Document ID: SEC-2023-0484-0001
Agency: sec
Document Type: Proposed Rule
Title: Modernization of Beneficial Ownership Reporting
Posted Date: 2023-05-04T04:00Z

[Federal Register Volume 88, Number 86 (Thursday, May 4, 2023)]
[Proposed Rules]
[Pages 28440-28442]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-09454]

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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 232 and 240

[Release Nos. 33-11180; 34-97405; File No. S7-06-22]
RIN 3235-AM93

Reopening of Comment Period for Modernization of Beneficial 
Ownership Reporting

AGENCY: Securities and Exchange Commission.

ACTION: Proposed rule; reopening of comment period.

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SUMMARY: The Securities and Exchange Commission (``Commission'') is 
reopening the comment period for its proposal, Modernization of 
Beneficial Ownership Reporting, Release No. 33-11030, (Feb. 10, 2022) 
(``Proposing Release''). In the Proposing Release, the Commission 
proposed to amend certain rules that govern beneficial ownership 
reporting (``Proposed Amendments''). The Proposed Amendments would 
modernize the filing deadlines for initial and amended beneficial 
ownership reports filed on Schedules 13D and 13G. The Proposed 
Amendments also would deem holders of certain cash-settled derivative 
securities as beneficial owners of the reference equity securities and 
clarify the disclosure requirements of Schedule 13D with respect to 
derivative securities. In addition, the Proposed Amendments would 
clarify and affirm the operation of the beneficial ownership reporting 
rules as applied to two or more persons that form a group under the 
Securities Exchange Act of 1934, and provide new exemptions to permit 
such persons to communicate and consult with each other, jointly engage 
issuers, and execute certain transactions without being subject to 
regulation as a group. Finally, the Proposed Amendments would require 
that Schedules 13D and 13G be filed using a structured, machine-
readable data language. The Commission is reopening the comment period 
to allow interested persons an opportunity to comment on the additional 
analysis and data contained in a staff memorandum that was added to the 
public comment file on April 28, 2023.

DATES: The comment period for the Proposing Release published March 10, 
2022, at 87 FR 13846, is reopened. Comments should be received on or 
before June 27, 2023.

ADDRESSES: Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/submitcomments.htm); or

Paper Comments

     Send paper comments to Vanessa A. Countryman, Secretary, 
Securities and Exchange Commission, 100 F Street NE, Washington, DC 
20549-1090.

All submissions should refer to File Number S7-06-22. This file number 
should be included on the subject line if email is used. To help the 
Commission process and review your comments more efficiently, please 
use only one method of submission. The Commission will post all 
submitted comments on the Commission's website (https://www.sec.gov/rules/proposed.shtml). Comments also are available for website viewing 
and printing in the Commission's Public Reference Room, 100 F Street 
NE, Washington, DC 20549, on official business days between the hours 
of 10

[[Page 28441]]

a.m. and 3 p.m. Operating conditions may limit access to the 
Commission's Public Reference Room. Do not include personal 
identifiable information in submissions; you should submit only 
information that you wish to make available publicly. We may redact in 
part or withhold entirely from publication submitted material that is 
obscene or subject to copyright protection.
    Studies, memoranda, or other substantive items may be added by the 
Commission or staff to the comment file during this rulemaking. A 
notification of the inclusion in the comment file of any such materials 
will be made available on the our website. To ensure direct electronic 
receipt of such notifications, sign up through the ``Stay Connected'' 
option at www.sec.gov to receive notifications by email.

FOR FURTHER INFORMATION CONTACT: Nicholas Panos, Senior Special 
Counsel, and Valian Afshar, Special Counsel, in the Office of Mergers 
and Acquisitions, Division of Corporation Finance, at (202) 551-3440, 
U.S. Securities and Exchange Commission, 100 F Street NE, Washington, 
DC 20549.

SUPPLEMENTARY INFORMATION: This release relates to the Commission's 
Proposed Amendments to 17 CFR 240.13d-1 (``Rule 13d-1''), 17 CFR 
240.13d-2 (``Rule 13d-2''), 17 CFR 240.13d-3 (``Rule 13d-3''), 17 CFR 
240.13d-5 (``Rule 13d-5''), 17 CFR 240.13d-6 (``Rule 13d-6'') and 17 
CFR 240.13d-101 (``Rule 13d-101''), under the Securities Exchange Act 
of 1934 \1\ (``Exchange Act'').\2\ We also are proposing amendments to 
17 CFR 232.13 (``Rule 13 of Regulation S-T'') and 17 CFR 232.201 
(``Rule 201 of Regulation S-T'') under 17 CFR part 232 (``Regulation S-
T'').\3\
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    \1\ 15 U.S.C. 78a et seq.
    \2\ Unless otherwise noted, when we refer to the Exchange Act, 
or any paragraph of the Exchange Act, we are referring to 15 U.S.C. 
78a et seq. of the United States Code, at which the Exchange Act is 
codified, and when we refer to rules under the Exchange Act, or any 
paragraph of these rules, we are referring to title 17, part 240 of 
the Code of Federal Regulations [17 CFR part 240], in which these 
rules are published.
    \3\ Unless otherwise noted, when we refer to Regulation S-T, or 
any paragraph of the rules thereunder, we are referring to title 17, 
part 232 of the Code of Federal Regulations [17 CFR part 232], in 
which these rules are published.
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I. Background

    As described more fully in the Proposing Release, the Commission 
proposed to amend certain rules to modernize the beneficial ownership 
reporting requirements.\4\ The Proposed Amendments would, among other 
things:
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    \4\ See Modernization of Beneficial Ownership Reporting, Release 
Nos. 33-11030; 34-94211 (Feb. 10, 2022) [87 FR 13846 (Mar. 10, 
2022)].
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    1. Revise the Rule 13d-1(a) filing deadline for the initial 
Schedule 13D to five days after the date on which a person acquires 
more than 5% of a covered class of equity securities; \5\ and amend 
Rules 13d-1(e), (f), and (g) to shorten the filing deadline for the 
initial Schedule 13D required to be filed by certain persons who 
forfeit their eligibility to report on Schedule 13G in lieu of Schedule 
13D to five days after the event that causes the ineligibility;
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    \5\ As used in this release, a ``covered class'' is a class of 
equity securities described in Section 13(d)(1) of the Exchange Act 
and Rule 13d-1(i) and generally means, with limited exception, a 
voting class of equity securities registered under Section 12 of the 
Exchange Act.
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    2. Revise the filing deadline under Rule 13d-2(a) for amendments to 
Schedule 13D to one business day after the date on which a material 
change occurs;
    3. Amend Rules 13d-1(b) and (d) to shorten the deadline for the 
initial Schedule 13G filing for Qualified Institutional Investors \6\ 
and Exempt Investors to within five business days after the last day of 
the month in which beneficial ownership first exceeds 5% of a covered 
class; and amend the deadline in Rule 13d-1(c), which permits Passive 
Investors to file an initial Schedule 13G in lieu of Schedule 13D 
within 10 days after acquiring beneficial ownership of more than 5% of 
a covered class, to five days after the date of such an acquisition;
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    \6\ Capitalized terms not defined in this release have the 
meaning set forth in the Proposing Release.
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    4. Revise the filing deadline for amendments to Schedule 13G in 
Rule 13d-2(b) to five business days after the end of the month in which 
a reportable change occurs; \7\ and amend Rule 13d-2(c) to shorten the 
filing deadline for Schedule 13G amendments filed pursuant to that 
provision to five days after the date on which beneficial ownership 
first exceeds 10% of a covered class, and thereafter upon any deviation 
by more than 5% of the covered class, with these requirements applying 
if the thresholds were crossed at any time during a month; \8\
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    \7\ The Proposed Amendments also would revise Rule 13d-2(b) to 
require that an amendment to a Schedule 13G be filed only if a 
``material change'' occurs instead of an amendment obligation 
arising for Schedule 13G filers upon the occurrence of ``any 
change'' in the facts previously reported regardless of the 
materiality of such change.
    \8\ The Proposed Amendments also would revise the Rule 13d-2(d) 
filing deadline for Schedule 13G amendments filed pursuant to that 
provision from a ``promptly'' standard to one business day after the 
date on which beneficial ownership exceeds 10% of a covered class, 
and thereafter upon any deviation by more than 5% of the covered 
class.
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    5. Add new paragraph (e) to Rule 13d-3 to deem holders of certain 
cash-settled derivative securities as beneficial owners of the 
reference covered class and amend Item 6 to Schedule 13D to remove any 
implication that a person is not required to disclose interests in all 
derivative securities that use a covered class as a reference security;
    6. Amend Rule 13d-5 to align the text of that rule, as applicable 
to two or more persons who act as a group, with the statutory language 
in Sections 13(d)(3) and (g)(3) of the Exchange Act and add a new 
provision in Rule 13d-5 that would affirm that if a person, in advance 
of filing a Schedule 13D, discloses to any other person that such 
filing will be made with the purpose of causing that other person to 
acquire securities in the covered class for which the Schedule 13D will 
be filed and such other person acquires securities in the covered 
class, then those persons are deemed to have formed a group within the 
meaning of Section 13(d)(3);
    7. Add new Rule 13d-6(c), which would set forth the circumstances 
under which two or more persons may communicate and consult with one 
another and engage with an issuer without concern that they will be 
subject to regulation as a group with respect to the issuer's equity 
securities; \9\ and
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    \9\ The Proposed Amendments also would add new Rule 13d-6(d) to 
set forth the circumstances under which two or more persons may 
enter into an agreement governing a derivative security in the 
ordinary course of business without concern that they will become 
subject to regulation as a group with respect to the derivative's 
reference equity securities.
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    8. Require that Schedules 13D and 13G be filed using a structured, 
machine-readable data language.\10\
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    \10\ The Proposed Amendments also would: (1) revise Rule 13(a) 
of Regulation S-T to permit Schedules 13D and 13G, and any 
amendments thereto, that are submitted by direct transmission on or 
before 10 p.m. eastern time on a given business day to be deemed to 
have been filed on the same business day to provide additional time 
for beneficial owners to prepare and submit their Schedule 13D or 
Schedule 13G filings; and (2) amend Rule 201(a) of Regulation S-T to 
make the temporary hardship exemption set forth in that rule--which 
applies to unanticipated technical difficulties preventing the 
timely preparation and submission of an electronic filing--
unavailable to Schedules 13D and 13G filings.
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II. Reopening of Comment Period

    Since the publication of the Proposing Release, the staff of the 
Division of Economic and Risk Analysis has prepared a memorandum that 
provides supplemental data and analysis related to certain economic 
effects of the Proposed Amendments.\11\
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    \11\ Memorandum of the Staff of the Division of Economic and 
Risk Analysis, Supplemental data and analysis on certain economic 
effects of proposed amendments regarding the reporting of beneficial 
ownership (Apr. 28, 2023), available at https://www.sec.gov/comments/s7-06-22/s70622.htm.

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[[Page 28442]]

    We believe that the information presented in the memorandum has the 
potential to be informative for purposes of further evaluating the 
Proposed Amendments. We are, therefore, reopening the comment period to 
permit interested parties to comment on the staff memorandum, which has 
been included in the comment file. We encourage any interested person 
to submit comments, including comments on the data or methodology used 
in the analysis contained in the memorandum and on how this analysis 
should inform our consideration of the benefits and costs of the 
Proposed Amendments. If any commenters who have already submitted a 
comment letter wish to provide supplemental or updated comments, we 
encourage them to do so. Comments are of particular assistance if 
accompanied by supporting data and analysis of the issues addressed in 
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those comments.

    Dated: April 28, 2023.

    By the Commission.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2023-09454 Filed 5-3-23; 8:45 am]
BILLING CODE 8011-01-P