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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. Under certain circumstances, a reporting manager can request confidential treatment of the information contained in the Form 13F filing. The SEC also proposed new Rule 10B-1 under the Exchange Act[30] in December 2021 in order to require any person with large notional positions[31] in credit default swaps, other swaps based on debt securities, or swaps based on equity securities to file reports with the SEC that disclose each security-based swap position and any related position in the reference debt or equity security, loan or narrow-based security index underlying the security-based swap. The time frame depends on whether the issuing company is subject to reporting requirements under the Securities Exchange Act of 1934. Section 13(k) of the Exchange Act prohibits SEC reporting companies from making personal loans to their directors and officers. Therefore, a firm will be a reporting person if it directly or indirectly acquires or has beneficial ownership of more than 5% of a class of an issuers Section 13(d) Securities for its own account or any discretionary client account(s). An acquisition or disposition of less than 1% may be considered a material change depending on the circumstances. For example, if a private fund that beneficially owns more than 5% of a class of an issuers Section 13(d) Securities is managed by a securities firm that is a limited partnership, the general partner of which is an LLC that in turn is owned in roughly equal proportions by two managing members, then each of the private fund, the securities firm, the firms general partner, and the two managing members of the general partner likely will have an independent Section 13 reporting obligation. Broadridge has announced the launch of a template and end-to-end process solution for fund companies and fund administrators that simplifies the steps involved in creating and providing the SEC's new Tailored Shareholder Reports.. The reports that an insider will file with the SEC[24] under Section 16 are: Form 3 Initial Statement of Beneficial Ownership of Securities. 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. A fund will be required to provide a table showing the expenses associated with a hypothetical $10,000 investment in the fund during the preceding reporting period in two formats: (1) as a percent of a shareholder's investment in the fund ( i.e., expense ratio), and (2) as a dollar amount. 1 Twitter 2 Facebook 3RSS 4YouTube Limited exemptions exist for transactions that do not need to be reported on Form 4, including the acquisition of a portfolio companys equity securities not exceeding $10,000, subject to specified conditions (the Small Acquisitions Exemption). The information is, however, subject to disclosure to Congress and other federal agencies and when ordered by a court. [6] 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 13F requires an institutional investment manager that meets the $100 million threshold (a reporting manager) to report the amount and value of the Section 13(f) Securities held in its discretionary accounts in the aggregate and on an issuer-by-issuer basis. Rule 10b5-1, originally enacted in 2000, enables insiders of publicly listed companies to sell a predetermined number of shares at a . STAY CONNECTED [15]For this purpose, an institutional investment manager has investment discretion over an account if it directly or indirectly (a) has the power to determine which securities are bought or sold for the account, or (b) makes decisions about which securities are bought or sold for the account, even though someone else is responsible for the investment decisions. You are required to retain a manually signed hard copy of all EDGAR filings (and related documents like powers of attorney) in your records available for SEC inspection for a period of five years after the date of filing. [17] 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. The term Qualified Institution also includes a non-U.S. institution that is the functional equivalent of any of the foregoing entities and the control persons and parent holding companies of an entity that qualifies as a Qualified Institution. Proposed Changes to Filing Deadlines. To avoid a short-swing profits violation, before entering into a transaction involving any covered securities (including any exercise of a derivative security), an insider should look back six months to determine if any prior sale or purchase can be matched with the proposed transaction and would result in the realization of any profit. Section 16: Reports of Directors, Officers, and Principal Shareholders. A reporting person who is not eligible to use Schedule 13G must file a Schedule13D within 10 days of such reporting persons direct or indirect acquisition of beneficial ownership of more than 5% of a class of an issuers Section 13(d) Securities. Summary of the United States reporting requirements relating to substantial shareholdings, takeovers, sensitive industries, short-selling and issuer requests. 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 . 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. Form N-PX: Reporting Say-on-pay Proxy Votes by Investment Managers with More than $100Million in Discretionary Accounts. 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). On September 23, 2020, the Securities and Exchange Commission ("SEC") announced that it had adopted amendments to Rule 14a-8 under the Securities Exchange Act of 1934 (the "Amendments"). Registration statements and prospectuses become public shortly after filing with the SEC. The list is available at http://www.sec.gov/divisions/investment/13flists.htm. These three types of Form 13F are: Any reporting manager that files a 13F Notice or 13F Combination Report must identify each other reporting manager that is responsible for a Form 13F filing that reports any Section 13(f) Securities over which such reporting manager shares investment discretion. [2]A group is defined in Rule 13d-5 as two or more persons [that] agree to act together for the purpose of acquiring, holding, voting or disposing of equity securities of an issuer. See, for example, the persons described above in Reporting Obligations of Control Persons. Form 5 must be filed no later than 45 days after the end of the public companys fiscal year. 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. Insiders: Officers, Directors, and 10% Beneficial Owners. You may file electronically on EDGAR yourself or have an outside vendor, such as a financial printer, do so on your behalf. Positions of Investment Managers with More than $100Million in Discretionary Accounts, Proxy Votes by Investment Managers with More than $100Million in Discretionary Accounts, of Directors, Officers, and Principal Shareholders, at the time of the registration of the companys equity, https://www.filermanagement.edgarfiling.sec.gov, https://www.sec.gov/rules/proposed/2022/33-11030.pdf, http://www.sec.gov/divisions/investment/13flists.htm, https://www.sec.gov/rules/proposed/2022/34-94313.pdf, https://www.sec.gov/rules/proposed/2021/34-93784.pdf, Corporate (Private Equity, Fusions & Acquisitions, Marchs de Capitaux), International Regulatory Enforcement (PHIRE), Consolidated Appropriations Act, 2021(CAA) Machine Readable Files, registered under Section 12 of the Exchange Act, manages discretionary accounts that, in the aggregate, purchase or sell any NMS securities (generally exchange-listed equity. [29] 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. [17] 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. 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. Consequently, the direct or indirect control persons of a securities firm may also be reporting persons with respect to a class of an issuers Section 13(d) Securities. The Firms Obligations. An excluded position must meet both of these requirements. issued by a Listed Company, etc. This is among the reasons that board disclosure and accountability have become increasingly critical aspects of good governance. 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[14] that exercises investment discretion[15] over one or more accounts holding equity securities that (a) are admitted for trading on a national securities exchange (the Section 13(f) Securities),[16] 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). Please contact us if you have any questions about including such a disclaimer. [1] 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. 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. Your company must also file current reports on Form 8-K to report certainspecified events, oftenwithin four business days after occurrence of the event. This ruling will eliminate the use of 30e-3 for open-end funds and ETFs, therefore Tailored Shareholder Reports will be mailed to shareholders, unless a . [31] 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. 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). 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. SEC regulations require that annual reports to stockholders contain certified financial statements and other specific items. 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. 33-11030 and 34-94211 (Feb. 10, 2022), available at https://www.sec.gov/rules/proposed/2022/33-11030.pdf. Under the proposed amendments, if adopted without further comment: In certain circumstances, it may be appropriate for the Schedule 13D or Schedule 13G made by control persons to include a disclaimer of beneficial ownership. Filings on Forms 3, 4, and 5 must be submitted to the SEC via EDGAR (unless a hardship exemption of the type specified in Regulation S-T applies).[27]. An insider must report on Form 4 any change that occurs with respect to its beneficial ownership interest in the public companys equity securities. SEC Reporting Requirements - Transaction reporting by officers, directors and 10% shareholders Section 16 of the Exchange Act applies to an SEC reporting company's directors and officers, as well as shareholders who own more than 10% of a class of the company's equity securities registered under the Exchange Act. An annual Form N-PX filing will be due by August 31 of each year thereafter to report the say-on-pay votes during the most recent 12-month period ended June 30. 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. Section 16 requires insiders of a public company to report their direct and indirect ownership of the companys equity securities and any transactions in such securities, and to disgorge any short-swing profits, which are discussed below. In calculating whether a securities firm beneficially owns more than 10% of a public companys equity securities, a firm that is a Qualified Institution[22] need not count any equity securities held for the benefit of any third party or in any customer or fiduciary accounts in the ordinary course of business as long as the equity securities were not acquired with an activist intent. Small companies would be exempt from disclosing details on pensions and peer groups. Under the new rule, large companies would be required to disclose details on executive compensation for the past five fiscal years while small companies need to report on the past three fiscal years. Previously, companies could file Form 144 in paper format, which many reporting persons elected to use. As an example, a reporting manager exercises voting power when it votes (or directs another party to vote) in accordance with the reporting managers voting policies or uses its independent judgment or expertise to determine how a clients voting policies should apply to a say-on-pay vote, or when it influences the decision of whether to vote a security, such as determining whether to vote on a say-on-pay matter or whether to recall loaned securities in advance of a vote. These obligations are discussed in more detail in Section 16: Reports of Directors, Officers, and Principal Stockholders below. Amendments to Schedule 13D. 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. Any control persons that make decisions as to how a reporting manager exercises its investment discretion with respect to the Section 13(f) Securities in its accounts may also have reporting obligations under Rule 13f-1 depending on the facts and circumstances. The SEC has indicated that filing within 10 days will be deemed a prompt filing. Equity securities not held in a Qualified Institutions fiduciary capacity or which were acquired with an activist intent are attributable to the Qualified Institution and will be counted to determine whether it is a 10% Beneficial Owner. 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. [5]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. [8] 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. It includes any person who directly or indirectly shares voting power or investment power (the power to sell the security). [24] Previously, an insider also had an obligation to deliver a copy of any Section 16 filing to the public company and the national exchange on which the public companys equity securities were listed. A securities firm (and, in some cases, its parent company or other control persons) generally will have a Section 13 reporting obligation if the firm directly or indirectly: Section 16(a) of the Exchange Act requires that directors and officers of a company that has a class of securities registered under Section 12 of the Exchange Act (a public company), as well as persons who beneficially own more than 10% of any class of equity security which is registered under Section 12 of the Exchange Act (other than any exempted security), file reports with the SEC on Forms 3, 4, and 5. Obligations of a Firms Clients. [28]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. On Form N-PX, reporting persons must identify each say-on-pay voting matter using the same language and order of priority as disclosed in the public companys form of SEC proxy card, if any, and disclose (a) the number of securities voted (or instructed to be voted) as well as how those shares were voted (i.e., for, against and/or abstain), and (b) the number of securities loaned, directly or indirectly, by the reporting manager that were not recalled to vote. [25] See Rule 16a-6 under the Exchange Act. 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. In addition, a securities firm that has a principal or employee on the board of directors of a public company may be deemed to be a director by deputization for Section 16 purposes. 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. [11]This includes a change in the previously reported ownership percentage of a reporting person even if such change results solely from an increase or decrease in the aggregate number of outstanding securities of the issuer. Please contact us if you require any assistance in seeking confidential treatment of your Form 13F filing. 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. 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. 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. 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. SEC amendments to Rule 10b5-1 take effect today. This summary should include disclosure thresholds, tender . SEC Issues Guidance on Interim Reporting Requirements to Disclose Changes in Shareholders' Equity. 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. [21] Insiders of a registered closed-end fund are subject to substantially similar requirements under Section 30(h) of the Investment Company Act of 1940, as amended. Copyright 2023 Paul Hastings, LLP. Section 16(c) of the Exchange Act prohibits an insider from engaging in short-sale transactions in covered securities, except that an insider may make short sales-against-the-box if they are made in accordance with Section 16(c). This final short-period filing will be due by March 1 of the immediately following calendar year. 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. Separate Shareholder Report Requirements . The SEC was created in the 1930s with an aim to curb stock manipulation and fraud that was taking place among companies. [23] An insider has an indirect profit interest in the equity securities held by a client if it receives a performance-based fee or allocation from the client, unless (a) the fee or allocation is calculated based on the net capital gains or net capital appreciation of the clients portfolio measured over a period of one year or more, and (b) the public companys equity securities held in the clients portfolio do not account for more than 10% of the market value of the portfolio. 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). 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. Once a securities firm ceases to be a reporting manager, it will be required to file a final Form N-PX for the period from July 1 to September 30 of the calendar year in which its final filing on Form 13F is due. Switching from Schedule 13G to Schedule 13D. To ensure shareholders can still obtain information about other share classes, funds must . For any securities firm that becomes a reporting manager after July 1, 2023, the initial Form N-PX will be due for the 12-month period ending June 30 of the calendar year following the due date of its initial Form 13F filing (e.g., if the reporting managers initial Form 13F is due on February 15, 2025, then the initial Form N-PX will be due by August 31, 2026 to disclose any say-on-pay votes during the period from July 1, 2025 to June 30, 2026). A fund client of an institutional investment manager generally will not have a reporting obligation under Rule 13f-1 even if it holds $100 million or more in Section 13(f) Securities since the obligation is tied to the exercise of investment discretion. In February 2022, the SEC proposed new Rule 13f-2 under the Exchange Act[28] that, if adopted, would require any institutional investment manager with investment discretion over accounts with large short positions[29] to file monthly reports with the SEC on a confidential basis. Under Rule 13d-3, beneficial ownership of a security means that a person has or shares the power, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, (a) to vote or direct the voting of a security (voting power), or (b) to dispose of or direct the disposition of a security (investment power). Proposed Reporting of Short Sales and Securities-based Swaps. Form 4 Statement of Changes of Beneficial Ownership of Securities. These funds also will have 18 months to comply with amendments to rule 30e-3 and Form N-CSR. 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, [1] and (b) the reporting requirements under Section 16 of the Exchange Act . However, Section 929R of the Dodd-Frank Wall Street Reform and Consumer Protection Act eliminated that obligation. During the cooling off period, the reporting person may not vote or direct the voting of the Section 13(d) Securities or acquire additional beneficial ownership of such securities. When a Qualified Institution or Exempt Investor exceeds the 5% threshold (subject to item 2 below), 2. Reporting of Shared Investment Discretion. 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.[23]. [13] Modernization of Beneficial Ownership Reporting, SEC Release Nos. This. In order to avoid duplicative reporting of the same Section 13(f) Security, the reporting managers must arrange to file one of the three different types of Form 13F.