The Commission has approved amendments to shorten the filing deadlines for initial and amended beneficial ownership reports filed on Schedules 13D and 13G.[1]  The final amendments reflect consideration of the concerns raised by commenters in response to the proposal.[2] 

With respect to Schedule 13D filings, the amended deadline for initial filings has been set at five business days, which is a meaningful change from the proposed deadline of five calendar days.  Additionally, the final amendments exclude: (1) proposed changes to Rule 13d-5(b) under the Securities Exchange Act of 1934 (“Exchange Act”), which would have amended the standard for forming a group for purposes of Sections 13(d)(3) and 13(g)(3) of the Exchange Act, and (2) the proposed addition of paragraph (e) to Rule 13d-3 under the Exchange Act, which would have deemed certain holders of cash-settled derivative securities as beneficial owners of the reference covered class.

Instead – with respect to the question of group formation for purposes of Sections 13(d)(3) and 13(g)(3) – the Commission explains that the appropriate legal standard for determining whether a group is formed is found in the statute itself, and that the standard generally is satisfied only if two or more persons take concerted actions for the purpose of acquiring, holding, or disposing of securities of an issuer.  With respect to cash-settled derivatives, the Commission provides a framework for analyzing whether holders of these securities are deemed to be beneficial owners of the reference covered class for purposes of Rule 13d-3.  The guidance on beneficial ownership determination is consistent with the treatment of security-based swaps set forth in a prior Commission release.[3]

Collectively, these changes reflect a recognition by the Commission that “a reduction in investment research and in significant shareholdings by [activist investors] could reduce market efficiency…because of the role that investments based on such research and analysis play in moving stock prices closer to their fundamental values.”[4]  Importantly, the Commission “acknowledge[s] that benefits may stem from the information asymmetry between a Schedule 13D filer and the market,” which results “from their own expenditures on research and analysis or from their efforts and expenditures to pursue changes at the issuers in which they accumulate these shareholdings.”[5]

The final amendments also will affect persons who make filings on Schedule 13G, including investment advisers to mutual funds and ETFs.  Under the final amendments, the deadline for initial Schedule 13G filings made by Qualified Institutional Investors[6] and Exempt Investors[7] is forty-five (45) calendar days after the calendar quarter in which the ownership threshold is crossed.  The same deadline applies for Schedule 13G amendments.  The proposal would have required initial and amended filings within five business days after month-end.  Since many Schedule 13G filers are also institutional investment managers that are required to make filings on Form 13F, the Schedule 13G filing deadlines have been aligned with the filing deadlines for Form 13F and will likely produce regulatory efficiency.  

The amendments to filing deadlines for Schedules 13D and G are appropriate in light of advances in the communications and technology used by market professionals since those timeframes were first established in 1968, while at the same time recognizing the importance of shareholder activism.  Accordingly, I support the final amendments.  I thank the staff in the Divisions of Corporation Finance and Economic and Risk Analysis, as well as the Office of the General Counsel, for their efforts.