BCI rules do not permit advertisement or solicitation by advocates or their firms. This website is for information only. See Disclaimer

SEC enhances Beneficial Owner Reporting Requirements

Featured in

The US Securities and Exchange Commission (“SEC”) on Tuesday amended the rules governing the Beneficial Ownership Reporting requirements by, inter alia, shortening the deadlines for initial and amended filings under Schedule 13D and 13G and providing clarification on disclosure requirement with respect to derivative securities. Further, the amendment requires that Schedule 13D and 13G filings be made using a structured, machine-readable data language.

Section 13(d) and Section 13(g) requires investors owning over 5 percent of a covered class of equity securities to file either a Schedule 13D or a Schedule 13G, depending on their intent. An investor with a control intent is required to file a Schedule 13D, while exempt Investors and investors without a control intent file Schedule 13G. The amendment shortens the initial filing deadline for Schedule 13D from 10 days to 5 days. For certain Schedule 13G filers (i.e., qualified institutional investors and exempt investors), the initial filing deadline has been shortened from 45 days after the end of a calendar year to 45 days after the end of the calendar quarter in which the investor beneficially owns more than 5 percent of the covered class. For other Schedule 13G filers (i.e., passive investors), the amendments shorten the initial filing deadline from 10 days to 5 business days. In addition, for all Schedule 13G filers, it is now required that an amendment filing be filed 45 days after the calendar quarter in which a material change occurred rather than 45 days after the calendar year in which any change occurred.

With respect to the aspect of disclosure under Schedule 13D, the amendment revises Item 6 to provide clarity on disclosure of interest. An investor is required to disclose interest in all derivatives using issuer’s equity security as a reference.

Lastly, for the investors to be able to better analyse the information disclosed under Schedule 13D and Schedule 13G, the amendment requires all the filings to be made using a structured, machine- readable data language.

Across the pond, its Indian counterpart SEBI in fact already has in place more streamlined and stringent disclosures requirements under both the Prohibition of Insider Trading Regulations and the Takeover Code.

The Prohibition of Insider Trading regulations requires every promoter, member of promoter group, designated person and director to disclose to the company, within two days of such transaction, any acquisition or disposal of securities of value in excess of INR 10 Lakhs (in one transaction or series of transactions within a calendar quarter). The company thereafter has to disclose the same to the stock exchange within two days of receiving such disclosure.

The Takeover Code on the other hand requires any acquirer who acquires 5% or more of shares or voting rights to disclose the same to the company and stock exchange within two days of such acquisition. Further, any acquirer already holding 5% of more of shares of voting rights must disclose to the company and the stock exchange the acquisition or disposal of 2% or more shares or voting rights withing two days of such transaction.

Presently, SEBI is seeking additional disclosures for identification of beneficial ownership in FPIs. In a recent MoneyControl article authored by Mr. Sumit Agrawal, Managing Partner, Regstreet Law Advisors on beneficial ownership in FPIs he explains that the Identification and verification of beneficial ownership is determined based on “ownership/entitlement interest or control”, “materiality threshold”, “look through” or where no owner entity is identified, the test of designated “senior managing official (SMO)”. In cases of multiple tier structures, it is not easy to determine the ultimate owner and it is usually the last category that keeps SEBI apprehensive. The MoneyControl article can be accessed at: Will SEBI walk the talk on disclosure of beneficial ownership in FPIs?

Latest RegPost