entry into and termination of a material definitive agreement (a copy of the agreement must also be publicly filed); completion of an acquisition or disposition of assets, notice of a delisting or failure to satisfy a continued listing rule or standard or transfer of listing, material modifications to rights of security holders, changes in your company's certifying accountant, election of directors, appointment of principal officers, and departure of directors and principal officersand, it has more than $10 million in total assets and a class of equity securities, like common stock, that is held of record by either (1) 2,000 or more persons or (2) 500 or more persons who are not accredited investorsor, it lists the securities on a U.S. exchange, is current in its ongoing annual reports required pursuant to, has total assets as of the end of its last fiscal year not in excess of $25 millionand, has engaged the services of a transfer agent registered with the Commission pursuant to Section 17A of the Exchange Actor, is required to file and is current in filing annual, semiannual and special financial reports under Securities Act Rule 257(b), had a public float of less than $75 million as of the end of its last semiannual period, or if it cannot calculate its public float, had less than $50 million in annual revenue as of the end of its last fiscal year and, engaged a transfer agent registered pursuant to Section 17A of the Exchange Act. 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). An agreement to act together does not need to be in writing and may be inferred by the SEC or a court from the concerted actions or common objective of the group members. It includes any person who directly or indirectly shares voting power or investment power (the power to sell the security). [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. SEC.gov | Officers, Directors and 10% Shareholders 2001 - 20065 years. A reporting manager will have no reporting obligation with respect to a voting decision that is entirely determined by its client or another party. Reporting persons that must report on Schedule 13D are also required to disclose a significant amount of additional information, including certain disciplinary events, the source and amount of funds or other consideration used to purchase the Section 13(d) Securities, the purpose of the acquisition, any plans to change or influence the control of the issuer, and a list of any transactions in the securities effected in the previous 60 days. Form 13H: Reporting Identifying Information for Large Traders. 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). See definition in Footnote 3 above and accompanying text. Schedules 13D and 13G are commonly referred to as a "beneficial ownership reports.". Produce a simple summary of these requirements so that our group can ensure we comply with these statutory requirements on our investments. Tailoring Shareholder Reports: SEC Finalizes Amendments to Registered Your companys CEO and CFO must certify the financial and certain other information contained in annual reports on Form 10-K and quarterly reports on Form 10-Q. The SEC Adopts Rules on Shareholder Reporting, Fund Advertisements Registration statements are subject to examination for compliance with disclosure requirements. November 2022 The US Securities and Exchange Commission (SEC) recently finalized rule and form amendments (Adopted Rules) that require mutual funds and most exchange-traded funds (ETFs) to provide shareholders with streamlined and "visually engaging" shareholder reports. In addition, the rules adopted under Section 16(b) provide for the matching of purchases and sales of derivative securities with purchases and sales of the securities underlying those derivative securities for the purpose of determining the profits that may be disgorged under Section 16(b). Proposed Changes to Filing Deadlines. 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. If a securities firm has multiple affiliates in its organization that qualify as Large Traders, Rule 13h-1 permits the Large Traders to delegate their reporting obligation to a control person that would file a consolidated Form 13H for all of the Large Traders it controls. Key Takeaways. 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. 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. 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). In addition, a Passive Investor does not have an obligation to notify discretionary account owners on whose behalf the firm holds more than 5% of such Section 13(d) Securities of such account owners potential reporting obligation. This final short-period filing will be due by March 1 of the immediately following calendar year. Reporting of Shared Investment Discretion. [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. [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. [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. The list is available at http://www.sec.gov/divisions/investment/13flists.htm. Please contact us if you would like further guidance in determining who may constitute a control person of your firm for these purposes. 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. Profit Interest Is Reported Under Section 16, Insiders of a public company are required to report their beneficial ownership of the companys equity securities and any transactions involving the equity securities. Shareholder Disclosure Requirements and Checklist - Diligent 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"). Small companies would be exempt from disclosing details on pensions and peer groups. [18] Under Rule 14Ad-1, a reporting manager exercises voting power when it votes or influences a vote. However, Section 929R of the Dodd-Frank Wall Street Reform and Consumer Protection Act eliminated that obligation. Previously, companies could file Form 144 in paper format, which many reporting persons elected to use. 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. 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). Proposed Reporting of Short Sales and Securities-based Swaps. Short-swing profits may result whenever an insider (a) sells (or is deemed to sell) any covered securities within six months of purchasing any covered securities of the same class at a lower price per share, or (b) purchases (or is deemed to purchase) any covered securities within six months of selling any covered securities of the same class at a higher price per share. However, any person who acquires a derivative security or power specified in clauses (a), (b), and (c) above with the purpose or effect of changing or influencing the control of the issuer, or in connection with any transaction having such purpose or effect, will, immediately upon acquisition, be deemed to be the beneficial owner of the securities which may be acquired through the exercise or conversion of such derivative security or power. The template's report composition component automates a multi-step process, resulting in new efficiencies for complying with the SEC rule, the fintech firm stated. 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. [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. SEC.gov | Exchange Act Reporting and Registration [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. Along with certain other institutions listed under the Exchange Act,[5] a reporting person that is a registered investment adviser or broker-dealer may file a Schedule 13G as a Qualified Institution if it (a) acquired its position in a class of an issuers Section 13(d) Securities in the ordinary course of its business, (b) did not acquire such securities with the purpose or effect of changing or influencing control of the issuer, nor in connection with any transaction with such purpose or effect (such purpose or effect, an activist intent), and (c)promptly notifies any discretionary account owner on whose behalf the firm holds more than 5% of the Section 13(d) Securities of such account owners potential reporting obligation. Availability of Filing on Schedule 13G by Control Persons. Whether you use an outside vendor or you make your EDGAR filings yourself, you must first obtain several different identification codes from the SEC before the filings can be submitted. However, it is possible that a reporting obligation may arise if the fund itself actually engages in the investment decision-making process (such as through an internal investment committee whose decisions bind the institutional investment manager). In the proposed rule release, the SEC directs approximately 200 requests for comment to the investment adviser and fund industry relating to each element of the rule proposal as it looks to finalize the rules. Change shareholder reporting requirements (Reporting Requirements) for open-end management investment . beneficially owns, in the aggregate, more than 5% of a class of the voting, equity securities (the Section 13(d) Securities): issued by any closed-end investment company registered under the Investment Company Act of 1940, as amended (the Investment Company Act), or, issued by any insurance company that would have been required to register its securities under Section 12 of the Exchange Act but for the exemption under Section 12(g)(2)(G) thereof (see, manages discretionary accounts that, in the aggregate, hold equity securities trading on a national securities exchange with an aggregate fair market value of $100 million or more (see, securities and standardized options) in an aggregate amount equal to or greater than (a) 2 million shares or shares with a fair market value of more than $20 million during a day, or (b) 20 million shares or shares with a fair market value of more than $200 million during a calendar month (see, Significant Acquisitions and Ownership Positions, any general partner, managing member, trustee, or controlling shareholder of the firm; and. Obligations of a Firms Control Persons. 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. Section 16 requirements apply to the directors and designated officers of a public company, even if such persons do not own any securities of the company. 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. [20]For the purpose of determining a persons initial insider status, Section 16 incorporates the definition of beneficial ownership in Section 13(d). This is among the reasons that board disclosure and accountability have become increasingly critical aspects of good governance. However, only a reporting person that was originally eligible to file a Schedule 13G and was later required to file a Schedule 13D may switch back to reporting on Schedule 13G.[10]. 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. For purposes of Section 16, an insider is (a)adirector of the public company, (b)a designated officer of the public company,[19] or (c) a person who beneficially owns[20] more than 10% of any class of equity security (other than an exempted security) which is registered under Section 12 of the Exchange Act (a 10% beneficial owner). In calculating the number of holders of record for purposes of determining whether Exchange Act registration is required, your company may exclude persons who acquired their securities in an exempt offering: Public float is calculated by multiplying the number of the companys common shares held by non-affiliates by the market price and, in the case of an IPO, adding to that number the product obtained by multiplying the common shares covered by the registration statement by their estimated public offering price. Public Company SEC Reporting Requirements and 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. 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. The time frame depends on whether the issuing company is subject to reporting requirements under the Securities Exchange Act of 1934. Houston, Texas Area. Form 13H requires that a Large Trader, reporting for itself and for any affiliate that exercises investment discretion over NMS securities, list the broker-dealers at which the Large Trader and its affiliates have accounts and designate each broker-dealer as a prime broker, an executing broker, and/or a clearing broker. Form 13H filings with the SEC are confidential and exempt from disclosure under the United States Freedom of Information Act. 33-11030 and 34-94211 (Feb. 10, 2022), available at https://www.sec.gov/rules/proposed/2022/33-11030.pdf. The information about the company required in an Exchange Act registration statement is similar to what is required in a registration statement for a public offering. If your company qualifies as a smaller reporting company or an emerging growth company, it will be eligible to rely on scaled disclosure requirements for these reports. The certified financial statement must include a two-year audited. While not set out in Section 16 or the rules thereunder, the concept of deputization has been found by the courts where a securities firm is acting as a director of a public company through its deputy and (a) the director shares confidential information with the firm, (b) the director influences the firms investment decisions with respect to the public company, or (c) the directors actions as a director are influenced by the firm. Loans made in the ordinary course of business at market rates by issuers that are financial institutions or in the business of consumer lending are excepted from the prohibition. [9]We have standard forms of powers of attorney and joint filing agreements for Schedule 13G filings. This no-action letter has given rise to what practitioners refer to as the rule of three, which provides that, where voting and investment decisions regarding an entitys portfolio are made by three or more persons and a majority of those persons must agree with respect to voting and investment decisions, then none of those persons individually has voting or dispositive power over the securities in the entitys portfolio and, thus, none of those persons will be deemed to have beneficial ownership over those securities. [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. 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. 34-93784 (Dec. 15, 2021), available at https://www.sec.gov/rules/proposed/2021/34-93784.pdf. Under Regulation NMS, an NMS Security is defined to include any U.S. exchange-listed equity securities and any standardized options, but does not include any exchange-listed debt securities, securities futures, or shares of open-end mutual funds that are not currently reported pursuant to an effective transaction reporting plan under the Exchange Act. SEC Reporting Obligations Under Section 13 and Section 16 of the Obligations of a Firms Clients. 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.