Q4 IR Director Samantha Senna, co-authors with our Surveillance Director Jamie Stanton to provide a comprehensive guide to understanding the amendments to SEC Regulation 13D-G, highlighting key implications for IR professionals.
In October, the SEC amended a series of rules regarding the reporting requirements for owners of equities. These changes are being called the most significant changes to beneficial ownership filing rules in the last 50 years. We have broken down the changes to provide you with insight into the effects they will have and the implications for IROs.
Background: What is SEC regulation 13D-G?
Regulation 13D-G is a reference to a section of the United States Securities and Exchange Commission (SEC) regulations, specifically within the framework of the Securities Exchange Act of 1934. Regulation 13D-G pertains to the disclosure of beneficial ownership of securities by certain individuals or groups who have acquired more than 5 percent of a covered class of equity securities. The choice between filing a Schedule 13D or 13G depends on the investor’s intentions. Schedule 13D is typically used by “activist” investors who may seek to influence or change the management or direction of the company. Schedule 13G is used by passive investors who have no such intentions.
What changed?
- 13D filing deadlines were shortened (from 10 to 5 days) and requirements for amendments to existing filings were updated
- 13G filing requirements were also shortened (from 45 days after the end of a calendar year to 45 days after the end of the calendar quarter in which the investor beneficially owns more than 5 percent of the covered class), particularly for passive investors with increased requirements for amendments
- 13F-2 filing requirements for short sale reporting
- More comprehensive requirements for filings to be made using “structured data” formats (which should make processing easier).
When will the changes go into effect?
- 13G requirements must be met by September 30, 2024
- Use of structured data formats for filing must be adopted by December 18, 2024
- Aggregated short sale related information will begin being published in late-2024
What are the implications for IROs?
Activist visibility:
- More rapid identification of activists establishing a 5% position
- Specific 2-day requirement to file an amendment if a “material” change in position is made
- With Engagement Analytics, Q4 helps clients monitor activist behavior almost real-time by alerting them of activist engagement with the company’s website. Being prepared is key to dealing with potential activist threats.
Passive investor changes:
- Better insight on passive investors with broader coverage required
- Quarterly position confirmations (where many were annual previously)
- Clarity on position changes (increase or decrease)
Short interest insight:
- IR teams will be able to see the gross short position on a monthly basis
- Monthly, net activity in each security will be aggregated across all reporting managers
- The updated regulations provide Surveillance teams with more comprehensive and frequent data on beneficial ownership and short interest. This data will empower SV teams to identify and monitor significant ownership changes, track short interest on a monthly basis, and gain deeper insights into investor behavior.
These amendments to the SEC Regulation 13D-G have been under consideration for years, so their adoption now marks a new environment for market information. As they are implemented, we expect the insights from market intelligence and stock surveillance will continue to improve.
