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indirect “beneficial ownership” of more than 5% of a class of equity securities (“5% Ownership”) registered under the Securities Exchange Act of 1934 (“Exchange Act”), so long as, subject to certain exceptions:
- The securities are acquired and held for investment purposes only, meaning that they were not acquired “with any purpose, or with the effect, of changing or influencing the control of the issuer”; and
- The investor beneficially owns less than 20% of the class of equity securities.
- The investor’s purpose or effect is no longer passive, but rather the investor seeks to change or influence control of the issuer; or
- The investor’s holdings increase to 20% or more of the class of equity securities.
Amendments to Schedule 13D must be filed “promptly” to report material changes (decreasing to two business days starting February 5, 2024). The acquisition or disposition of 1% of the class of securities is presumed to be material for these purposesalthougheven a lower threshold may be deemed material based on the facts and circumstances.
Forms 3 and 4
Upon becoming an “insider”, which generally means (i) a direct or indirect beneficial holder of more than 10% of a class of equity securities registered under the Exchange Act or (ii) a director or officer of the issuer of such securities, such insider must file a Form 3 within 10 days reporting such person’s “pecuniary interest”[1] (or lack thereof) in such securities.
Thereafter, all changes in ownership must be reported on Form 4 within two business days of such change.
Under the “short-swing profit rule” of Section 16 of the Exchange Act, any profits realized by an insider as a result of short-swing transactions (defined as any purchase and sale, or sale and purchase, within six months of each other) are recoverable by the issuer of such securities. In addition, insiders are prohibited from selling such shares short.
Note that these Section 16 obligations do not apply to securities of foreign private issuers registered in the U.S.
Form 13F and Form N-PX
A report on Form 13F is required to be filed within 45 days of the end of a calendar year by any “institutional investment manager” which exercises investment discretion with respect to equity securities that are listed on a national stock exchange in the U.S. and that had an aggregate fair market value of $100 million or more on the last trading day of any month of such calendar year. A Form 13F would also be required to be filed within 45 days after the last day of each of the first three calendar quarters of the subsequent calendar year
“Institutional investment managers” include entities, whether located in or outside the U.S., that buy and sell securities for their own accounts (such as banks and insurance companies), and persons or entities that have investment discretion over the accounts of others (such as investment advisors and certain trustees).
A parent is deemed to have investment discretion with respect to all accounts over which a subsidiary exercises investment discretion.
Form 13F filers are now also required to make public filings on Form N-PX to report their votes on certain compensation-related matters (so-called “say-on-pay” votes).
Form N-PX must be submitted no later than August 31 of each year for the most recent 12-month period ending on June 30. Although the compliance date for this new filing requirement is not until August 2024, the initial filing will cover proxies voted from July 1, 2023 through June 30, 2024.
- During any calendar day, trades either two million shares or shares with a fair market value of $20 million; or
- During any calendar month, trades either 20 million shares or shares with a fair market value of $200 million.
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Please note that the above is only a general summary of relevant SEC rules. Readers should seek specific legal advice before taking action with respect to the matters discussed herein.
This memorandum is provided by Goldfarb Gross Seligman & Co. for informational purposes only and should not be construed as a legal opinion.
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For further questions, please get in touch with:
Perry Wildes, Partner, International and Hi-Tech Department
Tamar Shamir, Associate, International and Hi-Tech Department
