Securities and Exchange Commission Updates Compliance And Disclosure Interpretations For Sections 13(d) And 13(g) Of The Exchange Act And Regulation 13D/13G Beneficial Ownership Reporting

Author:Mr Doron Lipshitz and David Schultz
Profession:O'Melveny & Myers LLP
 
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The U.S. Securities and Exchange Commission (the "Commission") recently released updated and consolidated compliance and disclosure interpretations relating to Sections 13(d) and 13(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and Regulations 13D/13G beneficial ownership reporting.

While some of the interpretations are restatements of positions previously taken by the Commission, certain other of the interpretations provide new or clarified guidance that may impact disclosure obligations for beneficial holders of reportable securities that are or may become subject to Section 13(d) or 13(g) reporting obligations. These updated compliance and disclosure interpretations are usefully consolidated on the Commission's website at: http://www.sec.gov/divisions/corpfin/guidance/reg13d-interp.htm.

Many of the positions taken in the updated interpretations had been previously advocated by the Commission through various channels (such as no-action letters and amici curiae briefs) prior to this latest round of consolidation and clarification. Now that many of the Commission's positions on such issues have been set forth in these updated interpretations, practitioners and reporting persons should review and consider such interpretations in conjunction with the codified rules under Section 13(d) and 13(g) of the Exchange Act and Regulation 13D/13G thereunder.

Below are a few examples of certain of the positions taken by the Commission in the updated compliance and disclosure interpretations, which are provided for illustrative purposes only. All relevant rules, regulations and interpretations should be reviewed in connection with any given reporting issue.

Limitations on General Reservation of Rights Language under Item 4 of Schedule 13D (Question 110.06). It is common practice for reporting persons to include generic "reservation of rights" disclosure in Item 4 of Schedule 13D (which requires a description of certain plans or proposals which relate to or would result in various actions that, among other things, affect control of the issuer). The Commission has clarified that, notwithstanding any such reservation of rights disclosure, a Schedule 13D must be amended when a reporting person formulates a "specific intention with respect to a disclosable matter" that is enumerated in Items 4(a) through (j) of Schedule 13D. The Commission elaborated that a specific intention is deemed to exist not only upon execution of a formal agreement to...

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