SEC Proposes Beneficial Ownership Reporting Changes to Regulations 13D and 13G – Finance and Banking


United States: SEC Proposes Changes to Regulations 13D and 13G Beneficial Ownership Reporting

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The proposed rules:

  • Accelerate certain schedules 13D and 13G production deadlines

  • Expand the definition of “beneficial ownership” to include cash-settled derivatives

  • Change the circumstances under which two or more people have formed a “group” for beneficial ownership reporting purposes

Fund

On February 10, 2022, the Securities and Exchange Commission (the SEC) released its long-awaited proposed set of rules (the Proposal)1 which, if enacted, would amend certain aspects of beneficial ownership reporting under Sections 13(d) and 13(g) of the Exchange Act of 1934 and Regulation 13D-G thereunder .

Proposed changes

Below is a table included in the proposal, supplemented by information provided by the authors of this Client Alert, which compares the general beneficial ownership reporting timelines as they currently exist to the proposed standards as they are. set out in the proposal.

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Cash-settled derivative securities

In addition to the changes to filing deadlines noted above, the proposal would deem holders of certain cash-settled derivative securities to be the beneficial owners of the reference equity securities if the derivative is held for the purpose or effect of modifying or influencing the transmitter control. . For example, a holder of a cash-settled derivative security, other than a security-based swap, could be considered the beneficial owner of the reference equity securities where there is an intent to influence/control.

In addition, the proposal seeks to amend section 6 of Schedule 13D to require disclosure of all interest on derivative securities (including cash-settled derivative securities) that use the issuer’s equity security as reference title.

‘Group’ formation

Finally, under the proposal, a person who shares information about an upcoming Schedule 13D filing that they will be required to make, to the extent that such information is not yet public and communicated for the purpose of bringing other persons to make purchases, and a person who subsequently purchases the issuer’s securities on the basis of such information shall be deemed to have formed a “group” within the meaning of Article 13.

Next steps

The authors of this Client Alert will continue to monitor the Proposal and any new developments related to it. Please contact one of the listed authors of this Customer Alert or your usual Lowenstein Sandler contact if you have any questions regarding the proposed rule changes or any other matter.

Footnote

1 SEC Publication No. 33-11030; 34-94211 “Modernization of beneficial ownership declarations” (https://www.sec.gov/rules/proposed/2022/33-11030.pdf)

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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