SEC Adopts Amendments to Rules Governing Beneficial Ownership Reporting

Over a year and a half following a corresponding consultation on the issue (EventID 14575), the U.S. Securities and Exchange Commission (SEC) has published its final rule relating to changes to the beneficial ownership reporting requirements of firms and individuals holding 5% or more of U.S. securities. The final rule thereby outlines the feedback the Commission has received to its consultation and presents the final amendments to 17 CFR Part 232 and 17 CFR Part 240 as they will apply 90 days following the final rule’s publication in the Federal Register. Below is a brief summary of the final rule. Deviations from the draft version in response to the feedback received are noted whenever applicable.
#### The final rule provides the following:
(1) Schedule 13D Filings: For „Regular“ investors that do not qualify for an exemption and that aren’t institutional or passive investors the deadline to file an initial Schedule 13D when a person acquires more than 5% beneficial ownership of a covered class of equity securities has been shortened from 10 calendar days to within 5 business days after crossing the threshold. The same timeline applies to events causing ineligibility for Schedule 13G reporting as further discussed below.
The deadline for filing an amendment to Schedule 13D after a material change has occurred has been changed from „promptly“ to within 2 business days after the material change, which represents an add-on of one day as compared to the draft version. „Material“ changes thereby include acquisitions or dispositions of 1% or more of the applicable class of securities. Furthermore, the SEC clarifies in the final rule that contracts, arrangements, understandings, and relationships related to an issuer’s securities, including options, security-based swaps, or any other derivative securities, are required to be revealed in item 6 of Schedule 13D.
(2) Schedule 13G Filings: For qualified institutional investors and exempt investors, the deadline for the initial Schedule 13G filing has been shortened from 45 days after the calendar year-end to 45 days after the calendar quarter-end if beneficial ownership exceeds 5% during that quarter. The filing after quarter-end by institutional and exempt investors represents a deviation from the draft in which the SEC sought filing within 5 business days following month end by such investors. On the other hand, and in line with the draft, passive investors will now be required to file the initial Schedule 13G within 5 business days of acquiring over 5% of a covered class.
As far as the reporting of changes to beneficial ownership is concerned, amendments must be filed within 45 days after each calendar quarter-end if a material change (again 1% change to the previous beneficial ownership level) has occurred since the prior filing which will likely result in more filers needing to submit quarterly amendments.
(3) Schedule 13G Filings where beneficial ownership exceeds 10% or changes exceed 5% of ownership: The SEC will implement different filing deadlines ranging from 5 business days to 10 calendar days, depending upon the type of investor. The following table depicts the exact filing deadlines for Schedule 13D and 13G filers:
Table 1: Beneficial Ownership Filing Deadlines

(4) Filing times: As proposed in the draft, the SEC is extending the EDGAR filing cut-off time from5:30 p.m. Eastern Time to 10 p.m. Eastern Time.
(5) Filing format: Also as proposed in the draft, investors will have to file the reports in a structured, machine-readable data language so as to enable the SEC to examine the data in a more efficient manner.
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To conclude, it shall be noted that the Commission has not adopted the proposed revisions to automatically consider holders of cash-settled derivative securities as beneficial owners of the reference covered class. Furthermore, the SEC did not adopt the proposed changes to clarify which group constellations are deemed to result in „one“ beneficial owner for purposes of having to file Schedules 13D or 13G. Instead, the standard for determining when a group is formed remains based on Sections 13(d)(3) and 13(g)(3) of the Exchange Act, where a group is formed when two or more persons act together for the purpose of acquiring, holding, or disposing of securities.