The SEC on Oct. 10 adopted amendments to shorten the disclosure requirements for individuals who purchase large stakes in companies.
Under the new amendments governing beneficial ownership reporting, the initial filing deadline for Schedule 13D filings will be shortened to five business days from 10, which the SEC said is a needed update.
"Today's adoption updates rules that first went into effect more than 50 years ago. Frankly, these deadlines from half a century ago feel antiquated," SEC Chair Gary Gensler said in a news release. "In our fast-paced markets, it shouldn't take 10 days for the public to learn about an attempt to change or influence control of a public company."
Beneficial ownership information is identifying information about individuals that directly or indirectly have control or ownership over a company; currently, if a beneficial owner controls more than 5% of a company, they have 10 days to disclose that information under federal securities laws through Schedule 13D or 13G filings.
Besides a change in the initial filing deadline for Schedule 13D, the new rule also requires that Schedule 13D amendments be filed within two business days; accelerates Schedule 13G reporting deadlines depending on who the filer is; clarifies the scope of 13D requirements in terms of derivative securities; and requires that all filings be made using a structured, machine-readable data language.
Finally, the rule provides some guidance on how to determine whether two or more people are acting as a group in terms of meeting the reporting threshold and how an investor's use of certain cash-settled derivative securities applies to reporting rules.
Commissioner Mark T. Uyeda said in a statement Oct. 10: "The amendments to filing deadlines for Schedules 13D and G are appropriate in light of advances in the communications and technology used by market professionals since those time frames were first established in 1968, while at the same time recognizing the importance of shareholder activism."
The SEC is currently investigating Elon Musk over his disclosure of company stock purchases he made in Twitter, now known as X, prior to buying the company.