When Do I Need To File Section 13D and 13G?

Becoming the owner of a company can be incredibly rewarding, but it comes with its own set of responsibilities. Under the Securities and Exchange Commission (SEC) regulations, owners of large stakes in publicly traded companies must file a Schedule 13D or 13G to report their ownership interest.

Schedule 13D is typically required when an individual or group acquires more than five percent of the voting shares of a company during any 12-month period. This form requires additional disclosure about the size of ownership position as well as information about strategies for acquiring additional voting securities.

Whether you use institutional investors or are doing your investing by yourself, it is important to be aware of this SEC filing requirement for Schedule 13G and Schedule 13D, since failing to do so could lead to penalties or even legal action. Below are some key insights into what these forms are and when to file.

Filing Schedule 13D and 13G When Becoming a Beneficial Owner

For the most part, Schedule 13D and 13G are filed when an individual or entity acquires a “beneficial ownership” of more than five percent of the voting securities of a publicly traded company.

The SEC defines “beneficial ownership” as the power to direct or influence the management or policies of a company. This includes not only direct ownership, but also indirect ownership via joint ventures, affiliates, and other forms. For instance, if you were given an inheritance of 5% of a company’s voting stock, or received beneficial ownership through a trust, you would need to file as a beneficial owner.

What is a Beneficial Owner?

For starters, it's important to define what a beneficial owner is for the purposes of filing Form 13G and Form 13D. According to the SEC, a beneficial owner is defined as an individual or group that holds more than 5% of a company’s voting shares. A beneficial owner has control over how those shares are voted and can influence corporate decisions.

For instance, let's say's an individual is looking to acquire more than 5% of a publicly traded company. In this situation, the individual would need to file Schedule 13D with the SEC.

In certain cases, beneficial owners may be able to opt for filing Form 13G instead due to certain circumstances, such as not having any plans to take direct ownership or influence a company.

Why Not File a Form 3?

If you're a beneficial owner, you might have heard of a Form 3 filing. The SEC's Form 3 filing is used to report ownership of securities. However, this form is not the same as Form 13D or 13G. Form 3 is meant for individuals who:

  • Are considered a director, officer, or beneficial owner of the security
  • Have owned more than 10 percent of the voting securities before their purchase
  • Are members of an advisory board or an investment advisor
  • An affiliated person of an investment
  • A trust, trustee, beneficiary, or settler required to report ownership

On the other hand, if you own less than 10% but more than 5% of the voting securities, or if you are a beneficial owner with plans to influence control over the company, you must file Form 13D or 13G.

What Information do I have to Include?

Schedules 13G and 13D will require you to input some basic information into the EDGAR database, which is the SEC's online database for filing. This information might include:

• The name and address of the beneficial owner

• A description of securities held by the beneficial owner and the amount of each security owned

• Information about any shares that have been acquired or sold in the past two years

• Details about how those shares were acquired

• Any plans, intentions, or proposals to acquire or sell additional voting securities

When Should I File?

When filing Form 13D or 13G, you must submit the form within ten days of becoming a beneficial owner. If you fail to file the form when required, there can be serious consequences such as fines and penalties imposed by the SEC.

Fortunately, filing is fairly straightforward when done online. It's important to keep in mind that the SEC requires all ownership reporting and filings to be made through their EDGAR database using a secure form of online authentication. If you need help filing, there are professional filing services that can guide you through the process.

The Bottom Line

If you are a beneficial owner of more than 5% of a publicly traded company’s voting stock, it is important to be aware of disclosure requirements and your responsibility to file a Schedule 13D or 13G with the SEC. If done incorrectly or not at all, there could be serious penalties imposed by the SEC. Fortunately, filing is straightforward when done online using the EDGAR database. If you need help filing these forms, threshold reporting, and other similar filings, there are services that offer guidance and assistance. With this information in hand, you can ensure that your ownership of a company is compliant with SEC regulations.

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