# Schedule 13G Explained: Definition, Filing Requirements, and Uses

## What Is Schedule 13G?

The [Securities and Exchange Commission](https://www.investopedia.com/terms/s/sec.asp) (SEC) Schedule 13G form is an alternative filing for the Schedule 13D form and is used to report a party's ownership of stock which exceeds 5% of a company's total stock issue. Schedule 13G is a shorter version of Schedule 13D with fewer reporting requirements. Schedule 13G can be filed in lieu of the SEC Schedule 13D form as long as the filer meets one of several exemptions.

Both Schedule 13D and Schedule 13G forms are referred to as "beneficial ownership reports." According to the SEC, a [beneficial owner](https://www.investopedia.com/terms/b/beneficialowner.asp) is anyone who directly or indirectly shares voting power or investment power. These forms are intended to provide information about individuals who have significant holdings in [publicly-traded](https://www.investopedia.com/terms/p/publiccompany.asp) companies and thus, allow for other investors and other interested parties to make informed decisions about their own investments. The ownership of over 5% of a publicly-traded stock is considered significant ownership and reporting this to the public is a requirement.

Investors and other interested parties can view the Schedule 13G forms of any public company through the SEC's [EDGAR](https://www.sec.gov/edgar/searchedgar/companysearch) system.

### Key Takeaways

*   Schedule 13G is filed to disclose beneficial ownership of more than 5% of a company's stock with fewer reporting requirements than Schedule 13D.
*   Institutional investors can use Schedule 13G if they acquire shares without intending to influence the company's control.
*   Filing deadlines for Schedule 13G vary depending on the investor's classification, such as institutional or passive investors.
*   Investors must amend Schedule 13G if there are significant changes in ownership, especially if crossing the 10% threshold.
*   Non-compliance with Schedule 13G can result in SEC fines, highlighting the importance of timely filing and awareness of internal control policies.

![Schedule 13G: A Securities and Exchange Commission form used to report stock ownership that exceeds 5% of a company's total issued stock.](https://www.investopedia.com/thmb/A4nyCGgcs12VDGnxOULKzzkttqI=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/schedule13g.asp-final-0ccfb6900f7b4492bab9995297d599a8.png)

*— Investopedia / Julie Bang*

## How Schedule 13G Works

Certain exemptions allow the filing of Schedule 13G instead of 13D. Institutional investors may use Schedule 13G if they bought securities in their normal business activities and do not wish to control the issuer. Non-institutional individuals can file Schedule 13G if they don't intend to control the issuer and own less than 20% of the security. Under Section 13(d)(6)(A) or (B) of the Securities Exchange Act of 1934, there are additional exemptions for investors. An investor may also be exempt if their beneficial ownership was acquired before December 22, 1970.

Schedule 13G has specific filing deadlines. [Institutional investors](https://www.investopedia.com/terms/i/institutionalinvestor.asp) must file within 45 days after exceeding 5% ownership by year-end or within 10 days of surpassing 10% in a month if not initially filed. Passive investors are required to file within 10 days of acquiring 5% or more of a security. Finally, exempt investors (as defined by Section 13(d)(6)(A) or (B) of the [Securities Exchange Act of 1934](https://www.investopedia.com/terms/s/seact1934.asp)) must file within 45 days of the end of the year in which they become obligated to file.

Any changes to the information contained in a Schedule 13G form must be amended through additional reporting. Institutional investors are required to file an amendment to report any changes within 45 days of the end of the year or within 10 days of first finishing a month above 10% and then within 10 days of any month-end where the holder's ownership increases or decreases by 5% or more. Passive investors have similar requirements for reporting amendments.

The SEC can impose fines on individuals and/or companies for improperly filing Schedule 13G forms or failing to file them. Individuals can be cited if they fail to promptly report information about their holdings and transactions, and companies can be fined if they do not report that their employees have not properly filed any required forms. Even if it is inadvertent, the failure to timely file a required beneficial ownership report is a violation of the requirements set out under Sections 13(d), 13(g), and 16(a) of the Securities Exchange Act of 1934.

It is very important that fund managers and other investors are aware of their [internal control policies](https://www.investopedia.com/terms/i/internalcontrols.asp) and procedures. In order to settle improper filing claims with the SEC, individual investors have been forced to pay upwards of $150,000 in financial penalties. The SEC makes an effort to police these sorts of violations because these forms are intended to protect the public, keeping them aware of the trading activity of insiders and ultimately, preventing [insider trading](https://www.investopedia.com/terms/i/insidertrading.asp) and other acts of stock manipulation.

## The Bottom Line

Schedule 13G provides a streamlined way for investors who own over 5% of a company's stock to disclose their holdings without the extensive requirements of Schedule 13D. It's essential for institutional investors and others to understand the exemptions that allow them to use this form and to adhere strictly to filing deadlines to avoid penalties. Proper reporting via Schedule 13G not only complies with SEC regulations but also ensures transparency in the market, helping to prevent insider trading and benefiting all stakeholders by maintaining fair market practices.

> **Article Sources**
>
> 1.  U.S. Securities and Exchange Commission. "[Schedules 13D and 13G](https://www.investor.gov/introduction-investing/investing-basics/glossary/schedules-13d-and-13g)." Accessed Nov. 19, 2020.
>     
> 2.  U.S. Securities and Exchange Commission. "[Securities Exchange Act of 1934](https://www.govinfo.gov/content/pkg/COMPS-1885/pdf/COMPS-1885.pdf)," Page 127. Accessed Nov. 19, 2020.
>     
> 3.  U.S. Securities and Exchange Commission. "[SEC Announces Charges Against Corporate Insiders for Violating Laws Requiring Prompt Reporting of Transactions and Holdings](https://www.sec.gov/news/press-release/2014-190)." Accessed Nov. 19, 2020.