On October 10, 2023, the SEC adopted an extensive final rule to modernize beneficial ownership reporting for Schedule 13D and 13G filings. Exchange Act Sections 13(D) and 13(G) and the related SEC rules require an investor who beneficially owns more than five percent of a class of voting equity securities registered under Section 12 of the Exchange Act (“covered securities”) report their beneficial ownership and certain changes in that ownership by publicly filing either a Schedule 13D or, if eligible, a Schedule 13G. These filings can often signal the beginning of an acquisition. The disclosure of ownership changes in public companies can trigger a strong reaction in the financial markets.
The rule mandated a range of disclosure and compliance changes, including requiring filers to report in XML format. Several key provisions of the rule have already been implemented. Filers need to prepare now to comply with the upcoming technical changes to file in XML format beginning December 18, 2024.
Rule Highlights:
- Modify the filing deadlines for the initial and amended Schedule 13D and 13G filings:
- Initial Schedule 13D to within five business days after the date on which a person acquires beneficial ownership of more than five percent or losing eligibility to file on Schedule 13G.
- Initial Schedule 13G filing for Qualified Institutional Investors (“QIIs”) and Exempt Investors to within 45 days after the end of the calendar quarter in which beneficial ownership first exceeds five percent.
- Amendments:
- Schedule 13D to two business days after the date on which a material change occurs.
- Schedule 13G amendments filed to 45 days after the end of the calendar quarter in which a reportable change occurs.
- Requires filers to submit Schedule 13D and 13G filings using a structured, machine-readable data language (XML)
- Changes the amendment reporting criteria and timing
- Extends the filing deadline to 10 pm EST to receive the same day’s filing date
Upcoming XML filing mandate
One of the key changes of the rule is to mandate XML format for Schedule 13D and 13G filings. The SEC also adopted XML reporting for Form 144 beneficial ownership filings recently, adding to their ongoing expansion of structured data. Structured data formats, such as XML and Inline XBRL, provide benefits to filers, the SEC and the marketplace, including easier data analysis and more accurate information.
Schedules 13D/G are currently filed in ASCII or HTML format. The information disclosed in these formats cannot automatically be analyzed by machine. In the new XML format, fields will have specific required formats, such as text or numeric. Each field name will identify the data reported within it and the structure will be validated by the EDGAR system in order for the filing to be accepted. Filers may need to change their preparation process to comply with the new XML technical requirements. While the SEC updated the EDGAR system to support voluntary XML filings on December 18, 2023, for Schedule 13D/G, beginning December 18, 2024, all Schedules 13D and 13G must be filed in XML.
Rule compliance timing
| Issue | Current Schedule 13D | New Schedule 13D | Current Schedule 13G | New Schedule 13G |
|---|---|---|---|---|
| Initial Filing Deadline | Within 10 days after acquiring beneficial ownership of more than 5% or losing eligibility to file on Schedule 13G. Rules 13d-1(a), (e), (f), and (g). | Within five business days after acquiring beneficial ownership of more than 5% or losing eligibility to file on Schedule 13G. Rules 13d-1(a), (e), (f), and (g). | QIIs & Exempt Investors: 45 days after calendar year-end in which beneficial ownership exceeds 5%. Rules 13d-1(b) and (d). QIIs: 10 days after month-end in which beneficial ownership exceeds 10%. Rule 13d-1(b). Passive Investors: Within 10 days after acquiring beneficial ownership of more than 5%. Rule 13d-1(c). | QIIs & Exempt Investors: 45 days after calendar quarter-end in which beneficial ownership exceeds 5%. Rules 13d-1(b) and (d). QIIs: Five business days after month-end in which beneficial ownership exceeds 10%. Rule 13d-1(b). Passive Investors: Within five business days after acquiring beneficial ownership of more than 5%. Rule 13d-1(c). |
| Amendment Triggering Event | Material change in the facts set forth in the previous Schedule 13D. Rule 13d-2(a). | Same as current Schedule 13D: Material change in the facts set forth in the previous Schedule 13D. Rule 13d-2(a). | All Schedule 13G Filers: Any change in the information previously reported on Schedule 13G. Rule 13d-2(b). QIIs & Passive Investors: Upon exceeding 10% beneficial ownership or a 5% increase or decrease in beneficial ownership. Rules 13d-2(c) and (d). | All Schedule 13G Filers: Material change in the information previously reported on Schedule 13G. Rule 13d-2(b). QIIs & Passive Investors: Same as current Schedule 13G: Upon exceeding 10% beneficial ownership or a 5% increase or decrease in beneficial ownership. Rules 13d-2(c) and (d). |
| Amendment Filing Deadline | Promptly after the triggering event. Rule 13d-2(a). | Within two business days after the triggering event. Rule 13d-2(a). | All Schedule 13G Filers: 45 days after calendar year-end in which any change occurred. Rule 13d-2(b). QIIs: 10 days after month-end in which beneficial ownership exceeded 10% or there was, as of the month-end, a 5% increase or decrease in beneficial ownership. Rule 13d-2(c). Passive Investors: Promptly after exceeding 10% beneficial ownership or a 5% increase or decrease in beneficial ownership. Rule 13d-2(d). | All Schedule 13G Filers: 45 days after calendar quarter-end in which a material change occurred. Rule 13d-2(b). QIIs: Five business days after month-end in which beneficial ownership exceeds 10% or a 5% increase or decrease in beneficial ownership. Rule 13d-2(c). Passive Investors: Two business days after exceeding 10% beneficial ownership or a 5% increase or decrease in beneficial ownership. Rule 13d-2(d). |
| Filing “Cut-Off” Time | 5:30 p.m. ET. Rule 13(a)(2) of Regulation S-T. | 10 p.m. ET. Rule 13(a)(4) of Regulation S-T. | All Schedule 13G Filers: 5:30 p.m. ET. Rule 13(a)(2) of Regulation S-T. | All Schedule 13G Filers: 10 p.m. ET. Rule 13(a)(4) of Regulation S-T. |
SEC Final Rule Modernization of Beneficial Ownership Reporting
How Toppan Merrill Can Help
The XML mandate compliance date is Dec 18, 2024. Have questions regarding this Schedule 13D and 13G XML rule? Contact our team of experts today!
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