Schedule 13G Instructions
Today I am continuing my discussion of Section 13 and in particular Schedule 13G.
Section 13 requires that any person that has acquired, either directly or indirectly, more than 5% of the beneficial ownership of a reporting company’s equity securities to file either a Schedule 13D or 13G within 10 days after the acquisition. The disclosure statement includes among other things, the identity of the beneficial owners, the amount of beneficial ownership, and plans or proposals regarding the issuer.
A Schedule 13G is a shorter and simpler form than a Schedule 13D. Schedule 13G eligible filers include (i) qualified institutional investors; (ii) passive investors; and (iii) exempt investors.
A qualified institutional investor is an investor that acquired the securities in the ordinary course of business and not with the purpose nor with the effect of changing or influencing the control of the issuer and includes for example a registered broker dealer; a registered investment advisor; a bank; and a registered investment company.
Shareholders who are passive investors can also file reports on Schedule 13G, avoiding the more burdensome Schedule 13D. A passive investor is defined as a person that: (i) has not acquired the securities with any purpose, or with the effect of, changing or influencing the control of the issuer, or in connection with or as a participant in any transaction having that purpose or effect, other than a qualified institutional investor; and (ii) is not directly or indirectly the beneficial owner of 20% or more of the class. A person in a control position, such as a director or executive officer, will not qualify as a passive investor.
A 13G filer must file the Schedule 13G within 10 days of the end of the month of the triggering event requiring the filing and must amend the Schedule 13G each year within 45 days of the end of the calendar year to report changes in beneficial ownership. However, if a 13G filing shareholder acquires in excess of 10% of the company’s stock, an amended 13G must be within 10 days of the acquisition. Moreover, an amendment must also be filed within 10 days to report increases or decreases of beneficial ownership of more than 5%.
If a Schedule 13G filer has a change that triggers a Schedule 13D, such as a change from a passive investor to having a view towards influencing control over the company, a Schedule 13D must be filed within 10 days. Only security holders who were once eligible to file on Schedule 13G and were required to switch to a Schedule 13D may switch back to a Schedule 13G filing. Security holders who were initially required to report on Schedule 13D must continue to report on Schedule 13D thereafter. LawCast.
