On February 10, 2022, the U.S. Securities and Exchange Commission (SEC) proposed amendments to the rules governing beneficial ownership reporting under Sections 13(d) and 13(g) of the Securities Exchange Act of 1934. These rules require beneficial owners of more than 5 percent of a company to report such ownership on a Schedule 13D or Schedule 13G. The beneficial ownership reporting rules were originally adopted over 50 years ago so that companies and the investing public could be made aware of investors who were accumulating positions in a public company, including activist stockholders with the purpose or effect of changing or influencing the control of the issuer. If adopted, the proposed amendments would make significant changes to the beneficial ownership reporting regime.

Accelerated Filing Deadlines

The proposed amendments would adjust filing deadlines as follows:

	Current Deadline	Proposed Deadline
Schedule 13D Filers	Initial Filing: Within 10 calendar days of acquiring more than 5%. Amendments: "Promptly" after any material change.	Initial Filing: Within five calendar days of acquiring more than 5%. Amendments: Within one business day of any material change.
Schedule 13G Filers
Qualified Institutional Investors (under Rule 13d-1(b))	Initial Filing: The earlier of: (a) 45 days after the end of the year in which a person acquired more than 5% beneficial ownership (if still a 5% beneficial owner at the end of such year); and (b) 10 days after the end of the first month in which a person's month-end beneficial ownership exceeds 10%. Annual Amendment: Within 45 days after the end of the year, unless there are no changes to the information last reported. Additional Amendments: Within 10 days after the end of the first month in which such person's month-end beneficial ownership exceeds 10%; thereafter, within 10 days after the end of any month in which such person's month-end beneficial ownership increases or decreases by more than 5%.	Initial Filing: Within five business days after the end of the first month in which a person's month-end beneficial ownership exceeds 5%. Annual Amendment: None Monthly Amendments: Within five business days after the end of each month if, as of the end of such month, there is a material change in the information previously reported. Additional Amendments: Promptly after acquiring greater than 10% beneficial ownership; thereafter, promptly after such person's beneficial ownership increases or decreases by more than 5%.
Passive Investor (under Rule 13d-1(c))	Initial Filing: Within 10 days after acquiring more than 5% beneficial ownership. Annual Amendment: Within 45 days after the end of the year, unless there are no changes to the information last reported. Additional Amendments: Promptly after acquiring greater than 10% beneficial ownership; thereafter, promptly after such person's beneficial ownership increases or decreases by more than 5%.	Initial Filing: Within five days after acquiring more than 5% beneficial ownership. Annual Amendment: None. Monthly Amendments: Within five business days after the end of each month if, as of the end of such month, there is a material change in the information previously reported. Additional Amendments: Within one business day after acquiring greater than 10% beneficial ownership; thereafter, within one business day after such person's beneficial ownership increases or decreases by more than 5%.
Exempt Investor (under Rule 13d-1(d))	Initial Filing: Within 45 days after the end of the year in which a person acquired more than 5% beneficial ownership (if still a 5% beneficial owner at the end of such year). Annual Amendment: Within 45 days after the end of the year, unless there are no changes to the information last reported.	Initial Filing: Within five business days after the end of the first month in which a person's month-end beneficial ownership exceeds 5%. Annual Amendment: None. Monthly Amendments: Within five business days after the end of each month if, as of the end of such month, there is a material change in the information previously reported.

To help facilitate these accelerated deadlines, the proposed amendments would revise the daily cutoff for Schedule 13D and Schedule 13G filings to 10:00 p.m. Eastern time (from 5:30 p.m. Eastern time). Any deadline that falls on a Saturday, Sunday, or federal holiday would continue to be moved to the next business day.

Disclosure of Derivative Securities

The proposed amendments would deem holders of cash-settled derivative securities, other than security-based swaps, to be beneficial owners of the reference equity securities if the derivatives are held with the purpose or effect of changing or influencing the control of the issuer of the reference securities, or in connection with or as a participant in any transaction having such purpose or effect. As a result, certain holders of cash-settled derivative securities may be obligated to disclose their beneficial ownership earlier than is currently required.

The proposed amendments would also revise Item 6 of Schedule 13D to clarify that beneficial owners must disclose interests in all derivative securities that use the issuer's equity security as a reference security, including those that are settled in cash, and regardless of whether they originate with the issuer or are part of the issuer's capital structure.

Group Formation

In the proposing release, the SEC expressed its view that parties need not have an agreement to act together in order to be a "group" for purposes of Sections 13(d) and 13(g); rather they need just to act together. That is, concerted actions by two or more persons for the purpose of acquiring, holding, or disposing of securities of an issuer may be sufficient, depending on the circumstances, to constitute the formation of a group. The proposed amendments are intended to remove any implication that an express agreement by two parties to act together is a requirement to form a group.

The proposed amendments would deem a group to exist where a Schedule 13D filer shares non-public information about an upcoming Schedule 13D filing with the purpose of causing the "tippee" to make, and the tippee makes, purchases based on that information. This type of group will be deemed to have acquired any beneficial ownership as of the earliest date on which the tippee acquired beneficial ownership based on such information.

The proposed amendments clarify that the group acquires any securities acquired by a member of the group after its formation, and that intra-group transfers would not constitute an additional acquisition by the group.

The proposed amendments provide two new exemptions from group status for beneficial owners who communicate with each other or the company, or who enter into agreements governing the terms of derivative securities, where such communications are not undertaken with the purpose or effect of changing or influencing control of the issuer.

What Happens Now?

The proposed amendments are subject to a comment period to end 30 days after publication of the proposing release in the Federal Register, or April 11, 2022, whichever is later. The SEC did not include a proposed effectiveness date for the amendments.

For more information on the proposed amendments, please contact any member of Wilson Sonsini's public company representation practice.