[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. Reports filed with the SEC can be viewed by the public on the SEC EDGAR website. 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. Form 13H: Reporting Identifying Information for Large Traders. 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). 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"). 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 . Houston, Texas Area. 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). the direct or indirect parent company of the firm and any other person that indirectly controls the firm (e.g., a general partner, managing member, trustee, or controlling shareholder of the direct or indirect parent company). Please research the equivalent of the SEC large shareholder reporting requirements (13Ds, etc.) 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.. 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. This final short-period filing will be due by March 1 of the immediately following calendar year. Disgorgement applies on strict liability basis even if an insider can show that his, her, or its trades were not made using any inside information. According to the SEC, funds will be required to provide shareholder reports that highlight key information, such as fund expenses, performance, and portfolio holdings. The monthly reports would include detailed information about the institutional investment managers gross short position on an issuer-by-issuer basis, any shares purchased to cover a short position in whole or in part, and any daily activity that increased, decreased or closed a short position during the calendar month (e.g., purchasing or selling options and other derivatives, tendering convertible securities, and engaging in secondary offering transactions). The reporting person will thereafter be subject to the Schedule 13D reporting requirements with respect to the Section13(d) Securities until such time as the former Schedule 13G reporting person once again qualifies as a Qualified Institution or Passive Investor with respect to the Section 13(d) Securities or has reduced its beneficial ownership interest below the 5% threshold. While a persons title is generally indicative, the final determination of whether a person is a director or designated officer of a public company for Section 16 purposes depends on the facts and circumstances, primarily based on the persons function and influence at the public company. Conclusion Any direct and indirect control person of a securities firm may file a Schedule 13G as an Exempt Investor, a Qualified Institution or as a Passive Investor to the same extent as any other reporting person as described above. Amendments to Form 13H must be filed (a) annually within 45 days after the end of each full calendar year so long as a securities firm continues to qualify as a Large Trader, and (b) promptly following the end of a calendar quarter if any of the information on the most recent Form 13H becomes inaccurate. Please contact us if you would like further guidance in determining who may constitute a control person of your firm for these purposes. When beneficial ownership of a Qualified Institution exceeds 10% at end of a month, 2. Accordingly, once an institutional investment managers obligation to report on Form13F is established, the manager must make four quarterly filings with the SEC. 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]. In each case, the reporting person must file a Schedule 13D within 10 days of the event that caused it to no longer satisfy the necessary conditions (except that, if a former Qualified Institution is able to qualify as a Passive Investor, such person may simply amend its Schedule 13G within 10 days to switch its status). [10]See Question 103.07 (September 14, 2009), Regulation 13D-G C&DIs. STAY CONNECTED Form 13F: Reporting Equity Positions of Investment Managers with More than $100Million in Discretionary Accounts. The instructions for the reports will encourage the use of graphics and text features to make them more effective. Inline eXtensible Business Reporting Language (iXBRL) tagging will be required for the Tailored Shareholder Reports. The three quarterly filings are required even if the aggregate fair market value of the Section 13(f) Securities held in a reporting managers discretionary accounts falls below the $100 million threshold during the calendar year. [16] The SEC publishes a complete list of Section 13(f) Securities on its official website each quarter, which a manager may rely on if there is any question with respect to a particular security. In order for a control person to file a Schedule 13G as a Qualified Institution, however, no more than 1% of a class of an issuers Section 13(d) Securities may be held (a) directly by the control person or (b) directly or indirectly by any of its subsidiaries or affiliates that are not Qualified Institutions. 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. A reporting person is a Passive Investor if it beneficially owns more than 5% but less than 20% of a class of an issuers Section 13(d) Securities and (a) the securities were not acquired or held with an activist intent, and (b) the securities were not acquired in connection with any transaction having an activist intent. A profit interest may exist as the result of any contract, arrangement, understanding, or relationship that the insider may have with another person or organization. Section 16 of the Exchange Act and the rules thereunder impose certain obligations on insiders of any public company. 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. 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. In that case, each control person would file a 13F Notice as described above. In determining whether a securities firm has crossed the 5% threshold with respect to a class of an issuers Section 13(d) Securities,[4] it must include the positions held in any proprietary accounts and the positions held in all discretionary client accounts that it manages (including any private or registered funds, accounts managed by or for principals and employees, and accounts managed for no compensation), and positions held in any accounts managed by the firms control persons (which may include certain officers and directors) for themselves, their spouses, and dependent children (including IRA and most trust accounts). 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. 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. On November 2, 2022, the SEC adopted Rule 14Ad-1 under the Exchange Act that will require any manager to annually report its proxy voting record with respect to the securities of any public company over which it exercises voting power[18] regarding the shareholder advisory votes on (a) the compensation paid to the public companys executives, (b) the frequency of the executive compensation approval votes, and (c) any so-called golden parachute arrangements in connection with a merger or acquisition (collectively, say-on-pay votes). Under Section 16(b) of Exchange Act, each of these insiders may be liable for any short-swing profits (i.e., profits made from a sale or purchase of the public companys securities made within less than six months of a matching purchase or sale). Both Schedule 13D and Schedule 13G require background information about the reporting persons and the Section 13(d) Securities listed on the schedule, including the name, address, and citizenship or place of organization of each reporting person, the amount of the securities beneficially owned and aggregate beneficial ownership percentage, and whether voting and investment power is held solely by the reporting persons or shared with others. If a client of a securities firm (including a private or registered fund or a separate account client) by itself beneficially owns more than 5% of a class of an issuers Section 13(d) Securities, the client has its own independent Section 13 reporting obligation. "Material" cybersecurity incident would have to be reported on a Form 8-K within four business days of it being determined to be material. 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. The required reports include an annual Form 10-K, quarterly Form 10Q's and current periodic Form 8-K as well as proxy reports and certain shareholder and affiliate reporting requirements. 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. Like millions of Americans, you may also invest directly in public companies. 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. They play a major role in the savings, investment, and retirement plans of many Americans. There is currently no filing fee for Schedule 13G or Schedule 13D. [30] Prohibition Against Fraud, Manipulation, or Deception in Connection with Security-Based Swaps; Prohibition against Undue Influence over Chief Compliance Officers; Position Reporting of Large Security-Based Swap Positions, SEC Release No. [20]For the purpose of determining a persons initial insider status, Section 16 incorporates the definition of beneficial ownership in Section 13(d). Thereafter, when beneficial ownership of a Qualified Institution increases or decreases by 5% or more from the last Schedule 13G filing, computed as of the last day of the month, 1. Section 16: Reports of Directors, Officers, and Principal Shareholders. [19] Under Rule 16a-1(f), the officers of a public company which are subject to Section 16 are (a)the president, (b) the principal financial officer, (c) the principal accounting officer or controller, (d) any vice president of the issuer in charge of a principal business unit, division, or function, (e) any other officer who performs a policy-making function, or (f) any other person who performs a similar policy-making function for the public company. Summary of the United States reporting requirements relating to substantial shareholdings, takeovers, sensitive industries, short-selling and issuer requests. Rule 14a-8 governs the eligibility, on substantive and procedural grounds, for a shareholder to have a proposal included in the proxy statement of a public company. [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. 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. Generally, shares of registered closed-end funds and exchange-traded funds (ETFs) are Section 13(f) Securities as well as certain convertible debt securities, equity options, and warrants. As a rule of thumb, promptly is generally considered to be within 2 to 5 calendar days of the material change, depending on the facts and circumstances. issued by a Listed Company, etc. This could occur in the case of (a) a reporting person that changes from acquiring or holding Section 13(d) Securities for passive investment to acquiring or holding such securities with an activist intent, (b) a reporting person that is a Qualified Institution that deregisters as an investment adviser pursuant to an exemption under the Investment Advisers Act of 1940, as amended, or applicable state law, or (c) a reporting person that is a Passive Investor that acquires 20% or more of a class of an issuers Section 13(d) Securities. STAY CONNECTED A disposition that reduces a reporting persons beneficial ownership interest below the 5% threshold, but is less than a 1% reduction, is not necessarily a material change that triggers an amendment to Schedule 13D. An insider is prohibited from earning short-swing profits on the equity securities (including derivative equity securities) of a public company or any security-based swap involving the public companys equity securities (the covered securities). The reports that an insider will file with the SEC[24] under Section 16 are: Form 3 Initial Statement of Beneficial Ownership of Securities. On September 25, 2018, the SEC staff issued guidance on compliance with the new requirement to present changes in shareholders' equity in interim financial statements within Form 10-Q filings. 13F Combination Report, on which a reporting manager includes some, but not all, of the Section 13(f) Securities over which it exercises investment discretion, and indicates that the remaining securities are reported on a Form 13F filed by another reporting manager. Schedule 13D must be filed within 10 days of crossing the 5% ownership threshold. For example, a direct or indirect control person of a securities firm will not qualify as a Qualified Institution if more than 1% of a class of an issuers Section 13(d) Securities is held by a private fund managed by the firm or other affiliate because a private fund is not among the institutions listed as a Qualified Institution under the Exchange Act. Availability of Filing on Schedule 13G by Control Persons. 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. Consequently, a person should file a Schedule 13D as soon as possible once it is obligated to switch from a Schedule 13G to reduce the duration of the cooling off period. [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. 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 . When two or more reporting managers share investment discretion over the same Section 13(f) Security (for example, as a result of a sub-advisory arrangement or a direct or indirect control relationship), each manager has an independent reporting obligation under Rule 13f-1 with respect to that security. A reporting person that is required to switch to reporting on a Schedule 13D will be subject to a cooling off period from the date of the event giving rise to a Schedule 13D obligation (such as the change to an activist intent or acquiring 20% of a class of an issuers Section 13(d) Securities) until 10calendar days after the filing of Schedule 13D. Even though the securities firm may not otherwise have an activist intent, the staff of the SEC has stated the fact that officers and directors have the ability to directly or indirectly influence the management and policies of an issuer will generally render officers and directors unable to certify to the requirements necessary to file as a Passive Investor.[7]. In calculating the amount of the disgorgement, an insider is required to pay the excess of (a) the highest sales price per share, over (b) the lowest purchase price per share, with respect to the covered securities involved in the matching transactions made within the six-month period. Produce a simple summary of these requirements so that our group can ensure we comply with these statutory requirements on our investments. Unlike the definition of beneficial ownership for the purpose of determining whether a person is a 10% beneficial owner discussed above (i.e., voting and dispositive power), for Section 16 reporting purposes, an insiders beneficial ownership depends on whether the person has the opportunity to profit, directly or indirectly, from a purchase, sale or other transaction in the public companys equity securities (a profit interest). In the example above, the reporting persons would be required to file a Schedule 13G initially within 10 days of exceeding the 5% threshold and thereafter promptly upon any transaction triggering an amendment (i.e., the filing deadlines applicable to a Passive Investor) and not the later deadlines applicable to a Qualified Institution. In order to receive your filing codes, you must first submit a Form ID to the SEC. [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. Proposed Changes to Filing Deadlines. Please contact us if you require any assistance in seeking confidential treatment of your Form 13F filing. The Section 13 (d) reporting requirement is satisfied by filing Schedule 13D with the SEC. The certified financial statement must include a two-year audited. [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. If a reporting person that previously filed a Schedule13G no longer satisfies the conditions to be an Exempt Investor, Qualified Institution, or Passive Investor, the person must switch to reporting its beneficial ownership of a class of an issuers Section 13(d) Securities on a Schedule 13D (assuming that the person continues to exceed the 5% threshold). 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). 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. In addition, Section 16 prohibits short selling by insiders of any class of the company's securities, whether or not that class is registered under the Exchange Act. 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.

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