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Obligations under section 13(d) and 13(g)

Posted by Ebbe Filt on 9 Aug 2017



Here at FundApps we help all types of investors, both the active 13(d) filers and the 13(g) filers. 

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The 13(g) regime is broken down into sub-regimes, which apply differently to investors depending upon their investor profile. This blog post aims to describe, in broad terms, the difference between two of the three separate regimes under Section 13 of the U.S. Exchange Act, namely the 13(d) and 13(g) - Qualified Institutional Investor regimes.

 

Schedule 13(d)

Schedule 13(d) reporting obligations are triggered when a person acquires a more-than 5% beneficial ownership position with respect to a reportable class of securities. The initial report must be submitted no later than 10 days after the threshold is triggered. The 13(d) report must include information about the identities of the beneficial owner, the funds used for the relevant trigger event and the number securities owned.

Further, the filer must also disclose the purpose of the acquisition and describe potential plans to change or influence the current management of the issuer. Naturally, not all 5% beneficial owners will have any plans at all to change management or in general influence the relevant issuers business.


Schedule 13(G)

FundApps’ clients are typically large institutional investors who hold large positions in issuers as part of their investment strategies, but not necessarily for the sake of controlling the issuers they invest in. The reporting requirements under Schedule 13(g) were introduced to ameliorate the filing burden on this type of professional investors, and the 13(g) report is therefore also much less complex than 13(d) in regards to the information that needs to be disclosed within it.


Pursuant to rule 13d-1(b)-(d), certain investors are eligible for filing the shorter 13(g) form instead of the heavy 13(d) report. The type of investors who falls under this rule are broadly defined by the industry as “Qualified Institutional Investors” (QII). Investors falling under rule 13(d)-(1) of the Exchange Act are large institutional investors such as banks, insurance companies and investment management companies. Qualification for eligibility to disclose under Schedule 13(g) needs to be granted by the Securities and Exchange Commision as prescribed in 13(g)(1)-(5) and Section 8 of the Investment Company Act of 1940 (.pdf).

The 13(g) filing obligations required from the QIIs is not only simpler than the 13(d) filings, but also has much lower frequency potentially. The initial 13(g) filing obligation triggered by beneficial ownership of more than 5% in a Section 12 registered issuer, is due 45 days after the year end of the calendar year in with the relevant acquisition occurred.

 

Automating 13D & 13G

Here at FundApps we want to help all types of investors, both the active 13(d) filers and the 13(g) filers. The main US rules are all covered within our Rapptr rule engine and even expands further than just 13(d) and 13(g) - QII.

Our engine further covers:

  • The specific “passive investor” regime under 13(g),
  • Quarterly 13F reports,
  • The insider regime under section 16(a),
  • The short selling prohibitions described under section 16(c).

We also automate the respective document needed to be filed through the EDGAR system, as part of our Shareholding Disclosure service. There's still a little bit of room for improvement, but our goal is end-to-end automation of all reports required by the difficult US major shareholding regulations.

To learn more about the third regime under Section 13, 13(f), read our blog posts about automating the 13(f) process.

 

Would you like to know more about how FundApps can help you with 13(d) and 13(g)? Book a demo or contact us to learn more.

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