Most chief compliance officers of registered investment advisors are intimately familiar with Form ADV. But what about Form 3 or Form 4 under Section 16? How about HSR? Your advisor may be subject to a number of shareholder and regulatory filings that, if not made timely and accurately, can have serious ramifications. This article provides an overview of some of the more common regulatory filings that advisors may be required to make with the SEC.
Form 13F
One of the regulatory filings that many CCOs are already familiar with, particularly at firms managing equities, is Form 13F. Pursuant to Section 13(f) of the Securities Exchange Act of 1934 and rule 13f-1 thereunder, institutional investment managers must use Form 13F to report to the SEC position information regarding certain equity securities. Specifically, every investment manager that exercises investment discretion with respect to accounts holding Section 13(f) securities having an aggregate fair market value on the last trading day of any month of any calendar year of at least USD $100,000,000 must file a report on Form 13F with the SEC within 45 days after the last day of each calendar quarter. 13F reports are publicly available.
A list of Section 13(f) securities is published quarterly by the SEC and primarily includes U.S. exchange-traded equities, closed-end funds, ETFs, as well as certain convertible debt securities, equity options, and warrants. This list can be found on the following page of the SEC’s web-site: https://www.sec.gov/divisions/investment/13flists.htm.
The actual Form 13F filing will be made electronically through the SEC’s EDGAR filing system.
Schedule 13D and 13G
Schedules 13D and 13G are regulatory filings that are also fairly well known to CCOs of larger equity managers. Schedule 13D is a publicly available beneficial ownership report that is required to be filed by any person or group of persons who acquires beneficial ownership of more than 5% of a voting class of a company’s equity securities registered under Section 12 of the Securities Exchange Act of 1934 (“Exchange Act”). As defined under SEC rules, the term “beneficial owner” includes any person who directly or indirectly shares voting power or investment power (the power to sell the security). Amendments must be filed promptly (this is not defined but is interpreted by many to be as soon as two business days) for material ownership changes.
In certain cases, qualified institutional investors (including registered investment advisors) holding between 5% and 20% of the voting share class, passive investors, and certain other investors may be eligible to file the more abbreviated Schedule 13G in lieu of Schedule 13D.
Most advisors that are passive and holding between 5% and 10% of the outstanding voting class of an issuer will only need to file a Schedule 13G annually within 45 days after the end of the calendar year. However, once an advisor that is passive crosses the 10% threshold, that advisor will need to file an amendment within 10 days after the end of that month, as well as within 10 days after the end of any month in which its ownership increases or decreases by more than 5% of such class. Separately, if the advisor manages a private fund that crosses the 5% threshold, a Schedule 13D or 13G on behalf of that fund must generally be filed within 10 days after the date the threshold was crossed.
Section 16
Under Section 16 of the Exchange Act, “corporate insiders” must file a publicly available statement of ownership with the SEC. Corporate insiders include officers and directors of a company as well as any beneficial owner of more than ten percent of a class of the company’s equity securities (registered under Section 12 of the Exchange Act). Qualified institutional investors, including registered investment advisors and certain other investors, that hold shares as a fiduciary or for the benefit of third parties are not considered a beneficial owner and are not subject to Section 16. However, a private fund managed by an advisor is subject to Section 16.
Form 3 is used to make an initial filing and, if the issuer is already registered under Section 12, must be filed within 10 days of becoming an officer, director, or beneficial owner. Form 4 is used to report changes in ownership and must be filed with the SEC within two business days. Form 5 is used to report any transactions that should have been reported earlier on a Form 4 or were eligible for deferred reporting. If required, Form 5 is due 45 days after the end of the company’s fiscal year.
Importantly, under Section 16, corporate insiders are subject to a short-swing profit rule and are required to return any profits made from the purchase and sale of a company’s equity securities if both transactions occur within a six-month period.
Hart Scott Rodino
The Hart-Scott-Rodino Antitrust Improvements Act of 1976 (“HSR”) established the Federal
Premerger Notification Program, which provides the Department of Justice and Federal Trade Commission information about larger mergers and acquisitions before they occur. Under HSR, parties to certain proposed transactions must file a notification form, pay a fee, and wait a specified period before completing the transactions.
Although there are three tests that must be satisfied in order for HSR to apply, most advisors that acquire shares for investment purposes (and are passive) in companies with a significant U.S. presence need not be concerned with HSR unless the acquiring person holds more than 10% of the issued and outstanding voting securities.
Form D
Form D must be filed after securities, including interests in private funds, are sold in reliance on an exemption provided in Regulation D or Section 4(a)(5) of the Securities Act of 1933. Form D is publicly available and must be filed with the SEC and relevant states.
A new notice must be filed with the SEC for each new offering of securities no later than 15 calendar days after the “date of first sale” of securities in the offering.
An amendment to a previously filed notice for an offering must be filed to correct a material mistake of fact or error in the previously filed notice or, with certain exceptions, in the event that there is a change in the information provided in the previous notice. Both such amendments must be filed as soon as practicable after discovery of the mistake, error, or change in information. Amendments are also due annually, on or before the first anniversary of the most recent previously filed notice, if the offering is continuing at that time.
Form 13H
Form 13H is a reporting form required for “Large Traders” and is used to help the SEC identify large market participants, collect information on their trading, and analyze their trading activity.
The form is required if a firm effects transactions for the purchase or sale of “NMS Securities” for or on behalf of discretionarily managed accounts, by or through one or more registered broker-dealers, in an aggregate amount equal to or greater than the following thresholds: (i) two million shares or $20 million during any calendar day or (ii) 20 million shares or $200 million during any calendar month.
NMS securities generally include any security or class of securities listed on national exchanges or traded through NASDAQ, including equities and options (e.g., common stock, ETFs, ADRs, etc.).
How to Make Regulatory Filings with the SEC
In order to file Form 13F and other filings with the SEC for the first time, it is necessary for a firm to become an EDGAR filer on the SEC’s web-site. The advisor should refer to the SEC’s EDGAR Filer Management page for assistance. To start, a Form ID should be created and submitted to the SEC for authorization. Upon acceptance, the firm will receive via email a unique CIK number. The firm should then return to the EDGAR web-site and use the CIK number and a passphrase to create the firm’s EDGAR access codes. Once the firm has the access codes, it can begin to make electronic regulatory filings through EDGAR.
For more information about these and other regulatory filings, please contact NCA Compliance.
Hayley Nelson is the President and Principal Consultant of NCA Compliance, Inc., a compliance consulting firm providing a wide range of customized compliance solutions for investment advisors. Ms. Nelson previously worked for the Securities and Exchange Commission and a large investment manager in New York.
