Corporate Practice Series Portfolio No. 68, Beneficial Ownership Reporting: Schedules 13D and 13G, provides a comprehensive discussion of the disclosure requirements set out under §§13(d) and 13(g) of the Securities Exchange Act of 1934. Principal consideration is given to the administrative and case law that has arisen around the disclosure requirements. The discussion also provides a guide to assist in the day-to-day compliance with these requirements.
Portfolio 68-1st: Beneficial Ownership Reporting: Schedules 13D and 13G I. Introduction A. Federal Laws Requiring Disclosure of Stock Ownership B. Legislative History C. Development of a Regulatory Scheme D. Regulatory Framework II. Concepts Governing Whether a §13(d) Filing Obligation Exists . Introductory Material A. General Approach to Analysis of Filing Obligations B. Definition of ‘Person' C. Definition of ‘Equity Security' 1. Contingent voting rights 2. Convertible securities 3. Depositary receipts 4. Securities of the same class D. ‘Acquisitions' of Securities 1. Transactions deemed to be acquisitions a. Gifts and contributions b. Exchange and Reorganization c. Unintentional acquisitions 2. Transactions not deemed to be acquisitions a. Prior to an initial public offering b. Issuer repurchases and conversions c. Parent/subsidiary merger d. Spinoffs e. Executors or administrators of decedents' estates f. Acquisitions prior to Dec. 20, 1970 E. Beneficial Ownership 1. Statutory and regulatory provisions 2. Voting power 3. Investment power 4. Multiple beneficial owners 5. Right to acquire securities a. The 60-day time frame b. Material contingencies c. Power to recover beneficial ownership d. Other arrangements 6. Power over income or profits 7. Indirect power 8. Beneficial ownership by groups and group members 9. Shared power 10. Divesting beneficial ownership to evade disclosure 11. Evidence of investment or voting power 12. Disclaiming beneficial ownership 13. Specific beneficial ownership applications a. Corporate Families b. Partnerships c. Limited liability companies d. Estate administrators e. ESOPs and other plans f. Exchange members g. Nominees h. Pledgees i. Underwriters j. Investment advisers k. Family members l. Short sales m. Security futures F. Calculating Ownership Percentage 1. Determining the number of shares beneficially owned 2. Determining the number of shares outstanding G. Groups 1. Statutory and regulatory provisions 2. Elements of group status a. Two or more persons (1). Management (2). Issuer (3). Corporate families (4). Professional representatives of group members (5). Acquiring equity securities in a private offering (6). Trust beneficiaries b. Agreement to act together (1). Circumstantial evidence of groups (2). Personal and business relationships (3). Preliminary discussions (4). Shareholder proposals c. Purpose of acquiring, holding, disposing, or voting securities d. Beneficial ownership 3. Attribution of beneficial ownership to the group 4. Cessation of group status 5. Required disclosure H. Exemptions from Schedule 13D Filing Requirements 1. Registered exchange offers—§13(d)(6)(A) 2. Exemption for acquisitions of less than 2 percent in 12 months a. Counting 2 percent b. Counting 12 months 3. Acquisitions by the issuer of its own equity securities—§13(d)(6)(C) 4. Subsidiaries 5. SEC exemptions ‘by rules or regulations or by order'—§13(d)(6)(D) 6. Acquisitions pursuant to preemptive rights—Rule 13d-6 7. Institutional and passive investors III. Amendments—Rule 13d-2(a) A. Introduction B. ‘Material' Changes 1. Control intent 2. Change of plans or proposals
3. Acquisitions and dispositions a. One percent threshold b. Reducing holdings to 5 percent or below c. No acquisition requirement d. Previous SEC interpretations of the 2 percent exemption 4. Formation or elimination of a holding company 5. New group members 6. Changes in officers and directors C. ‘Prompt' Amendment Requirement D. Effect of Other Public Disclosure E. Amendments on Schedule 14D-1—Tender Offers IV. Preparing a Schedule 13D A. Schedule 13D Filing Deadline B. Joint Filings C. Required Information 1. Format 2. Cover page a. Nature of the cover page information b. Format of cover page c. Instructions for cover page (1). Group status (2). Source of funds (3). Disclosure of legal proceedings (4). Amount beneficially owned by each filer (5). Disclaimer of beneficial ownership (6). Type of filer (7). Incorporation of cover page information into the text of a statement on Schedule 13D (8). Amendments to a cover page 3. Completing the text a. Item numbers and captions b. Incorporation by reference c. Information required in filings by partnerships, syndicates, other groups, and corporations d. Amendments e. Disclosure of complaints and allegations f. Rule 12b-20—additional disclosures 4. Text items a. Item 1—security and issuer b. Item 2—identity and background c. Item 3—source and amount of funds or other consideration d. Item 4—purpose of transaction (1). Disclosure of control intent (2). What is a plan? (3). Proposals (4). Impeding change of control (5). Plans of the issuer (6). Disclosure of the implications of control intent (7). Disclosure of planned purchases and tender offers (8). Plans relating to debt securities (9). Impact on Proxy Filings
(10). Boilerplate disclosure e. Item 5—interest in securities of the issuer f. Item 6—contracts, arrangements, understandings, or relationships with respect to securities of the issuer g. Item 7—material to be filed as exhibits 5. Signature pages D. Curing Filings E. Filing Logistics 1. EDGAR filings mandated 2. Filing fees—former Rule 13d-7 F. Document Retention V. Schedule 13G A. Comparison of Schedule 13G and Schedule 13D B. Institutions Eligible to File Schedule 13Gs 1. Eligible institutions a. Fraternal benefit societies b. Groups c. Foreign governments d. Auction rate Securities 2. Securities acquired and held in the ordinary course of business 3. Securities acquired and held for investment purposes only 4. Losing eligibility to file on Schedule 13G 5. Annual amendments 6. Monthly amendment requirement C. Passive Investors Eligible to File Schedule 13Gs 1. No control purpose 2. Timing of initial Schedule 13G filing 3. Amendments 4. Change of passive investment intent 5. Crossing the 20 percent threshold 6. Switching to a Schedule 13G 7. Schedule 13Gs by passive investors are optional 8. Transition issues D. Persons Required to File Schedule 13G E. Filing Logistics 1. Filing dates 2. Compliance systems F. Preparing a Schedule 13G 57 1. Cover page 2. Item 1—issuer 3. Item 2—filer 4. Item 3—type of filer 5. Item 4—ownership 6. Item 5—ownership of 5 percent or less 7. Item 6—ownership on behalf of another person 8. Item 7—identification of subsidiaries 9. Item 8—identification of group members 10. Item 9—notice of dissolution of groups 11. Item 10—certifications 12. Bringdown date 13. Signature pages and filing logistics 14. EDGAR VI. Form 13F A. Introduction B. Filings by Large Institutional Holders 1. Section 13(f) 2. Rules 13f-1 and 13f-2 3. Form 13F 4. Confidential treatment 5. Litigation 6. Legality of Rule VII. Section 13(h) VIII. Remedies . Introductory Material A. Private Actions 1. Standing 2. Statute of limitations 3. Damages 4. Injunctive relief a. Corrective disclosure b. Prohibition of voting c. Solicitation of proxies d. Limitation of further purchases e. Divestiture and sale of shares f. Rescission g. Influencing management h. Disgorgement of profits i. Future compliance 5. Types of allegations 6. Takeover battles B. SEC Enforcement 1. SEC authority and process 2. Judicial remedies a. Injunctions b. Disgorgement c. Monetary penalties d. Serving as officers and directors e. Other remedies 3. Administrative remedies a. Cease-and-desist authority b. Accounting and disgorgement c. Suspension