Schedule 13D and 13G Filing Requirements Securities Lawyer 101 Q&A
In going public transactions, a company can register a class of securities and thereby become subject to the SEC’s reporting requirements by filing a Form 10 Registration Statement or Form 8-A registration statement under Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Shareholders of issuers with a class of securities registered under the Exchange Act are subject to insider reporting requirements. Sections 13(d) and 13(g) (15 USCS § 78m) of the Exchange Act require beneficial owners of more than 5 percent of a class of equity securities of a Securities & Exchange Commission (SEC) reporting issuer to disclose information relating to their beneficial ownership by filing a Schedule 13D or Schedule 13G with the SEC. This blog post addresses the most common questions we receive about Schedules 13D and Schedule 13G beneficial ownership reporting.
Q. What is a beneficial owner?
A. The term “beneficial owner” is defined under SEC rules and includes any person who directly or indirectly shares voting power or investment power (the power to sell) of a security.
Q. What Do Sections 13(D) and 13(G) require beneficial owners to do?
A. Section 13D and 13G require any person who, after directly or indirectly acquiring beneficial ownership of any class of registered equity securities (or certain unregistered equity securities), is directly or indirectly the beneficial owner of more than 5% of that class, to file a Schedule 13D or 13D with the SEC within 10 days of their acquisition.
Q. What Disclosures are required in Schedule 13D?
A. Schedule 13D requires detailed disclosure, including information regarding the background of the investor, the purpose of acquiring the stock, and arrangements with the issuer. Schedule 13D also requires prompt updates in the event of material changes.
Q. What is Schedule 13G?
A. Schedule 13G requires less disclosure than Schedule 13D and may be used by certain persons or groups including qualified institutional investors pursuant to Rule 13D-1(b), passive investors pursuant to Rule 13D-1(c), and exempt investors pursuant to Rule 13D-1(d) in limited circumstances. Schedule 13G requires only basic information and in most cases must only be updated periodically. Certain exemptions from the 13D filing requirements allow holders to file Schedule 13G. One exemption is available to certain classes of institutional investors, including registered brokers, registered investment companies and registered investment advisors, when the investor has acquired the securities in the ordinary course of his business and not with the purpose nor with the effect of changing or influencing the control of the issuer, nor in connection with or as a participant in any transaction having such purpose or effect. Another exemption is available to any other type of investor, provided that the investor is not directly or indirectly the beneficial owner of 20% or more of the class of stock and has not acquired the securities with any purpose, or with the effect of, changing or influencing the control of the issuer, or in connection with or as a participant in any transaction having that purpose or effect. Holders who previously filed a Schedule 13G cannot rely upon this exemption and file a Schedule 13D within 10 days if it continues to hold more than 5% of the class and if it has acquired or held the securities with a purpose or effect of changing or influencing control of the issuer, or in connection with or as a participant in any transaction having that purpose or effect. Additionally, the investor cannot vote or direct the voting of these securities and may not acquire additional equity securities of the issuer or any controlling person from the time that the securities are acquired or held with such purpose or effect until 10 days after the filing of the Schedule 13D.
Q. When Am I required to file Schedule 13D and 13G?
A. An initial filing on Schedule 13D or Schedule 13G must be made within 10 days after the acquisition of 5% or more of the issuer’s securities.
Q. Am I required to amend my Schedule 13D and Schedule 13G?
A. Yes. Amendments to Schedule 13D must be made “promptly” following a “material change” including an increase or decrease of 1% or more of the security. Amendments to Schedule 13G must be made (i) within 45 days following the end of each calendar year of any change (other than a change that results solely from a change in the number of the issuer’s outstanding shares) and (ii) promptly after acquiring 10% of the issuer, and, thereafter, promptly after an increase or decrease of more than 5% of the shares held.
Q. When do I have to file a Schedule 13D if I previously filed a Schedule 13G?
A. Schedule 13D should be filed even if a Schedule 13G was previously filed if the shares are held with purposes of changing or influencing control of the issuer and no longer held for investment.
Q. Do I have to file a Schedule 13G if I filed a Form 3?
A. The obligations to file Schedule 13G and Schedule 13G are independent of other filing obligations including Form 3, Form 4 and Form 5 under Section 16 of the Exchange Act. For example, a person that becomes an officer, director or 10% shareholder, who is also a 5% shareholder, must file a Form 3 as well as a Schedule 13D to report initial ownership. Similarly, they must also file a Form 4 and amended Schedule 13D when previously reported information changes.
For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956, by email at [email protected] or visit www.securitieslawyer101.com. This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal and compliance advice on any specific matter, nor does this message create an attorney-client relationship. Please note that the prior results discussed herein do not guarantee similar outcomes.
Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855