Investment Fund Law Blog
Section 13(d) of the 1934 Act and Regulation 13D thereunder require beneficial owners of more than 5% of a class of equity securities of a publicly traded company to file a report with the SEC. For purposes of calculating the percentage of shares held, a fund manager will generally be deemed the beneficial owner of the shares held by its clients, as well as of any shares held in its proprietary account.
The Section 13(d) reporting requirement is satisfied by filing Schedule 13D with the SEC. Schedule 13D must be filed within 10 days of crossing the 5% ownership threshold. Schedule 13D must be amended promptly to reflect any material changes in the information provided. “Promptly” is not defined in the 1934 Act but is generally interpreted to mean less than two business days.
The following investors are eligible to file short-form Schedule 13G in lieu of Schedule 13D:
- “Qualified Institutional Investors.” Registered investment advisers, registered broker-dealers, registered investment companies, banks, insurance companies, employee benefit plans, pension plans, savings associations and church plans are deemed “qualified institutional investors” and are eligible to file Schedule 13G in relation to securities they acquire in the ordinary course of business. Qualified institutional investors must file Schedule 13G within 45 days after the end of the year in which they cross the 5% ownership threshold. Amendments are also generally due within 45 days after the end of each calendar year. A qualified institutional investor must file an amendment within 10 days of the end of the month in which its beneficial ownership of a class of registered equity securities exceeds 10% and within 10 days of the end of any month in which its beneficial ownership increases or decreases by 5% or more. If a qualified institutional investor ceases to hold the securities as a passive investment, it must file a Schedule 13D within 10 days of its change in investment purpose.
- “Passive Investors.” Investors who do not hold the registered equity securities for the purpose of influencing or changing control of the issuer are eligible to file Schedule 13G so long as their shareholding does not exceed 20% of the relevant share class. Passive investors must file their initial Schedule 13G within 10 days of crossing the 5% threshold. Amendments must be filed within 45 days after the end of the year. Passive investors must file an amendment promptly after acquiring more than 10% of the relevant class of registered equity securities and whenever they increase or decrease their shareholding by more than 5%. A passive investor must file Schedule 13D promptly if it acquires more than 20% of the relevant class of registered equity securities or ceases to hold the securities for passive investment purposes.