Investors who beneficially own more than 5% of a class of voting equity securities of an SEC-registered issuer may need to file a report with the SEC by February 17, 2009. This annual reporting deadline applies in certain circumstances to regulated institutional investors, passive investors and other categories of investors described below. The rules apply to investments in any SEC-reporting issuer, including foreign private issuers and MJDS1 issuers.

General Rule: File a Beneficial Ownership Report Within 10 Days of Acquisition

Investors must generally file a beneficial ownership report within 10 days of an acquisition of voting equity securities that crosses the 5% threshold. Subject to the exceptions described below, the initial report must be filed on Schedule 13D, which requires extensive disclosure, including a detailed description of the facts and circumstances surrounding the acquisition, the source of funds and the investor's plans regarding control of the company.

Passive Investors

Investors who would otherwise be required to file Schedule 13D may instead file a short-form Schedule 13G provided they own less than 20% of the class of voting equity securities and have not acquired them with the purpose or effect of changing or influencing the control of the issuer. Following the initial filing, a passive investor who acquires beneficial ownership of more than 10% of the class of voting equity securities must promptly file an amendment to the Schedule 13G and must thereafter amend promptly if the ownership changes by more than 5% of the class. If there are any other changes in previously reported information, an amendment is required within 45 days of year-end – that is, by February 17, 2009.

Regulated Institutional Investors

Certain regulated institutional investors, including broker-dealers, banks and insurance companies, that acquire more than 5% of a class of voting equity securities in the ordinary course of business, and not with the purpose or effect of changing or influencing the control of the issuer, are exempt from filing Schedule 13D.2 These U.S. and non-U.S. institutional investors may instead file Schedule 13G, with the following deadlines:

  • If the investor's beneficial ownership is greater than 5% but not more than 10%, Schedule 13G is due within 45 days of year-end.

  • If the investor's beneficial ownership exceeds 10% (computed as of the last day of the month), Schedule 13G is due within 10 days of the end of the first month in which that occurred.

Once an institutional investor has a Schedule 13G on file with the SEC, it must file an amendment within 10 days of the end of the first month in which its ownership of the class of voting equity securities exceeds 10% (computed as above). Thereafter, it must file an amendment if its ownership changes by more than 5% of the class (computed as above). If there are any other changes in previously reported information, an amendment to the Schedule 13G is required within 45 days of year-end.

Multiple Small Acquisitions

Investors whose ownership crosses the 5% threshold by virtue of multiple small acquisitions aggregating less than 2% in any 12-month period must file Schedule 13G, and amendments to reflect any changes, within 45 days of year-end.

Other Schedule 13D Exemptions

Any investor outside the above categories that was exempt from the initial reporting requirement but that was a 5% beneficial owner on December 31, 2008 must file Schedule 13G by February 17, 2009. Typically, this would occur when the investor already owned more than 5% at the time the issuer became an SEC registrant.

Footnotes

1.Multijurisdictional Disclosure System

2.This accommodation used to apply only to U.S. institutions, but the SEC recently amended its rules to extend the accommodation to non-U.S. institutions that are functionally equivalent to their U.S. counterparts and subject to a substantially comparable regulatory regime. The rule changes are discussed in Torys' October 3, 2008 bulletin at www.torys.com/Publications/Documents/Publication%20PDFs/MA%202008-9.pdf .

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.