On September 14, the Securities and Exchange Commission’s Division of Corporation Finance issued new and updated Compliance and Disclosure Interpretations (C&DIs) of sections, rules and regulations under the Securities Act of 1933 and the Securities Exchange Act of 1934. The current changes were focused on Sections 13(d) and 13(g) of the Exchange Act and Regulation 13D-G, where the SEC reordered and revised prior telephone interpretations and added new interpretations. The SEC’s new guidance included the following:

  • The SEC clarified that in a merger where a shareholder of the target acquires at least 5% of the acquiring company in a stock-for-stock exchange, the reporting exemption provided in Section 13(d)(6)(A) of the Exchange Act does not apply, and the shareholder must file a Schedule 13D or 13G, as applicable.
  • The SEC affirmed that a shareholder’s lack of intent to acquire more than 5% of a class of securities (for example, if the shareholder’s broker mistakenly acquires at least 5% of a company’s shares against the shareholder’s orders) does not exempt the shareholder from its requirement to file a Schedule 13D or 13G, as applicable.
  • Because directors and officers have the ability to directly or indirectly influence a company’s management and policies, the SEC clarified that directors and officers would most likely not be eligible to file on Schedule 13G pursuant to Rule 13d-1(c).
  • The SEC affirmed that a Schedule 13D must be filed within 10 days after the trade date, and not the settlement date, of the acquisition that creates the reporting obligation.
  • The SEC confirmed that if a shareholder becomes a 5% beneficial owner due solely to a change in the issuer’s outstanding securities, it has an obligation to file a report, but may do so on Schedule 13G (unless the shareholder influences or controls the change in such outstanding securities, in which event the shareholder would be required to file a Schedule 13D).
  • The SEC stated that curing a failure to file a timely amendment to Schedule 13D will not affect whether the filer is liable under federal securities laws.
  • The SEC stated that individual Schedule 13D filers must amend their respective Schedule 13Ds upon formation of a group.
  • The SEC provided guidance that if a holder holds preferred securities convertible into more than 5% of a registered class of securities, but the conversion terms limit conversion into 5% or more of such class, the holder may not be obligated to file a beneficial ownership report if such conversion terms are binding and valid, according to SEC standards.
  • The SEC stated that the disclosures in any initial or amended Schedule 13D should reflect ownership as of the date of the report, and not the date of the event requiring filing of the report.
  • The SEC confirmed that a Schedule 13D filer must promptly amend its filings upon any change in its plans with respect to its holdings, even if such plans have not yet been disclosed to the issuer or its management.
  • The SEC commented that a Schedule 13D filer may not include in its filings statements that oppose management, its proposals or a pending transaction without also considering whether such statements constitute solicitation materials and require disclosure under Regulation 14A.
  • The SEC stated that a Schedule 13D filer may include on one Schedule 13D all open-market purchases or sales on the same day within a $1 price range; it does not need to include such transactions on separate Schedule 13Ds.

Click here to view the new C&DIs with respect to Sections 13(d) and 13(g) of the Exchange Act and Regulation 13D-G.

Click here to view the complete C&DIs.