Key Beneficial Ownership Reporting Changes Effective September 30, 2024

On October 10, 2023, the Securities and Exchange Commission (SEC) adopted significant amendments to beneficial ownership reporting rules under Sections 13(d) and 13(g) of the Securities Exchange Act of 1934. These changes, the first major overhaul in nearly 50 years, aim to provide more timely and transparent information to investors in today's modernized financial markets.

The amendments introduce accelerated filing deadlines, clarify disclosure requirements, and mandate the use of structured data formats. As market participants prepare for these sweeping changes, it's crucial to understand the new requirements and their potential impact on reporting processes and market dynamics.

Key Changes Effective September 30, 2024?

Schedule 13D Changes

• Initial filings: Must be made within 5 business days of crossing the 5% ownership threshold, down from 10 calendar days.
• Amendments: Are due within 2 business days of a material change, replacing the previous "promptly" standard.

Schedule 13G Changes

Qualified Institutional Investors (QIIs) and Exempt Investors:

• Initial reports: Due within 45 days after the calendar quarter-end in which they exceed 5% ownership rather than 45 days after year-end.

• QIIs crossing 10% ownership must file within 5 business days after month-end, down from 10 calendar days.

Passive Investors:

• Initial reports: Due within 5 business days of exceeding 5% ownership, down from 10 calendar days.
• When exceeding 10% ownership or experiencing a 5% change in ownership, amendments must be filed within 2 business days instead of the previous language that only stated "promptly").

All Schedule 13G filers:

• Amendments are due within 45 days following the calendar quarter-end when a material change occurs, replacing the previous annual update requirement.

New Filing Cut-off Time:

The amendments introduce a new 10 p.m. Eastern Time filing cut-off, extending the current 5:30 p.m. deadline to provide filers additional time to meet the accelerated requirements.

Increased SEC Enforcement Activity

These rule changes come amid increased SEC enforcement activity related to beneficial ownership reporting. The Commission recently announced charges against multiple individuals and companies for violations of Sections 13(d) and 16(a) of the Exchange Act, underscoring the importance of compliance in this area.

Key Takeaways

• Significantly shortened filing deadlines for both Schedule 13D and 13G
• New quarterly reporting requirements for Schedule 13G filers
• Mandated use of machine-readable data format by the end of 2024
• Extended daily filing deadline to 10 p.m. Eastern Time

The SEC's modernization of beneficial ownership reporting represents a significant step toward real-time market transparency. As these changes take effect, they promise to provide investors, issuers, and the market at large with more current and accessible information on significant ownership positions and potential control situations.

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