SEC Amends Rules Governing Beneficial Ownership Reporting
23 October 2023
Dear Clients and Friends,
On October 10, 2023, the U.S. Securities and Exchange Commission (SEC) amended the rules governing beneficial ownership reporting.
The amendments to beneficial ownership reporting are significant, and set shorter filing deadlines for reports that are required to be filed on Schedules 13D or 13G by any shareholder beneficially owning more than 5% of U.S.-registered securities.
This client alert summarizes the changes most relevant to Israeli investors who own U.S.-registered securities.[1]
Below is a summary of the new filing deadlines for initial and amended Schedules 13D and 13G filings:
| Type of Filing | Current Deadline | New Deadline | Effective Date |
| Initial 13D | Within 10 calendar days after acquiring more than 5% beneficial ownership | Within 5 business days after acquiring more than 5% beneficial ownership | 90 days after publication in the Federal Register (i.e., early 2024) |
| Within 10 calendar days after losing 13G eligibility | Within 5 business days after losing 13G eligibility | 90 days after publication in the Federal Register (i.e., early 2024) | |
| Amended 13D | Promptly after material change | Within 2 business days from the material change | 90 days after publication in the Federal Register (i.e., early 2024) |
| Initial 13G | For passive investors: Within 10 calendar days after acquiring more than 5% beneficial ownership | For passive investors: Within 5 business days after acquiring more than 5% beneficial ownership | September 30, 2024 |
| For exempt investors[2]: Annually, 45 days after year-end on which beneficial ownership exceeds 5% | For exempt investors: Quarterly, 45 days after quarter-end on which beneficial ownership exceeds 5% | September 30, 2024 | |
| Amended 13G | For passive and exempt investors: Annually, 45 days after each year-end for any change | For passive and exempt investors: Quarterly, 45 days after each quarter-end for any material change | September 30, 2024 |
| For passive investors: Promptly upon acquiring more than 10% beneficial ownership and thereafter for increases or decreases By more than 5% | For passive investors: Within 2 business days upon acquiring more than 10% beneficial ownership and thereafter for increases or decreases by more than 5% | September 30, 2024 |
Group formation: The SEC addressed the long-standing issue of when two or more investors who cooperate will constitute a ‘group’ for purposes of beneficial ownership reporting. The SEC clarified that a group will be formed whenever (i) two or more persons “take concerted action or agree informally” to acquire, hold or dispose of shares (emphasizing that an express agreement is not required) or (ii) a shareholder discloses to another person its plans to file a Schedule 13D if the other person acquires securities as a result of such disclosure, in each case requiring a Schedule 13D if such group members jointly hold more than 5%. The SEC provided guidance in a form of Q&A on certain common types of shareholders engagements, which can be found in Exhibit A to this Client Update. This component of the new rules will take effect upon publication in the Federal Register.
Treatment of derivates: The SEC provided conditions where a holder of cash-settled derivatives (including call options, put options, and security-based swaps) would be considered the beneficial owner of the securities underlying such derivatives. Even if not counted toward shares that are beneficial owned, Schedule 13D was revised to clarify that disclosure is required for all such derivate securities. This component will take effect upon publication in the Federal Register.
Filing format: Finally, Schedules 13D and 13G will now be required to be filed using a structured, machine-readable data language (i.e., an XML-based language), which is designed to allow investors to more efficiently access, aggregate and analyze the information reported therein. This component will become effective on December 18, 2024.
[1] The new rules also govern the reporting obligations of qualified institutional investors such as broker-dealers, investment advisers, investment companies and insurance companies registered or licensed under U.S. federal or state law, and certain foreign institutional investors subject to a regulatory scheme substantially comparable to that of the U.S. This Client Update does not cover such investors.
[2] Exempt investors are persons beneficially owning more than 5%, but who have not made an acquisition of beneficial ownership subject to Section 13(d) of the Securities Exchange Act of 1934 (the Exchange Act) – for example, persons who acquired all their shares prior to an issuer’s IPO and registration of such shares under the Exchange Act. Although not required to file Schedule 13D, such persons remain subject to Section 13(g) of the Exchange Act and are required to file Schedule 13G instead.
We at Herzog are available to assist with Schedules 13D and 13G filings and are happy to address any questions or comments.
Corporate & Securities Department
Herzog Fox & Neeman
