders of financial instruments falling within DTR 5.3.1R (1), unless the exemption available in DTR 5.11.4R applies. SEC filings are financial statements, periodic reports, and other formal documents that public companies, broker-dealers, and insiders are required to submit to the U.S. Securities and Exchange Commission (SEC). Under current SEC rules, a person holding securities-based swaps or other derivative contracts may be deemed to beneficially own the underlying securities if the swap or derivative contract provides the holder with voting or investment power over the underlying securities. Officers of the public companys parent(s) or subsidiary(ies) are deemed officers of the public company if they perform such policy-making functions for the public company. Consequently, a person should file a Schedule 13D as soon as possible once it is obligated to switch from a Schedule 13G to reduce the duration of the cooling off period. In each case, the reporting person must file a Schedule 13D within 10 days of the event that caused it to no longer satisfy the necessary conditions (except that, if a former Qualified Institution is able to qualify as a Passive Investor, such person may simply amend its Schedule 13G within 10 days to switch its status).  While the rule of three is frequently relied on by practitioners and has been acknowledged by the SEC staff, it has never been formally approved by the SEC. Form 3 must be filed within 10 days of any individual or entity first becoming an insider or at the time of the registration of the companys equitysecurities on a national securities exchange. Registration statements are subject to examination for compliance with disclosure requirements. The requirement was adopted in August as part of . Schedules 13D and 13G: Reporting Significant Acquisitions and Ownership Positions. In order to receive your filing codes, you must first submit a Form ID to the SEC. On September 25, 2018, the SEC staff issued guidance on compliance with the new requirement to present changes in shareholders' equity in interim financial statements within Form 10-Q filings. Qualified Institutions. Obligations of a Firms Control Persons. SEC rules require your company to file annual reports on Form 10-K and quarterly reports on Form 10-Q with the SEC on an ongoing basis. In calculating the amount of the disgorgement, an insider is required to pay the excess of (a) the highest sales price per share, over (b) the lowest purchase price per share, with respect to the covered securities involved in the matching transactions made within the six-month period. The SEC was created in the 1930s with an aim to curb stock manipulation and fraud that was taking place among companies. While a persons title is generally indicative, the final determination of whether a person is a director or designated officer of a public company for Section 16 purposes depends on the facts and circumstances, primarily based on the persons function and influence at the public company. across all major Western European equity markets. Whether you use an outside vendor or you make your EDGAR filings yourself, you must first obtain several different identification codes from the SEC before the filings can be submitted. An acquisition or disposition of less than 1% may be considered a material change depending on the circumstances. A reporting person that is a Qualified Institution also is required to file its initial Schedule 13G within 45 days of the end of the calendar year in which the person exceeds the 5% threshold. This legal update summarizes (a) the reporting requirements under Section 13 of the Securities Exchange Act of 1934, as amended (the Exchange Act), which are generally applicable to persons that own, or exercise investment discretion over accounts that own, publicly traded or exchange-listed equity securities, and (b) the reporting requirements under Section 16 of the Exchange Act, which are applicable to persons considered to be insiders of public companies. While not set out in Section 16 or the rules thereunder, the concept of deputization has been found by the courts where a securities firm is acting as a director of a public company through its deputy and (a) the director shares confidential information with the firm, (b) the director influences the firms investment decisions with respect to the public company, or (c) the directors actions as a director are influenced by the firm.  A reporting manager must file Form 13F (i) within 45 days after the last day of each calendar year in which it meets the $100 million threshold, and (ii) within 45 days after the last day of each of the first three calendar quarters of the following calendar year. Schedule 13D must be filed within 10 days of crossing the 5% ownership threshold. All rights reserved. Under Regulation NMS, an NMS Security is defined to include any U.S. exchange-listed equity securities and any standardized options, but does not include any exchange-listed debt securities, securities futures, or shares of open-end mutual funds that are not currently reported pursuant to an effective transaction reporting plan under the Exchange Act. Rule 13h-1 under the Exchange Act requires a Form 13H to be filed with the SEC by any individual or entity (each, a Large Trader) that, directly or indirectly, exercises investment discretion over one or more accounts and effects transactions in NMS Securities (as defined below) for those accounts through one or more registered broker-dealers that, in the aggregate, equal or exceed (a) 2 million shares or $20million in fair market value during any calendar day, or (b) 20 million shares or $200 million in fair market value during any calendar month (each, an identifying activity level). SEC's proposed disclosure requirements for public companies.  Importantly, with respect to Section 13(d) Securities, a person is deemed to beneficially own the applicable securities if the person has the right to acquire the securities within 60 days of the reporting date, including (a) through the exercise of any option, warrant or right; (b) through the conversion of a security; (c) through the power to revoke a trust, discretionary account, or similar arrangement; or (d) upon the automatic termination of a trust, discretionary account, or similar arrangement. Schedule 13D must be amended promptly to reflect any material changes in the information provided. The mandatory electronic filing of Forms 144 will commence on April 13, 2023. The direct and indirect beneficial owners of the same Section 13(d) Securities may satisfy their reporting obligations by making a joint Schedule13D or Schedule 13G filing, provided that: Initial filings. 34-93784 (Dec. 15, 2021), available at https://www.sec.gov/rules/proposed/2021/34-93784.pdf. Certain swaps may be Section 13(f) Securities if the transaction grants the reporting manager investment discretion over an underlying asset that is a Section 13(f) Security. Short Position and Short Activity Reporting by Institutional Investment Managers, SEC Release 34-94313 (Feb. 25, 2022), available at https://www.sec.gov/rules/proposed/2022/34-94313.pdf. If a securities firm has multiple affiliates in its organization that qualify as Large Traders, Rule 13h-1 permits the Large Traders to delegate their reporting obligation to a control person that would file a consolidated Form 13H for all of the Large Traders it controls. The initial report would be due within 1 business day of exceeding the notional threshold and an amendment would be due within 1 business day following any material change to the information in a previously filed report (including a change equal to 10% or more of a security-based swap position). Reporting of Shared Investment Discretion. As discussed above, a securities firm is deemed to be the beneficial owner of the Section 13(d) Securities in all accounts over which it exercises voting and/or investment power. Section 16 of the Exchange Act and the rules thereunder impose certain obligations on insiders of any public company. While the persons subject to the reporting requirements under Section 13 and Section 16 (each, a reporting person) generally include both individuals and entities, this legal update focuses on the application of the reporting requirements to investment advisers and broker-dealers (each, a securities firm). 33-11030 and 34-94211 (Feb. 10, 2022), available at https://www.sec.gov/rules/proposed/2022/33-11030.pdf. For the purpose of determining a persons initial insider status, Section 16 incorporates the definition of beneficial ownership in Section 13(d). If there has been any material change to the information in a Schedule 13D previously filed by a reporting person, the person must promptly file an amendment to such Schedule 13D. Section 12 (g) of the Securities Exchange Act of 1934 calls for issuers of securities to register with the SEC and begin public dissemination of financial information within 120 days of the. Previously, companies could file Form 144 in paper format, which many reporting persons elected to use. Form 4 Statement of Changes of Beneficial Ownership of Securities. This legal update also includes a summary of certain proposed rules under the Exchange Act that would impose additional reporting requirements if adopted, and concludes with a schedule of the filing deadlines under Sections 13 and 16 for 2023. Please contact us if you have any questions about including such a disclaimer. These reports require much of the same information about the company as is required in a registration statement for a public offering.  A reporting manager may choose to exclude from its Form 13F any small position in an issuers Section 13(f) Securities that (a) amounts to less than 10,000 shares, and (b) has an aggregate fair market value of less than $200,000. As a rule of thumb, promptly is generally considered to be within 2 to 5 calendar days of the material change, depending on the facts and circumstances. As discussed above, each reporting person has an independent reporting obligation under Section 13 of the Exchange Act. Individualized outreach to large holders should be a priority. In June 2022, the SEC adopted rule and form amendments that require electronic filing of all Forms 144 on EDGAR. A material change includes, without limitation, a reporting persons acquisition or disposition of 1% or more of a class of the issuers Section 13(d) Securities, including as a result of an issuers repurchase of its securities.  Under proposed Rule 13f-2, an institutional investment manager would be subject to the monthly reporting requirement if it had investment discretion over accounts with (a) gross short positions in the equity securities of public companies with a value of at least $10 million or an average of 2.5% of the issuers outstanding equity securities, or (b) gross short positions in any other equity securities with a value of at least $500,000, in each case, at the close of any settlement date during a calendar month. The monthly reports would include detailed information about the institutional investment managers gross short position on an issuer-by-issuer basis, any shares purchased to cover a short position in whole or in part, and any daily activity that increased, decreased or closed a short position during the calendar month (e.g., purchasing or selling options and other derivatives, tendering convertible securities, and engaging in secondary offering transactions). If a reporting person that previously filed a Schedule13G no longer satisfies the conditions to be an Exempt Investor, Qualified Institution, or Passive Investor, the person must switch to reporting its beneficial ownership of a class of an issuers Section 13(d) Securities on a Schedule 13D (assuming that the person continues to exceed the 5% threshold). Please contact us if you need these forms. Any control person (as defined below) of a securities firm, by virtue of its ability to direct the voting and/or investment power exercised by the firm, may be considered an indirect beneficial owner of the Section 13(d) Securities. The Adopted Rules require a separate annual report prepared for each fund and class of a registrant, so that, according to the SEC, shareholders can more easily navigate and read information that applies to them. Even if your company does not have an effective registration statement for a public offering, it could still be required to file a registration statement and become a reporting company under Section 12 of the Exchange Act if: For banks, bank holding companies and savings and loan holding companies, the threshold is 2,000 or more holders of record; the separate registration trigger for 500 or more non-accredited holders of record does not apply. The reporting person will thereafter be subject to the Schedule 13D reporting requirements with respect to the Section13(d) Securities until such time as the former Schedule 13G reporting person once again qualifies as a Qualified Institution or Passive Investor with respect to the Section 13(d) Securities or has reduced its beneficial ownership interest below the 5% threshold. In general, Schedule 13G is available to any reporting person that falls within one of the following three categories: Exempt Investors.