The Securities and Exchange Commission (SEC) adopted changes
to its rules governing the beneficial ownership of stocks, shortening the
reporting timeline for certain investors, among other changes. The rule
revisions align with the SEC’s previously
announced efforts to adapt long-standing requirements to modern marketplace
conditions.
The revamped rules, which apply to Sections 13(d) and 13(g)
of the Securities Exchange Act of 1934, will be enacted under Regulation 13D-G,
stipulating that anyone possessing more than 5 percent of a particular class of
equity securities must disclose their stock positions in a timelier manner.
“Today’s adoption updates rules that first went into effect
more than 50 years ago. Frankly, these deadlines from half a century ago feel
antiquated,” SEC Chair Gary Gensler said in a press release. “In our fast-paced
markets, it shouldn’t take 10 days for the public to learn about an attempt to
change or influence control of a public company. I am pleased to support this
adoption because it updates Schedules 13D and 13G reporting requirements for
modern markets, ensures investors receive material information in a timely way,
and reduces information asymmetries.”
Once effective, the deadline for initial beneficial
ownership reporting will reduce from 10 business days to five. Any position
changes will need to be filed within two business days. Investors also will
have to file other paperwork under Schedule 13G disclosing certain details
regarding their plans for a particular security holding.
The SEC also released guidance on the current legal standard
for instances in which two or more individuals may be considered a group for
the purposes of determining whether they meet the threshold for beneficial
ownership rules to apply. The guidance also clarifies under the current
beneficial ownership reporting rules, investors using certain cash-settled
derivative securities may be treated as beneficial owners of the class of the
reference equity securities.
The new rules are set to take effect 90 days from their
publication in the Federal Register. The new deadline for Schedule 13G
paperwork will become effective Sept. 30, 2024. The new rules about the special
language will be required starting on Dec. 18, 2024.