This is a reminder to investors who beneficially own more than 5% of the voting equity securities of an SEC-registered company that you may be required to file a report with the SEC by February 14, 2006.
General Rule for Filing Beneficial Ownership Reports: 10 Days Post-acquisition
An investor who beneficially owns more than 5% of a class of voting equity securities of an SEC-registered company is generally required by U.S. securities laws to file a report with the SEC.1 The investor must file a long form report on Schedule 13D within 10 days of an acquisition of securities that crosses the 5% threshold. Schedule 13D requires a detailed description of the facts and circumstances surrounding the acquisition, including the identity of the investor, the source of funds for the acquisition, the investor’s plans regarding control of the company and any arrangements between the investor and others regarding the securities. Schedule 13D must be amended promptly to reflect material changes (such as subsequent acquisitions of 1% or more of the class).
There are several exemptions from the requirement to file a Schedule 13D. The exemptions generally allow beneficial owners to file short form reports on Schedule 13G, in some cases within 45 days of the calendar year-end, instead of 10 days after the acquisition. Schedule 13G requires substantially less disclosure than Schedule 13D. An annual amendment to a previously filed Schedule 13G might also be required within 45 days of the calendar year-end (amendments are no longer required once an investor has reported beneficial ownership of 5% or less). The annual deadline for filing the Schedule 13G or amendments is Tuesday, February 14, 2006. Investors in the following situations should be aware of this approaching deadline:
Certain U.S.-regulated institutional investors, including broker-dealers, banks and insurance companies, that crossed the 5% threshold by acquiring securities in the ordinary course of business, without the intention or effect of influencing control over the company, are generally exempt from filing Schedule 13D. These investors must file a short form report on Schedule 13G by February 14, 2006. If a Schedule 13G is already on file with the SEC, an annual amendment is required if there are any changes in the previously reported information (more prompt amendments may also have been required during the year if ownership exceeded certain percentages).
Non-institutional investors with a passive investment intent who own less than 20% of a class of securities are permitted, as are institutional investors, to file a short form Schedule 13G. They must do so within 10 days of the acquisition of securities. Investors who have filed Schedule 13G under this rule must amend their report by February 14, 2006 if there are any changes in the previously reported information (more prompt amendments may have been required during the year if ownership exceeded certain percentages).
Multiple Small Acquisitions
Schedule 13D is not required if an investor’s ownership crosses the 5% threshold only because of an acquisition that, together with all other acquisitions in the previous 12 months, did not exceed 2% of the class. A beneficial owner who crossed the 5% threshold under these circumstances must file Schedule 13G by February 14, 2006. An annual amendment is required if there are any changes in the information reported previously.
Other Schedule 13D Exemptions
Any other investor who was not required to file Schedule 13D during the year because of an exemption but who was a 5% beneficial owner on December 31, 2005, must file Schedule 13G by February 14, 2006. Typically, this would occur when the investor already owned more than 5% at the time the issuer became an SEC registrant (such as in the issuer’s IPO).
1. “Beneficial ownership” is defined very broadly to include both direct and indirect investment power. Securities underlying options must sometimes be counted and if a group of investors is acting together, all of their securities might have to be aggregated.
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