# Modernization of Beneficial Ownership Reporting > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A2023-22678 ## Record - **Collection:** Federal Register - **Document type:** Rule - **Published:** November 7, 2023 - **Citation:** 88 FR 76896 ## Text SECURITIES AND EXCHANGE COMMISSION 17 CFR Parts 232 and 240 [Release Nos. 33-11253; 34-98704; File No. S7-06-22] RIN 3235-AM93 Modernization of Beneficial Ownership Reporting AGENCY: Securities and Exchange Commission. ACTION: Final rule; guidance. SUMMARY: The Securities and Exchange Commission (“Commission”) is adopting amendments to certain rules that govern beneficial ownership reporting. The amendments generally shorten the filing deadlines for initial and amended beneficial ownership reports filed on Schedules 13D and 13G. The amendments also clarify the disclosure requirements of Schedule 13D with respect to derivative securities. We also are expanding the timeframe within a given business day by which Schedules 13D and 13G must be filed, and separately requiring that Schedule 13D and 13G filings be made using a structured, machine-readable data language. Further, we discuss how, under the current rules, an investor's use of a cash-settled derivative security may result in the person being treated as a beneficial owner of the class of the reference equity security. We also are providing guidance on the application of the current legal standard found in section 13(d)(3) and 13(g)(3) of the Securities Exchange Act of 1934 to certain common types of shareholder engagement activities. Finally, we are making certain technical revisions. DATES: Effective dates: The amendments are effective on February 5, 2024. Compliance dates: See section II.G. FOR FURTHER INFORMATION CONTACT: Nicholas Panos, Senior Special Counsel, and Valian Afshar, Senior Special Counsel, Division of Corporation Finance, at (202) 551-3440, U.S. Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549. SUPPLEMENTARY INFORMATION: We are adopting amendments to 17 CFR 240.13d-1 (“Rule 13d-1”), 17 CFR 240.13d-2 (“Rule 13d-2”), 17 CFR 240.13d-3 (“Rule 13d-3”), 17 CFR 240.13d-5 (“Rule 13d-5”), 17 CFR 240.13d-6 (“Rule 13d-6”), 17 CFR 240.13d-101 (“Rule 13d-101”), and 17 CFR 240.13d-102 (“Rule 13d-102”) under the Securities Exchange Act of 1934 [15 U.S.C. 78a et seq. ] (“Exchange Act”). 1 We also are adopting amendments to 17 CFR 232.13 (“Rule 13 of Regulation S-T”) and 17 CFR 232.201 (“Rule 201 of Regulation S-T”) under 17 CFR part 232 (“Regulation S-T”). 2 In addition, we are rescinding 17 CFR 240.13d-7 (“Rule 13d-7”). 1 Unless otherwise noted, when we refer to the Exchange Act, or any paragraph of the Exchange Act, we are referring to 15 U.S.C. 78a of the United States Code, at which the Exchange Act is codified, and when we refer to rules under the Exchange Act, or any paragraph of these rules, we are referring to title 17, part 240 of the Code of Federal Regulations [17 CFR part 240], in which these rules are published. 2 Unless otherwise noted, when we refer to Regulation S-T, or any paragraph of the rules thereunder, we are referring to title 17, part 232 of the Code of Federal Regulations [17 CFR part 232], in which these rules are published. Table of Contents I. Introduction II. Discussion of the Final Amendments A. Amendments to Rules 13D-1 and 13D-2 and Rules 13 and 201 of Regulation S-T To Revise Filing Deadlines and Filing Date Assignment 1. Rule 13d-1(a), (e), (f), and (g) 2. Rule 13d-1(b), (c), and (d) 3. Rule 13d-2(a) and (b) 4. Rule 13d-2(c) and (d) 5. Rules 13(a)(4) and 201(a) of Regulation S-T B. Proposed Amendment to Rule 13D-3 Regarding the Use of Cash-Settled Derivative Securities 1. Proposed Amendment 2. Comments Received 3. Commission Guidance C. Proposed Amendments to Rule 13D-5 1. Proposed Rule 13d-5(b)(1)(i), (b)(2)(i), and (b)(1)(ii) 2. Proposed Rule 13d-5(b)(1)(iii) and (b)(2)(ii) 3. Proposed Rule 13d-5(b)(1)(iv) and (b)(2)(iii) D. Proposed Amendments to Rule 13D-6 To Create Certain Exemptions 1. Proposed Amendments 2. Comments Received 3. Final Amendments E. Amendment to Schedule 13D To Clarify Disclosure Requirements Regarding Derivative Securities 1. Proposed Amendment 2. Comments Received 3. Final Amendment F. Structured Data Requirement for Schedules 13D and 13G 1. Proposed Amendment 2. Comments Received 3. Final Amendment G. Compliance Dates III. Other Matters IV. Economic Analysis A. Overview B. Baseline 1. Current Schedule 13D and 13G Filing Requirements 2. Market Trends 3. Affected Parties and Current Market Practices C. Economic Effects of the Final Rules 1. Shortened Initial Schedule 13D Filing Deadline 2. Shortened Schedule 13G Filing Deadlines 3. Other Amendments D. Reasonable Alternatives to the Final Rules 1. Alternative Filing Deadlines 2. Tiered Approaches 3. Modify Structured Data Requirement V. Paperwork Reduction Act A. Summary of the Collections of Information B. Summary of Comment Letters on PRA Estimates C. Burden and Cost Estimates for the Final Amendments VI. Regulatory Flexibility Act Certification Statutory Authority I. Introduction We are amending certain rules within 17 CFR 240.13d-1 through 240.13f-1 (“Regulation 13D-G”) 3 and Regulation S-T to modernize the beneficial ownership reporting requirements and improve their operation and efficacy. Some 4 of these amendments are based on the amendments that the Commission proposed in 2022 (“Proposed Amendments”). 5 Specifically, we are adopting revisions to the deadlines for Schedule 13D and Schedule 13G filings. We also are adopting certain related technical changes to Regulation S-T that the Commission proposed in connection with these amendments. Further, we are requiring that Schedule 13D and 13G filings be submitted using a structured, machine-readable data language. 3 Unless otherwise noted, when we refer to Regulation 13D-G, we are referring to title 17, part 240 of the Code of Federal Regulations [17 CFR part 240], in which 17 CFR 240.13d-1 through 240.13f-1 are published. 4 See infra note 22 for a discussion of certain technical amendments we are adopting that the Commission did not previously propose. 5 See Modernization of Beneficial Ownership Reporting, Release Nos. 33-11030; 34-94211 (Feb. 10, 2022) [87 FR 13846 (Mar. 10, 2022)] (“Proposing Release”). On Apr. 28, 2023, the Commission reopened the comment period for the Proposing Release in connection with the addition to the comment file of a memorandum prepared by staff of the Commission's Division of Economic and Risk Analysis. See Reopening of Comment Period for Modernization of Beneficial Ownership Reporting, Release Nos. 33-11180; 34-97405 (Apr. 28, 2023) [88 FR 28440 (May 4, 2023)] (“Reopening Release”). That memorandum provided supplemental data and analysis related to certain economic effects of the Proposed Amendments. See Memorandum of the Staff of the Division of Economic and Risk Analysis, Supplemental data and analysis on certain economic effects of proposed amendments regarding the reporting of beneficial ownership (Apr. 28, 2023), available at https://www.sec.gov/comments/s7-06-22/s70622-20165251-334474.pdf (“DERA Memorandum”). In response to the comments we received on the Proposed Amendments, 6 however, we are making certain adjustments from the proposal. For example, we are not adopting proposed 17 CFR 240.13d-3(e) (“Rule 13d-3(e)”) to deem certain holders of cash-settled derivative securities 7 as beneficial owners of the reference covered class. 8 Instead, we discuss how, under current Rule 13d-3, persons using these types of derivative securities may already be subject to regulation as beneficial owners. We also are not adopting many of the proposed amendments to Rules 13d-5 9 and 13d-6. Instead, we are issuing guidance on the application of the current legal standard found in sections 13(d)(3) and 13(g)(3) to certain common types of shareholder engagement activities. 6 See generally letters submitted in connection with the Proposed Amendments, available at https://www.sec.gov/comments/s7-06-22/s70622.htm. Unless otherwise specified, all references in this release to comment letters are to comments submitted on the Proposed Amendments. Further, on June 22, 2023, the Commission's Investor Advisory Committee (“IAC”) adopted recommendations (“IAC Recommendations”) with respect to the Proposed Amendments. See U.S. Securities and Exchange Commission Investor Advisory Committee, Recommendation of the Market Structure Subcommittee of the SEC Investor Advisory Committee on SEC Proposed Amendments to Regulation 13D-G, Proposed Rule 10B-1, and Proposed Rule 9j-1 (June 22, 2023), available at https://www.sec.gov/files/spotlight/iac/20230622-recommendation-regarding-sec-proposed-amendments-regulation-13d-g-proposed-rule-10b-1-and.pdf. The IAC was established in Apr. 2012 pursuant to section 911 of the Dodd-Frank Wall Street Reform and Consumer Protection Act [Pub. L. 111-203, sec. 911, 124 Stat. 1376, 1822 (2010)] (“Dodd-Frank Act”) to advise and make recommendations to the Commission on regulatory priorities, the regulation of securities products, trading strategies, fee structures, the effectiveness of disclosure, and initiatives to protect investor interests and to promote investor confidence and the integrity of the securities marketplace. We discuss the IAC Recommendations in connection with the comments received on the Proposed Amendments below. See infra sections II.A.1.b, II.A.2.b, II.B.2, and II.C.1.b. In addition, on Sept. 21, 2022, the IAC held a meeting that included a panel discussion on the Proposed Amendments. See the agenda for that meeting, including the panelists that discussed the Proposed Amendments, at https://www.sec.gov/spotlight/investor-advisory-committee/iac092122-agenda.htm. 7 As used in this release (including for purposes of proposed Rule 13d-3(e)), the term “derivative security” has the meaning set forth in 17 CFR 240.16a-1(c) (“Rule 16a-1(c)”). See Rule 16a-1(c) (defining “derivative securities” as including certain rights, such as options, warrants, convertible securities, stock appreciation rights, or similar rights “with an exercise or conversion privilege at a price related to an equity security, or similar securities with a value derived from the value of an equity security,” excluding certain enumerated rights, obligations, interests, and options). For purposes of proposed Rule 13d-3(e), the term “derivative security” would not have included a security-based swap, as defined in section 3(a)(68) of the Exchange Act and the rules and regulations thereunder (“SBS”). As the context requires, references to “SBS” in this release includes both the singular (“security-based swap”) and plural (“security-based swaps”) form. See Proposing Release at 13864 & nn.110-114. 8 As used in this release, a “covered class” is a class of equity securities described in section 13(d)(1) of the Exchange Act and Rule 13d-1(i) and generally means, with limited exception, a voting class of equity securities registered under section 12 of the Exchange Act. 9 See infra note 22 and sections II.C.2 and II.C.3 for a discussion of the proposed amendments to Rule 13d-5 that we are adopting. With respect to the Schedule 13D and Schedule 13G filing deadlines, we are amending the following rules: • 17 CFR 240.13d-1(a) (“Rule 13d-1(a)”): Shortening the filing deadline for the initial Schedule 13D to within five business days 10 after the date on which a person acquires beneficial ownership of more than five percent of a covered class; 11 10 The term “business day” currently is not defined in section 13(d) or 13(g) or any rule of Regulation 13D-G. Accordingly, we are amending 17 CFR 240.13d-1(i) (“Rule 13d-1(i)”) by adopting a new paragraph (i)(2) that defines “business day” for purposes of Regulation 13D-G to mean any day, other than Saturday, Sunday, or a Federal holiday, from 12 a.m. to 11:59 p.m. Eastern Time. See infra notes 14 and 134 for further discussion of our new definition of “business day.” 11 Throughout this release, we refer to an initial Schedule 13D filing obligation as being incurred under Rule 13d-1(a) when a person “acquires beneficial ownership of more than 5% of a covered class,” among other similar formulations. These formulations refer to the requirement in Rule 13d-1(a), which currently states that “[a]ny person who, after acquiring directly or indirectly the beneficial ownership of any equity security of a [covered class], is directly or indirectly the beneficial owner of more than five percent of the class shall, within 10 days after the acquisition, file with the Commission, a . . . Schedule 13D.” • 17 CFR 240.13d-1(e), (f), and (g) (“Rule 13d-1(e), (f), and (g)”): Shortening the filing deadline for the initial Schedule 13D required to be filed by certain persons who become ineligible to report on Schedule 13G in lieu of Schedule 13D to five business days after the event that causes the ineligibility; • 17 CFR 240.13d-1(b) and (d) (“Rule 13d-1(b) and (d)”): Shortening the deadline for the initial Schedule 13G filing for Qualified Institutional Investors (“QIIs”) 12 and Exempt Investors 13 to within 45 days 14 after the end of the calendar quarter in which beneficial ownership first exceeds five percent of a covered class; 15 12 The institutional investors qualified to report on Schedule 13G, in lieu of Schedule 13D and in reliance upon Rule 13d-1(b), include a broker or dealer registered under section 15 of the Exchange Act, a bank as defined in section 3(a)(6) of the Exchange Act, an insurance company as defined in section 3(a)(19) of the Exchange Act, an investment company registered under section 8 of the Investment Company Act of 1940, a person registered as an investment adviser under section 203 of the Investment Advisers Act of 1940, a parent holding company or control person (if certain conditions are met), an employee benefit plan or pension fund that is subject to the provisions of the Employee Retirement Income Security Act of 1974, a savings association as defined in section 3(b) of the Federal Deposit Insurance Act, a church plan that is excluded from the definition of an investment company under section 3(c)(14) of the Investment Company Act of 1940, non-U.S. institutions that are the functional equivalent of any of the institutions listed in Rule 13d-1(b)(1)(ii)(A) through (I), so long as the non-U.S. institution is subject to a regulatory scheme that is substantially comparable to the regulatory scheme applicable to the equivalent U.S. institution, and related holding companies and groups (collectively, “Qualified Institutional Investors” or “QIIs”). 17 CFR 240.13d-1(b)(1)(ii). In addition, under Rule 13d-1(b), in order to qualify to report on Schedule 13G in lieu of Schedule 13D, a QII must have acquired securities in the covered class in the ordinary course of business and not with the purpose nor with the effect of changing or influencing the control of the issuer, nor in connection with or as a participant in any transaction having such purpose or effect. 17 CFR 240.13d-1(b)(1)(i). 13 The term “Exempt Investor” as used in this release refers to persons holding beneficial ownership of more than 5% of a covered class, but who have not made an acquisition of beneficial ownership subject to section 13(d). For example, persons who acquire all of their securities prior to the issuer registering the subject securities under the Exchange Act are not subject to section 13(d). In addition, persons who acquire no more than 2% of a covered class within a 12-month period are exempted from section 13(d) by section 13(d)(6)(B). In both cases, however, those persons are subject to section 13(g). Amendments to Beneficial Ownership Reporting Requirements, Release No. 34-39538 (Jan. 12, 1998) [63 FR 2854, n.8 (Jan. 16, 1998)]; see also Proposing Release at 13856, n.55. 14 Any reference to “day” in this release means “calendar day,” and those terms may be used interchangeably. Any reference to “business day” means “business day,” as we are defining that term. See supra note 10 and infra note 134 for discussions of our new definition of “business day.” 15 In addition, we are retaining the requirement in Rule 13d-1(b)(2) that a QII file its initial Schedule 13G on a more expedited basis if its beneficial ownership exceeds 10% of a covered class. 17 CFR 240.13d-1(b)(2). We are amending that rule, however, to require that such an initial Schedule 13G be filed within five business days after the end of the first month in which the QII's beneficial ownership exceeds 10% of a covered class, computed as of the last day of the month, rather than the current requirement of 10 calendar days after month-end. • 17 CFR 240.13d-1(c) (“Rule 13d-1(c)”): Shortening the deadline for Passive Investors 16 to file an initial Schedule 13G in lieu of Schedule 13D to within five business days after the date on which they acquire beneficial ownership of more than five percent of a covered class; 16 The term “Passive Investors” as used in this release refers to beneficial owners of more than 5% but less than 20% of a covered class who can certify under Item 10 of Schedule 13G that the subject securities were not acquired and are not held for the purpose or effect of changing or influencing the control of the issuer of such securities and were not acquired in connection with or as a participant in any transaction having such purpose or effect. Amendments to Beneficial Ownership Reporting Requirements, Release No. 34-39538 (Jan. 12, 1998) [63 FR 2854, n.9 (Jan. 16, 1998)]. These investors are ineligible to report beneficial ownership pursuant to Rule 13d-1(b) or (d) but are eligible to report beneficial ownership on Schedule 13G in reliance upon Rule 13d-1(c). • 17 CFR 240.13d-2(a) (“Rule 13d-2(a)”): Revising the deadline for filing amendments to Schedule 13D to two business days after the date on which a material change occurs; • 17 CFR 240.13d-2(b) (“Rule 13d-2(b)”): Shortening the deadline for Schedule 13G amendments filed pursuant to that provision to 45 days after the end of the calendar quarter in which a reportable change occurs; • 17 CFR 240.13d-2(c) (“Rule 13d-2(c)”): Shortening the filing deadline for Schedule 13G amendments filed pursuant to that provision to five business days after the end of the month in which beneficial ownership first exceeds 10 percent of a covered class, and thereafter upon any deviation by more than five percent of the covered class, with these requirements applying if the thresholds were crossed at any time during a month; and • 17 CFR 13d-2(d) (“Rule 13d-2(d)”): Revising the deadline for Schedule 13G amendments filed pursuant to that provision to two business days after the date on which beneficial ownership exceeds 10 percent of a covered class, and thereafter upon any deviation by more than five percent of the covered class. In addition, we are amending Rule 13d-2(b) to require that an amendment to a Schedule 13G be filed only if a “material change” occurs (replacing the current rule text that requires an amendment upon the occurrence of “any change” in the facts previously reported). Further, we are amending 17 CFR 232.13(a) (“Rule 13(a) of Regulation S-T”) to permit Schedules 13D and 13G, and any amendments thereto, that are submitted by direct transmission commencing on or before 10 p.m. Eastern Time 17 on a given business day to be deemed to have been filed on the same business day. 18 This amendment should provide additional time for beneficial owners to prepare and submit their Schedule 13D or 13G filings. 19 The following table summarizes the changes we are adopting with respect to Schedule 13D and 13G filings, as described more fully in section II.A: 17 When we refer to “Eastern Time” in this release, we mean Eastern Standard Time or Eastern Daylight Saving Time, whichever is currently in effect. 18 This rule applies to filing deadlines expressed both in calendar days and in business days. For example, for filing deadlines expressed in calendar days, if the deadline falls on a Federal holiday, a Saturday, or a Sunday, then the filing may be made on the next business day thereafter. See infra note 268. 19 See Rule 13(a)(2) of Regulation S-T. We also are amending 17 CFR 232.201(a) (“Rule 201(a) of Regulation S-T”) to make the temporary hardship exemption set forth in that rule—which applies to unanticipated technical difficulties preventing the timely preparation and submission of an electronic filing—unavailable to Schedules 13D and 13G, including any amendments thereto. Issue Current Schedule 13D New Schedule 13D Current Schedule 13G New Schedule 13G Initial Filing Deadline Within 10 days after acquiring beneficial ownership of more than 5% or losing eligibility to file on Schedule 13G. Rule 13d-1(a), (e), (f), and (g) Within five business days after acquiring beneficial ownership of more than 5% or losing eligibility to file on Schedule 13G. Rule 13d-1(a), (e), (f), and (g) QIIs & Exempt Investors: 45 days after calendar year-end in which beneficial ownership exceeds 5%. Rule 13d-1(b) and (d) QIIs: 10 days after month-end in which beneficial ownership exceeds 10%. Rule 13d-1(b) QIIs & Exempt Investors: 45 days after calendar quarter-end in which beneficial ownership exceeds 5%. Rule 13d-1(b) and (d). QIIs: Five business days after month-end in which beneficial ownership exceeds 10%. Rule 13d-1(b). Passive Investors: Within 10 days after acquiring beneficial ownership of more than 5%. Rule 13d-1(c) Passive Investors: Within five business days after acquiring beneficial ownership of more than 5%. Rule 13d-1(c). Amendment Triggering Event Material change in the facts set forth in the previous Schedule 13D. Rule 13d-2(a) Same as current Schedule 13D: Material change in the facts set forth in the previous Schedule 13D. Rule 13d-2(a) All Schedule 13G Filers: Any change in the information previously reported on Schedule 13G. Rule 13d-2(b) QIIs & Passive Investors: Upon exceeding 10% beneficial ownership or a 5% increase or decrease in beneficial ownership. Rule 13d-2(c) and (d) All Schedule 13G Filers: Material change in the information previously reported on Schedule 13G. Rule 13d-2(b). QIIs & Passive Investors: Same as current Schedule 13G: Upon exceeding 10% beneficial ownership or a 5% increase or decrease in beneficial ownership. Rule 13d-2(c) and (d). Amendment Filing Deadline Promptly after the triggering event. Rule 13d-2(a) Within two business days after the triggering event. Rule 13d-2(a) All Schedule 13G Filers: 45 days after calendar year-end in which any change occurred. Rule 13d-2(b) QIIs: 10 days after month-end in which beneficial ownership exceeded 10% or there was, as of the month-end, a 5% increase or decrease in beneficial ownership. Rule 13d-2(c) All Schedule 13G Filers: 45 days after calendar quarter-end in which a material change occurred. Rule 13d-2(b). QIIs: Five business days after month-end in which beneficial ownership exceeds 10% or a 5% increase or decrease in beneficial ownership. Rule 13d-2(c). Passive Investors: Promptly after exceeding 10% beneficial ownership or a 5% increase or decrease in beneficial ownership. Rule 13d-2(d) Passive Investors: Two business days after exceeding 10% beneficial ownership or a 5% increase or decrease in beneficial ownership. Rule 13d-2(d). Filing “Cut-Off” Time 5:30 p.m. Eastern Time. Rule 13(a)(2) of Regulation S-T 10 p.m. Eastern Time. Rule 13(a)(4) of Regulation S-T All Schedule 13G Filers: 5:30 p.m. Eastern Time. Rule 13(a)(2) of Regulation S-T All Schedule 13G Filers: 10 p.m. Eastern Time. Rule 13(a)(4) of Regulation S-T. As noted above, we are not adopting proposed Rule 13d-3(e). Instead, we discuss the circumstances in which a holder of a cash-settled derivative security, excluding SBS, may be deemed the beneficial owner of the reference covered class under Rule 13d-3. We also are not adopting the proposed exemption in 17 CFR 240.13d-6(d) (“Rule 13d-6(d)”), which the Commission proposed to enable certain persons to transact in derivative securities in the ordinary course of business without concern that they had formed a group under section 13(d)(3) or 13(g)(3), in part because we are not adopting proposed Rule 13d-3(e). To further clarify the disclosure requirements with respect to derivative securities, particularly cash-settled derivative securities, held by a person required to report on Schedule 13D, the Commission is adopting an amendment to Schedule 13D. Specifically, we are amending Item 6 of Schedule 13D, codified at Rule 13d-101, to remove any implication that a person is not required to disclose interests in all derivative securities that use a covered class as a reference security. This amendment is intended to eliminate any ambiguity regarding the scope of the disclosure obligations of Item 6 of Schedule 13D as to derivative securities, including with respect to any derivative not originating with, or offered or sold by, the issuer, such as a cash-settled option or SBS. As noted above, we are not adopting most of the proposed substantive amendments to Rule 13d-5. 20 We also are not adopting proposed 17 CFR 240.13d-6(c) (“Rule 13d-6(c)”), which would have specified certain circumstances under which two or more persons may coordinate and consult with one another and engage with an issuer without being subject to regulation as a group. Instead, we are issuing guidance regarding the appropriate legal standard for determining whether a group is formed. This guidance is intended to provide clarity on the circumstances under which a person may be deemed to have formed a group with another person or persons within the meaning of sections 13(d)(3) and 13(g)(3). 20 But see infra note 22 and sections II.C.2 and 3 for a discussion of the proposed amendments to Rule 13d-5 that we are adopting. We are adopting the proposed requirement that Schedules 13D and 13G be filed using a structured, machine-readable data language. We are, therefore, now requiring that all disclosures, including quantitative disclosures, textual narratives, and identification checkboxes, on Schedules 13D and 13G be filed using an XML-based language. 21 This requirement is intended to make it easier for investors and other market participants to access, compile, and analyze information that is disclosed on Schedules 13D and 13G. 21 Under this structured data requirement, only the exhibits to Schedules 13D and 13G will remain unstructured. Finally, we also are adopting certain technical revisions, some of which were not included among the Proposed Amendments. 22 22 Specifically, as proposed, we are: (1) changing the title of Rule 13d-5 from “Acquisition of securities” to “Acquisition of beneficial ownership”; (2) revising 17 CFR 240.13d-5(a) (“Rule 13d-5(a)”) to conform the text to the new title; (3) redesignating current Rule 13d-6 as new 17 CFR 240.13d-6(a) (“Rule 13d-6(a)”); and (4) redesignating current 17 CFR 240.13d-5(b)(2) (“Rule 13d-5(b)(2)”) as new 17 CFR 240.13d-6(b) (“Rule 13d-6(b)”). The Commission did not receive any substantive comments on these amendments, so we are adopting them as proposed for the reasons set forth in the Proposing Release. We also are making other technical changes not included in the Proposing Release, namely: (1) rescinding in its entirety Rule 13d-7 because Congress already repealed the statutory requirements under sections 13(d)(1), (d)(2), (g)(1), and (g)(2) for beneficial owners to deliver a copy of a Schedule 13D or 13G, and any amendments thereto, to the issuer of the covered class and any national securities exchanges where such equity securities are listed, see Public Law 111-203, 124 Stat. 1900 929R(a)(1)(B) through (4)(B) (2010); (2) making conforming amendments to Schedules 13D and 13G to remove the notes in those Schedules that refer to Rule 13d-7 and its requirements; (3) correcting incorrect cross references in Item 8 of Schedule 13G; and (4) replacing the gender-based pronouns used in Rules 13d-1, 13d-3, 13d-6, 13d-101, and 13d-102 with gender-neutral phrases and making additional conforming edits to the surrounding text as necessary. Although the Commission did not propose these amendments, we find good cause, in accordance with the Administrative Procedure Act (“APA”), Public Law 79-404, 60 Stat. 237 (June 11, 1946), that, in light of their technical nature, notice and public comment in respect of these amendments is impracticable, unnecessary, or contrary to the public interest. 5 U.S.C. 553(b)(3)(B). II. Discussion of the Final Amendments A. Amendments to Rules 13d-1 and 13d-2 and Rules 13 and 201 of Regulation S-T To Revise Filing Deadlines and Filing Date Assignment We are adopting a series of amendments to the deadlines for filing initial and amended beneficial ownership reports on Schedules 13D and 13G and expanding the timeframe within a given business day in which such filings may be timely made. These amendments are listed in section I above and discussed in more detail below. 1. Rule 13d-1(a), (e), (f), and (g) Section 13(d)(1) of the Exchange Act requires a disclosure statement to be filed “within ten days after [acquiring beneficial ownership of more than five percent of a covered class] or within such shorter time as the Commission may establish by rule.” 23 Consistent with this provision, Rule 13d-1(a) sets forth the 10-day filing deadline for the initial Schedule 13D. 24 Although the Dodd-Frank Act amended section 13(d)(1) to grant the Commission the authority to shorten the deadline for filing the initial Schedule 13D, the 10-day deadline has not been updated since it was enacted more than 50 years ago. 25 23 15 U.S.C. 78m(d)(1). 24 17 CFR 240.13d-1(a) (requiring that a Schedule 13D be filed “within 10 days after the acquisition” of beneficial ownership of more than 5% of a covered class). 25 Section 13(d)(1) of the Exchange Act was enacted by the Ninetieth Congress in 1968 through the approval of Senate Bill 510. Rule 13d-1(e), (f), and (g) set forth the initial Schedule 13D filing obligations for investors who are no longer eligible to rely upon Rule 13d-1(b) 26 or (c) 27 (which permit investors to file the more abbreviated Schedule 13G in lieu of the longer-form Schedule 13D). Rule 13d-1(e), (f), and (g) ensure that initial Schedule 13D filings uniformly are subject to a 10-day deadline, regardless of whether the beneficial owners were previously eligible to file a Schedule 13G in lieu of the Schedule 13D. 26 17 CFR 240.13d-1(b). 27 17 CFR 240.13d-1(c). Rule 13d-1(e) applies to persons who have been filing a Schedule 13G in lieu of Schedule 13D in reliance upon either Rule 13d-1(b) or (c). Rule 13d-1(b) and (c) both provide that a person may not rely on those provisions if he or she beneficially owns the relevant equity securities with the purpose or effect of changing or influencing the control of the issuer. 28 Institutional and non-institutional beneficial owners who are unable to certify that they do not hold beneficial ownership for the purpose of or with the effect of changing or influencing the control of the issuer or in connection with any transaction that would have such purpose or effect, as described more fully under Item 10 of Schedule 13G, or certain institutional investors that also acquire or hold beneficial ownership outside of the ordinary course of business, are considered to have, for purposes of this release, a “disqualifying purpose or effect.” 29 Rule 13d-1(e)(1) requires such persons to file their initial Schedule 13D within 10 days of losing their Schedule 13G eligibility because they beneficially own a covered class with a disqualifying purpose or effect. 28 The provision at 17 CFR 240.12b-2 (“Rule 12b-2 of Regulation 12B”) defines the term “control” to mean “the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise.” The provision at 17 CFR 240.12b-1 sets forth the scope of Regulation 12B and provides that all rules contained in Regulation 12B “shall govern . . . all reports filed pursuant to section[ ] 13.” 29 Whether investors are engaged in activity with the purpose or effect of changing or influencing control of an issuer, and thus holding beneficial ownership with a disqualifying purpose or effect, ordinarily is a determination that would be based upon the specific facts and circumstances. For that reason, the Commission has not provided extensive guidance on this issue. The Commission has previously expressed the view that most solicitations in support of a proposal specifically calling for a change of control of the company ( e.g., a proposal to seek a buyer for the company or a contested election of directors or a sale of a significant amount of assets or a restructuring of a corporation) would clearly have that purpose and effect. For a more expansive discussion of the Commission's reasoning and factors to consider when making this determination, see Amendments to Beneficial Ownership Reporting Requirements, Release No. 34-39538 (Jan. 12, 1998) [63 FR 2854 (Jan. 16, 1998)]. Similarly, Rule 13d-1(f) applies to persons who have been filing a Schedule 13G in lieu of Schedule 13D in reliance on Rule 13d-1(c). Rule 13d-1(c) provides that persons may not rely on that provision if they beneficially own 20 percent or more of a covered class. Rule 13d-1(f)(1) currently requires that such persons file their initial Schedule 13D within 10 days of losing their Schedule 13G eligibility because they beneficially own 20 percent or more of a covered class. Finally, Rule 13d-1(g) applies to persons who have been filing a Schedule 13G in lieu of Schedule 13D in reliance upon Rule 13d-1(b). Only QIIs may rely on Rule 13d-1(b). Further, in order to rely on Rule 13d-1(b), a QII must beneficially own the relevant equity securities in the ordinary course of its business. Rule 13d-1(g) currently requires that such persons either file their initial Schedule 13D or amend their Schedule 13G to indicate that they are now relying on Rule 13d-1(c) (assuming they are eligible to rely on that rule) within 10 days of losing their Schedule 13G eligibility under Rule 13d-1(b) because they either no longer are a QII or no longer beneficially own the relevant equity securities in the ordinary course of their business. Rule 13d-1(e), (f), and (g) operate as regulatory safeguards that reestablish the application of Rule 13d-1(a) to beneficial owners who previously relied on Rule 13d-1(b) or (c). Under Rule 13d-1(e), (f), and (g), beneficial owners “shall immediately become subject to” Rules 13d-1(a) and 13d-2(a), which provisions are reinstated anew with respect to those persons the moment they become ineligible to rely upon Rule 13d-1(b) and (c). a. Proposed Amendments In the Proposing Release, the Commission proposed to amend Rule 13d-1(a) to require a Schedule 13D to be filed within five days after the date on which a person acquires beneficial ownership of more than five percent of a covered class. The Commission stated that the deadline for filing an initial Schedule 13D should be revised in light of advances in technology and developments in the financial markets and noted that shortening that deadline would be consistent with previous efforts to accelerate public disclosures of material information to the market. 30 The Commission also asserted that the proposed five-day deadline would maintain an appropriate balance between the requirement that material information be timely disseminated to investors and the competing interest that undue burdens not be imposed in the change of control context. 31 In addition, the Commission stated that it was mindful of the need to balance the market's demand for timely information and the administrative burden placed upon a filer to adequately and accurately prepare that information. 32 Finally, the Commission noted that the current 10-day filing deadline “contributes to information asymmetries that could harm investors” and stated that shortening that deadline could increase transparency and provide assurance “that transactions are not being made based on mispriced securities caused by a prolonged lag in the dissemination of market-moving information,” thereby improving investor confidence, market efficiency, and liquidity. 33 30 Proposing Release at 13851. 31 Id. 32 Id. at 13852. 33 Proposing Release at 13850, 13852. In the Proposing Release, the Commission also proposed to amend the initial Schedule 13D filing deadline under Rule 13d-1(e)(1), (f)(1), and (g) for largely the same reasons that it proposed to amend Rule 13d-1(a). Specifically, the Commission proposed to make conforming revisions to Rule 13d-1(e), (f), and (g) so that persons who initially elected to report beneficial ownership on Schedule 13G, in lieu of a Schedule 13D, but subsequently lost their eligibility would be treated no differently from persons who make a Schedule 13D their initial filing. 34 Accordingly, the Commission proposed to amend Rule 13d-1(e), (f), and (g) to make the required Schedule 13D—or, in the case of Rule 13d-1(g), the amendment to Schedule 13G indicating that the filer is now relying on Rule 13d-1(c), if applicable—due no later than five days after the date on which the person became ineligible to report on Schedule 13G. 35 34 Id. at 13854. 35 Id. b. Comments Received Commenters 36 expressed a range of views on the proposed amendments to Rule 13d-1(a), (e), (f), and (g). A number of commenters supported shortening the deadline for filing an initial Schedule 13D from 10 days to five days. 37 Several commenters asserted that the proposed amendments would increase the timeliness and quality of information for market participants. 38 A number of commenters asserted that the proposed amendments would increase transparency and fairness in the financial markets. 39 36 Throughout the release, in describing some of the comments we received on the Proposed Amendments, we focus on those commenters that responded to a specific request for comment or question raised in the Proposing Release or Reopening Release, or that addressed a specific Proposed Amendment. We note that several commenters expressed general support or opposition for the Proposed Amendments or raised concerns or made recommendations that are unrelated to or beyond the scope of the Proposed Amendments; we do not, however, summarize all of their comments in this release. For the sake of brevity, we also do not cite letters that substantially duplicate comments made in other letters that we cite in this release. For example, in response to the Reopening Release, a number of commenters submitted substantially identical letters generally supporting some of the Proposed Amendments and expressing concerns or making recommendations with respect to other parts of the Proposed Amendments. See, e.g., Letter Type B, available at https://www.sec.gov/comments/s7-06-22/s70622-typeb.htm; Letter Type C, available at https://www.sec.gov/comments/s7-06-22/s70622-typec.pdf. We also note that several commenters submitted letters with substantially similar views as those expressed in Letter Type B, but with the letters worded sufficiently differently that they could not be consolidated with Letter Type B. See, e.g., letter from Gerardo Cruz (June 27, 2023). We note the same with respect to Letter Type C. See, e.g., letters from Chad Thompson (June 29, 2023); Bert Abanes (June 28, 2023). See infra note 37 for a discussion of Letter Type A. See infra note 458 for a discussion of Letter Type D and Letter Type E. 37 See, e.g., letters from Committee on Federal Regulation of Securities of the Section of Business Law of the American Bar Association (Apr. 28, 2022) (“ABA”) (expressly supporting only the proposed amendment to Rule 13d-1(a), but noting that “[t]he Committee is not unanimous in this view” and that “[t]here is support among some members of the Committee to further shorten the initial filing deadline to one or two calendar days” and that “there are other members of the Committee that suggest a five business day deadline is more appropriate”); Brandon Rees, Deputy Director of Corporations and Capital Markets, AFL-CIO (Apr. 11, 2022) (“AFL-CIO”) (expressly supporting only the proposed amendment to Rule 13d-1(a)); Americans for Financial Reform Education Fund (Apr. 11, 2022) (“AFREF”) (same); Americans for Financial Reform Education Fund, American Federation of Labor and Congress of Industrial Organizations (AFL-CIO), Communications Workers of America (CWA), Interfaith Center on Corporate Responsibility (ICCR), Public Citizen (June 27, 2023) (“AFREF, et al.”) (same); Anonymous (Feb. 19, 2022) (“Anonymous 1”); Anonymous (Feb. 19, 2022) (“Anonymous 3”); Anonymous (Feb. 20, 2022) (“Anonymous 5”); Anonymous (Mar. 14, 2022) (“Anonymous 11”); Anonymous (Mar. 14, 2022) (“Anonymous 12”); Anthony R., Individual Investors (Feb. 18, 2022) (“Anthony R.”); Better Markets (Apr. 11, 2022) (“Better Markets I”) (same); Better Markets (June 27, 2023) (“Better Markets II”) (same); Maria Ghazal, Senior Vice President and Counsel, Business Roundtable (Apr. 11, 2022) (“BRT”) (same); Curtis Robinson (Feb. 18, 2022) (“C. Robinson”); Richard F. McMahon, Jr., Senior Vice President, Energy Supply & Finance Edison Electric Institute (Mar. 22, 2022) (“EEI”); An Investor, Engineer (Apr. 4, 2022) (“Engineer”); Mark R. Allen, Executive Vice President, FedEx Corporation (Apr. 12, 2022) (“FedEx”); Freeport-McMoRan Inc./Douglas N. Currault II, Senior Vice President and General Counsel (Apr. 11, 2022) (“Freeport-McMoRan”); Tyler Gellasch, Executive Director, Healthy Markets Association (Mar. 22, 2022) (“HMA I”); Healthy Markets Association (Apr. 29, 2022) (“HMA II”) (same); Jack Pieper (Feb. 21, 2022) (“J. Pieper”); Joshua Soucie, Managing Director, Singularity Acquisitions LLC (Feb. 21, 2022) (“J. Soucie”); Jonah (Feb. 18, 2022) (“Jonah”); Juan, Relationship Banker II (Feb. 19, 2022) (“Juan”); Brandon Rees, Deputy Director of Corporations and Capital Markets, AFL-CIO (June 6, 2022) (“Labor Unions”) (same); Mark C. (Feb. 19, 2022) (“Mark C.”); Mike (Feb. 23, 2022) (“Mike”); Jeffrey S. Davis, Senior Vice President and Senior Deputy General Counsel, Nasdaq, Inc. (Apr. 12, 2022) (“Nasdaq”); National Investor Relations Institute (Apr. 15, 2022) (“NIRI”) (same); Phillip Worts (July 29, 2023) (“P. Worts”); Marc Steinberg, Radford Chair in Law and Professor of Law, Southern Methodist University (Feb. 22, 2022) (“Prof. Steinberg”) (same); Society for Corporate Governance (Apr. 13, 2022) (“SCG”) (same); Christina Maguire, President and Chief Executive Officer, Society for Corporate Governance and Matthew D. Brusch, President and CEO, National Investor Relations Institute (July 7, 2023) (“SCG & NIRI”) (same); Tammy Baldwin, Sherrod Brown, Bernard Sanders, Elizabeth Warren, Tammy Duckworth, and Jeffrey A. Merkley, United States Senators (July 18, 2022) (“Sen. Baldwin, et al.”) (same); SIFMA Asset Management Group, William Thurn, Managing Director, SIFMA AMG (Apr. 11, 2022) (“SIFMA AMG”) (same); Theodore N. Mirvis, Adam O. Emmerich, David A. Katz, Sabastian V. Niles, Jenna E. Levine, and Carmen X. W. Lu (Feb. 10, 2022) (“T. Mirvis, et al.”); Taj Reilly (Feb. 19, 2022) (“T. Reilly”); TIAA (Apr. 11, 2022) (“TIAA”) (same); Todd (Feb. 19, 2022) (“Todd”); Wachtell, Lipton, Rosen & Katz (Apr. 11, 2022) (“WLRK I”) (same); Wachtell, Lipton, Rosen & Katz (Oct. 4, 2022) (“WLRK II”); see also Letter Type B; Letter Type C. We note that commenters submitted a substantively identical version of the letter from Sen. Baldwin, et al. an additional 16 times. See Letter Type A, available at https://www.sec.gov/comments/s7-32-10/s73210-typeb.pdf. As such, every citation to the letter from Sen. Baldwin, et al. in this release should also be read as a citation to those additional 16 submissions of the substantively identical letter. 38 See, e.g., letters from ABA; Anthony R.; FedEx; Freeport-McMoRan; Jonah; P. Worts; T. Mirvis, et al. 39 See, e.g., letters from ABA; AFREF, et al.; Anonymous 5; Anonymous 12; Better Markets I; FedEx; Freeport-McMoRan; Labor Unions; Nasdaq; P. Worts; Sen. Baldwin, et al. Several commenters identified potential specific benefits of the proposed amendments. For example, some commenters asserted that the proposed amendments would be particularly beneficial for retail investors by providing them with additional information and transparency. 40 Another commenter stated that the proposed amendments would enable investors and the market to “better track when beneficial owners take significant positions in covered securities for purposes of controlling or exerting influence over issuers, resulting in more informed decision-making by investors and more accurate valuation of securities by the market.” 41 40 See, e.g., letters from C. Robinson (“I welcome all rules that require more disclosure and faster times to report[ ].”); J. Soucie; P. Worts. 41 See letter from TIAA; see also letter from P. Worts. Other commenters highlighted potential downsides of the current 10-day deadline. For example, one commenter described the 10-day deadline as costly to public companies and investors generally and based its support for the proposed amendments “on the fundamental concept that a public company must have timely information about its owners in order to engage with them effectively and respond promptly to their concerns.” 42 Another commenter stated that “[i]nvestors' and market participants' abilities to prudently manage their positions and exposures is materially undermined by the arbitrary, unnecessary, discriminatory delay in reporting.” 43 42 See letter from SCG; see also letter from NIRI (stating that the proposal “would also ensure that public companies are not ambushed and are better prepared to respond to an activist investor who has accumulated a significant position over a relatively short period of time”). 43 See letter from HMA I. Several commenters suggested that the proposed amendments would reduce information asymmetry among market participants. 44 Other commenters raised similar information asymmetry-based concerns regarding the 10-day filing deadline. For example, one commenter expressed concern that under the current deadline, pension funds are deprived of any short-term gains from hedge fund activism if they sell shares during the 10-day delay in disclosure of a beneficial ownership stake. 45 Another commenter asserted that the current 10-day deadline “disadvantages selling shareholders after the 5% threshold is reached and permits activist investors to ambush public companies, often by disclosing an ownership interest that far exceeds 5% of shares outstanding.” 46 Further, one commenter suggested that the proposed amendments could help address information asymmetries that facilitate “stealth” accumulations at artificially low market prices, which purportedly transfer value from public investors to those activists engaged in seeking ownership, control, or influence over the target company. 47 44 See, e.g., letters from ABA; AFREF; AFREF, et al.; Better Markets II; Freeport-McMoRan; Nasdaq; NIRI; SCG; SCG & NIRI; see also Letter Type C. One of these commenters stated that “if the filing window is shortened, institutional investors will be better able to manage liquidity shocks in a way that serves their ultimate beneficiaries, instead of costing them money by unknowingly selling undervalued shares.” See letter from AFREF, et al. 45 See letter from Labor Unions. 46 See letter from NIRI. 47 See letter from Better Markets I; see also letter from Better Markets II. Other commenters supported the proposed amendments based on changes in technology and developments in the financial markets. 48 For example, one commenter supported the proposal based on the “increasing effectiveness of activist campaigns and their decreased cost due to advances in information technology and the rise of concentrated economic ownership in the United States,” citing “cost-effective activism” due to both the fact that “little more than 10 to 15 institutions are the target audience” and “the Commission's new universal proxy rule.” 49 Similarly, other commenters described the current Schedule 13D filing deadline as “outdated.” 50 One commenter agreed with the expressed concern in the Proposing Release that material information about potential change of control transactions is not being disseminated to the public in a manner that would be considered timely in today's financial markets. 51 One commenter cited an April 2020 survey it conducted of its members (composed of corporate officers and investor relations consultants) indicating that 82 percent supported modernization of the Schedule 13D filing deadlines. 52 48 See, e.g., letters from ABA; AFL-CIO; Better Markets I; BRT; C. Robinson; FedEx; Freeport-McMoRan; HMA I; HMA II; NIRI; SCG; Sen. Baldwin, et al.; T. Mirvis, et al.; T. Reilly; WLRK I; WLRK II; see also Letter Type B. 49 See letter from WLRK II. The commenter also noted that “successful activism campaigns have been run by stockholders with relatively small stakes, often below or well below 5%.” Id. 50 See, e.g., letters from Sen. Baldwin, et al.; T. Mirvis, et al. 51 See letter from BRT. 52 See letter from NIRI. Several commenters noted that many foreign jurisdictions require beneficial ownership reporting on a shorter deadline than currently required under Regulation 13D-G. 53 One commenter disagreed with the notion expressed in the Proposing Release that the comparison of the beneficial ownership reporting deadline in the United States to foreign jurisdictions is imperfect because U.S. corporate law permits anti-takeover provisions that are not present in those jurisdictions. 54 To the contrary, that commenter asserted that some of those foreign jurisdictions are even less “stockholder” and “activism” friendly than the United States, making corporate takeovers and activism more difficult, and described the corporate laws and corporate governance practices of those foreign jurisdictions as compared to the United States (focusing, in particular, on Delaware corporate law). 55 Other commenters noted that the proposed amendments would be consistent with similar Commission efforts to accelerate filing deadlines. 56 53 See, e.g., letters from AFREF; Better Markets I; SCG; Sen. Baldwin, et al.; WLRK II. 54 See letter from WLRK II. 55 See id. The commenter also presented statistics indicating that, notwithstanding the stricter beneficial ownership reporting obligations and purportedly increased inhibitions on shareholder activism, those foreign jurisdictions have experienced increased shareholder activism in recent years. Id. Some commenters, however, disagreed with and questioned the utility of this analysis of foreign jurisdictions. See letters from Jose Ceballos, Council for Investor Rights and Corporate Accountability (Dec. 20, 2022) (“CIRCA III”); Richard B. Zabel, General Counsel Chief Legal Officer, Elliott Investment Management L.P. (Nov. 21, 2022) (“EIM III”); see also letter from Richard B. Zabel, General Counsel Chief Legal Officer, Elliott Investment Management L.P. (June 27, 2023) (“EIM IV”) (reiterating the points made in the commenter's letter dated Nov. 21, 2022). One of those commenters asserted that “regulatory structures, as well as cultural norms . . . mean that activism in non-U.S. markets is less prevalent than in the United States” which is “to the detriment of investors in those non-U.S. markets where, in many cases, there remains a lack of independent voices in the market able to hold boards and management accountable.” See letter from EIM III. The commenter also stated that, because activism is less prevalent in those foreign jurisdictions than in the U.S., “[s]ome level of increased activist engagement in a handful of non-U.S. markets . . . does not mean that the Commission should seek to emulate regulatory structures in those other jurisdictions.” Id. The other commenter noted that the analysis ignores that some of the cited foreign jurisdictions offer benefits to shareholders that the United States does not. See letter from CIRCA III. 56 See, e.g., letters from SCG; WLRK I. A number of commenters asserted that the proposed amendments would not impose significant costs or burdens on beneficial owners of more than five percent of a covered class. 57 For example, one of those commenters stated that the compliance costs of the proposed amendments “are unlikely to be unduly burdensome, in a manner that outweighs the benefits” of the proposal given the nature of investors that generally file a Schedule 13D and the technology available to them. 58 Another commenter agreed that the proposed amendments would be consistent in balancing investors' need for adequate disclosures with the burdens placed on filers to accurately prepare required disclosures. 59 57 See, e.g., letters from ABA; Anonymous 11; BRT; Freeport-McMoRan; J. Soucie; WLRK I. 58 See letter from WLRK I. 59 See letter from FedEx. Several commenters stated that the proposed amendments would not significantly reduce shareholder activism. 60 For example, one commenter asserted that the proposed five-day deadline would not significantly impair the ability of activists to pursue their agendas. 61 Another commenter questioned whether there is an empirical basis for asserting that the proposed amendments would prevent shareholder activism and engagement. 62 Some commenters asserted that the proposed amendments would not interfere with shareholder activism on environmental, social, or governance (“ESG”) issues because many such activists are not Schedule 13D filers. 63 One commenter was “not persuaded that a 10-day delay in beneficial ownership disclosure after acquiring a 5 percent stake is needed to incentivize . . . [a] large investor to be an activist investor.” 64 And, one commenter asserted that the proposed amendments are “more likely to adversely affect short-term behaviors than long-term oriented activism.” 65 60 See, e.g., letters from ABA; AFREF; Better Markets I; Better Markets II; HMA II; Labor Unions; Sen. Baldwin, et al.; WLRK I. 61 See letter from Better Markets I. The commenter stated that that many Schedule 13D filers currently do not avail themselves of the full 10-day filing period, many activists are effective in their campaigns without reaching the 5% beneficial ownership reporting threshold, and the proposed five-day deadline would give activists enough time to accumulate profits before public disclosure of their goals, enabling them to offset the costs of their activism. Id.; see also letter from Better Markets II (reiterating the point made in its first letter and citing the data and analysis in the DERA Memorandum for support). 62 See letter from HMA II. 63 See letters from Labor Unions; Sen. Baldwin, et al. One of those commenters noted that some of the most impactful ESG campaigns to date have occurred in Australia, where the beneficial ownership reporting deadline for a 5% stake is two business days, which “provides further evidence that a 10 day window is not needed to use shareholder activism to meaningfully change corporate behavior.” See letter from Sen. Baldwin, et al. The Commission is not expressing any view as to whether the measures described by the commenters referenced herein would constitute activities undertaken for the purpose of changing or influencing control of an issuer. Nothing stated in this release changes or supersedes the Commission's prior guidance regarding whether certain soliciting activity has a control purpose or effect. See supra note 29. 64 See letter from AFL-CIO. 65 See letter from WLRK I. In addition, a number of commenters stated that shareholder activism is not uniformly beneficial for issuers and their shareholders. 66 For example, one commenter asserted that hedge fund activism could be contributing to an emphasis on short-term gains over sustainable, long-term growth that benefits longer-term investors. 67 One commenter noted that while a Schedule 13D filing by an activist may often lead to an immediate bump in the issuer's stock price, there is no compelling evidence that activist interventions deliver long-term value to shareholders. 68 One commenter asserted that the current 10-day deadline may discourage companies from going public, inhibiting capital formation, based on the threat of activism and “the burden of being subject to attacks by activist investors, a number of whom have short-term agendas.” 69 One commenter stated that activist investors often pressure companies and their management to agree to their short-term demands that may or may not be in the long-term interests of shareholders, employees, and other stakeholders. 70 Further, one commenter cited a study indicating that activist hedge fund campaigns targeting public companies are associated with a reduction in jobs, research and development spending, and capital expenditures, which arguably harms employees. 71 66 See, e.g., letters from AFREF; Better Markets I; HMA II; Labor Unions; NIRI; SCG; Sen. Baldwin, et al.; WLRK I. 67 See letter from AFREF. The commenter also noted that while hedge fund activism is associated with short-term increases in shareholder value, the evidence is much more mixed on the question of whether hedge fund activism results in long-term gains. Id.; see also letter from Better Markets I (stating that the benefits of shareholders seeking to acquire or influence corporate control and policy are mixed because some act out of short-term profit motives, not a desire to promote long-term value). 68 See letter from WLRK I. 69 See letter from SCG. The commenter also stated that although activists would have less time to buy additional shares after crossing 5% under the proposal, there is no shareholder protection rationale that would justify forcing other investors to subsidize activists' efforts to build larger positions in issuers. Id. 70 See letter from NIRI. 71 See letter from Labor Unions. The commenter also asserted that the proposed amendments would benefit pension funds based on a study it cited that found that while company value tends to increase in the first three years after being targeted by an activist hedge fund, these gains tend to be reversed in the fourth and fifth years. Id.; see also letter from Sen. Baldwin, et al. (citing the same study for the proposition that “research . . . shows the stock price increase [associated with an activist's Schedule 13D filing] is temporary and in fact the company is often in a weaker economic position post-activist intervention”). But see letter from International Institute of Law and Finance (Nov. 1, 2022) (“Profs. Bishop and Partnoy II”) (critiquing the cited study, noting, among other things, that “a simple analysis of the data, not undertaken in that study, shows that employment levels at firms targeted by activists decrease substantially in the years prior to an activist intervention, violating the parallel trends assumption that is required to make any sort of causal inference from the empirical design”). Finally, commenters raised a variety of other points in support of the proposed amendments. For example, one commenter stated that the balance that Congress sought to strike in the Williams Act 72 was between activist investors seeking to change companies and those companies' management—not between an activist investor and a company's other investors. 73 One commenter stated that the proposed amendments could moderate the sudden, abrupt changes in corporate governance that often occur in issuers targeted by activist investors. 74 And, one commenter noted that the proposed amendments fall “squarely” within the Commission's legal authority under section 929R of the Dodd-Frank Act and align with the Williams Act's intent because Congress chose a 10-day deadline to accommodate the practical challenges associated with preparing and filing a Schedule 13D. 75 72 Public Law 90-439, 82 Stat. 454 (July 29, 1968). 73 See letter from HMA II. The commenter also stated that there is no evidence or legitimate policy rationale to support a connection between the purported benefits of activist strategies generally on the one hand, and the purported need to preserve the ability of the small subset of investors engaged in them to be able to trade while in possession of material, non-public information to the detriment of other investors—for precisely 10 days. Id. 74 See letter from AFREF. The commenter stated that the proposed amendments could decrease the likelihood of issuers that are not targeted by activist investors taking preemptive steps ( e.g., overspending on short-term shareholder payouts and forgoing investments necessary for long-term financial health and growth) to avoid becoming targets of activism. Id. The commenter also asserted that the proposed amendments would benefit shareholders and other market participants by facilitating sound corporate governance. Id. For example, the commenter stated that a shortened filing deadline would help investors ensure their asset managers are fulfilling their fiduciary duties and help inform the education and advocacy efforts of those with a stake in proxy contests, shareholder resolutions, and other important votes. Id. 75 See letter from Better Markets I. A number of commenters opposed shortening the initial Schedule 13D filing deadline to five days. 76 Several commenters expressed concern that the proposed amendments would disincentivize shareholder activism by reducing the amount of time that such shareholders have to accumulate positions in an issuer before filing a Schedule 13D, thereby depriving issuers and their shareholders of the positive benefits of such activism. 77 For example, one commenter stated that “if active shareholders are unable to establish an economically efficient pre-disclosure ownership stake, public company shareholders (and the economy more broadly) will be less likely to benefit from the improved stock price performance that often attends the monitoring and engagement activities pursued by engaged shareholders, given that such shareholders would have difficulty justifying certain engagements with issuers.” 78 Similarly, another commenter asserted that the proposal would “mak[e] it more costly for blockholders to build a sufficient position to effect change” and “reduce the profitability of, and therefore the incentive to pursue, activist strategies,” which would “reduce management's accountability to shareholders and corporate governance generally.” 79 And another commenter stated that “although the SEC requires an activist buyer to disclose information that the buyer has acquired, the SEC fails to ask whether the buyer would acquire the information initially” and suggested that, under the proposed deadline, “the buyer would often be unlikely to make the original investment in information.” 80 76 See, e.g., letters from Adrian Day, RIA (Feb. 12, 2022) (“A. Day”); Daniel Austin, Director, U.S. Policy and Regulation, Alternative Investment Management Association (Apr. 11, 2022) (“AIMA”); Ben Mason (June 26, 2023) (“B. Mason”); Bernard Sharfman (Mar. 22, 2022) (“B. Sharfman”) (expressly opposing only the proposed amendment to Rule 13d-1(a)); CIRCA (Apr. 11, 2022) (“CIRCA I”) (same); CIRCA III (same); Milan Dalal, CIRCA (June 27, 2023) (“CIRCA IV”) (same); Charles F. Pohl, Chairman, Dodge & Cox (Apr. 12, 2022) (“Dodge & Cox”); Edwin Fraser (Apr. 11, 2022) (“E. Fraser”) (same); Susan Olson, General Counsel and Sarah Bessin, Associate General Counsel, Investment Company Institute (Apr. 7, 2022) (“ICI I”); Irenic Capital Management LP (Apr. 11, 2022) (“ICM”) (same); Marcus Frampton (Mar. 16, 2022) (“M. Frampton”) (same); Managed Funds Association (Apr. 11, 2022) (“MFA”) (same); National Venture Capital Association (Apr. 11, 2022) (“NVCA”) (same); Perkins Coie LLP (Apr. 12, 2022) (“Perkins Coie”); Jeffrey N. Gordon, Professor of Law, Columbia Law School (June 20, 2022) (“Prof. Gordon”) (same); Robert Eccles and Shivaram Rajgopal (Mar. 31, 2022) (“Profs. Eccles and Rajgopal”) (same); Alan Schwartz, Sterling Professor, Yale Law School and the Yale School of Management and Steven Shavell, Samuel R. Rosenthal Professor of Law and Economics, Harvard Law School Director, John M. Olin Center for Law, Economics & Business, Harvard University (Apr. 12, 2022) (“Profs. Schwartz and Shavell I”) (same); Alan Schwartz, Sterling Professor, Yale Law School and the Yale School of Management and Steven Shavell, Samuel R. Rosenthal Professor of Law and Economics, Harvard Law School Director, John M. Olin Center for Law, Economics & Business, Harvard University (May 15, 2022) (“Profs. Schwartz and Shavell II”) (same); Edward P. Swanson, Texas A&M University, Glen M. Young, Texas State University, and Christopher G. Yust, Texas A&M University (Feb. 19, 2022) (“Profs. Swanson, Young, and Yust”) (same); Rolf Parta (Apr. 7, 2022) (“R. Parta”) (same); Allison K. Thacker, President and Chief Investment Officer, Rice Management Company, Treasurer, William Marsh Rice University (Mar. 21, 2022) (“Rice Management”) (same); Jennifer Nadborny, Simpson Thacher Bartlett LLP (Apr. 11, 2022) (“STB”) (same); Donna Anderson, Marc Wyatt, and Bob Grohowski, T. Rowe Price (Apr. 11, 2022) (“TRP”) (same). 77 See, e.g., letters from AIMA; CIRCA I; CIRCA III; CIRCA IV; Dodge & Cox; ICM; MFA; Prof. Gordon; Profs. Eccles and Rajgopal; Profs. Schwartz and Shavell I: Profs. Schwartz and Shavell II; Profs. Swanson, Young, and Yust; Rice Management; TRP. 78 See letter from ICM. 79 See letter from AIMA. 80 See letter from Profs. Schwartz and Shavell II (emphasis in original); see also letter from Profs. Schwartz and Shavell I. In addition, one commenter expressed concern that the proposed amendments would disproportionately disincentivize shareholder activism that is targeted towards reforms other than a sale of the issuer. 81 Another commenter asserted that the proposed amendments would inhibit an activist investor's ability to make overtures to an issuer's management prior to public disclosure and to consult with other shareholders to ensure that shareholders' opinions and proposals are considered when approaching management. 82 And, one commenter stated that the proposed amendments would particularly disincentivize activism at medium- and small-cap companies because a larger economic position is needed to offset the activists' costs. 83 81 See letter from Profs. Swanson, Young, and Yust. The comment letter also stated that if the proposed accelerated initial Schedule 13D filing deadline reduces activists' ability to profit from price discovery, the proposed amendments could reduce market efficiency. Id. 82 See letter from CIRCA I. In a separate letter, this commenter also disagreed with those supporting commenters that expressed concern about the negative effects that activists may have on targeted companies and cited data indicating that activist interventions benefit all shareholders in both the short- and long-term. See letter from CIRCA III. 83 See letter from Prof. Gordon; see also letter from ICM (predicting a reduction in shareholder activism and related benefits for other shareholders and stating that the predicted “harms . . . will be most pronounced at micro-, small-, and mid-capitalization issuers . . . where the majority of active shareholder engagement occurs”). Several commenters took issue with the information asymmetry concerns that the Commission expressed as a justification for the proposed amendments. 84 For example, one commenter cited data indicating that shareholders who sell during the period after an activist accumulates more than five percent beneficial ownership but before the activist files its Schedule 13D still generally benefit from that activist's accumulation because the stock price generally increases prior to the Schedule 13D filing. 85 Some commenters stated that the information asymmetry described in the Proposing Release is no different from the general asymmetry that exists in the market when any investor—activist or otherwise—determines to invest the time and resources to develop and then implement an investment thesis. 86 Similarly, some commenters asserted that information asymmetry is a quintessential element of the U.S. capital markets where investors are, and should be, entitled to profit from their analysis, hard work, and risk taking. 87 Other commenters stated that selling shareholders are not forced to sell their shares and do so voluntarily, either seeking liquidity or because they have doubts about the issuer's prospects, and noted that such shareholders have the same access as the Schedule 13D filer to disclosures from both the issuer and insiders. 88 Some commenters asserted that the Commission ignored the fact that although some investors may miss out on selling at an appreciated price once the Schedule 13D is filed, a larger number of investors generally will benefit from the efforts of an activist. 89 Finally, one commenter asserted that the Williams Act was not intended to address information asymmetry-based concerns or the interests of shareholders who elect to sell prior to the disclosure of an initial Schedule 13D and cited to the legislative history and a U.S. Supreme Court decision to support such assertion. 90 84 See, e.g., letters from AIMA; CIRCA I; CIRCA III; CIRCA IV; Dodge & Cox; ICM; Prof. Gordon; Profs. Swanson, Young, and Yust; TRP. In addition, one commenter did not oppose the proposal but expressed concern about the information asymmetry-based justification. See letter from Elliott Investment Management L.P. (Apr. 11, 2022) (“EIM I”). That commenter stated, among other things, that “the suggestion that an activist's awareness of her confidential intention to build a position in a public company should prohibit her from trading is both illogical and inconsistent with established law” and contrasted the proposal with the “recently proposed short sale reporting rulemaking” in which “the Commission . . . expressly provided an alternative that protects the confidentiality of short sellers and their strategies, in recognition that disclosure would vitiate the value of their research.” Id. (citing Short Position and Short Activity Reporting by Institutional Investment Managers, Release No. 34-94313 (Feb. 25, 2022) [87 FR 14950 (Mar. 16, 2022)] (“Short Position Reporting Proposal”)); see also letter from Richard B. Zabel, General Counsel & Chief Legal Officer, Elliott Investment Management L.P. (Sept. 18, 2023). 85 See letter from Profs. Swanson, Young, and Yust. 86 See, e.g., letters from CIRCA I; ICM; Prof. Gordon. These commenters also asserted that the Commission has long recognized the legitimacy of this asymmetry, including by allowing confidential treatment in Form 13F filings and in other contexts. Id. 87 See, e.g., letters from CIRCA I; ICM; Prof. Gordon. 88 See, e.g., letters from AIMA; ICM. Similarly, one commenter noted the absence of data indicating that shareholders are harmed by the timing of when they sell a security under the current Schedule 13D reporting regime and posited that shareholders selling during the 10-day period are generally sophisticated, non-retail investors seeking liquidity based on an investment strategy which is unrelated (and indifferent) to disclosure indicating whether an activist has a stake in the company. See letter from CIRCA III. 89 See letters from AIMA; TRP. 90 See letter from ICM (citing Rondeau v. Mosinee Paper Corp., 422 U.S. 49 (1975)); see also letters from B. Sharfman (“[T]he U.S. Supreme Court has repeatedly and unambiguously stated that the `sole purpose' of the Williams Act was for the protection of investors who are confronted with a cash tender offer.” (citing Piper et al. v. Chris-Craft Industries, Inc., 430 U.S. 1 (1977)); EIM IV (citing Rondeau, 422 U.S. 49, for the same proposition, but not expressly opposing the proposal). A number of commenters also disagreed with the Commission's technological advancement- and financial market development-based justifications for the proposed acceleration of the beneficial ownership reporting deadlines. 91 For example, some commenters asserted that neither Congress nor the Commission previously suggested that technological ability to file is or should be the primary basis to determine the appropriate filing deadlines for Schedules 13D and 13G. 92 One commenter asserted that the Commission has not made significant technological advances over the years to its own systems that market participants rely on to prepare Schedules 13D and 13G, making it challenging and costly for investors to gather the information about beneficial ownership they need to file Schedules 13D and 13G. 93 One commenter asserted that technological advances do not support shortening the filing deadline as proposed because despite advances in technology, the filing process still has numerous operational components that take time to complete. 94 Another commenter stated that recent trends indicate that activist investors are having a moderate and declining impact in the United States and, therefore, the Commission should “encourage new forms of activism, not suppress them.” 95 91 See, e.g., letters from AIMA; CIRCA IV; Dodge & Cox; ICI I; ICM; Robert E. Bishop, Fellow, UC Berkeley School of Law Center for Law and Business, Frank Partnoy, Adrian A. Kragen Professor of Law, UC Berkeley School of Law (Apr. 11, 2022) (“Profs. Bishop and Partnoy I”); STB; see also letter from Investment Adviser Association (Apr. 11, 2022) (“IAA”) (neither clearly supporting nor opposing the proposed amendments, but expressing certain concerns and making certain recommendations regarding the proposed amendments). 92 See, e.g., letters from AIMA; ICI I; ICM; STB. 93 See letter from ICI I. 94 See letter from IAA. The commenter cited legal developments since 1968, including various anti-takeover mechanisms and the adoption of section 13(f) and Form 13F, as well as certain technological developments that provide public companies with the benefit of nearly-contemporaneous insight into their shareholder base and that have facilitated management entrenchment as offsetting factors to any technological advancements during that time period that would increase the ease of making a Schedule 13D filing. Id. 95 See letter from Profs. Bishop and Partnoy I. The commenter further said that “given the development of poison pills, public company boards are no longer monitored by hostile takeovers, so activism is the remaining recourse.” Id. Several commenters expressed concerns that the proposed amendments do not align with the purpose or objectives of the Williams Act. For example, one commenter asserted that the proposed amendments “would necessarily be considered to be beyond [the Commission's] statutory authority and an `abuse of discretion,' if not `arbitrary and capricious' under the APA” because the proposed rule does not connect the proposed reduction in filing time with what the commenter described as the “sole purpose” of the Williams Act under Supreme Court precedent, namely the protection of shareholders confronted with a cash tender offer. 96 Another commenter stated that not all of the investors who file on Schedule 13D are activist investors engaging in the types of activities the Williams Act seeks to regulate. 97 Other commenters expressed concern that the proposed amendments would disrupt the balance that the Williams Act sought to strike. 98 96 See letter from B. Sharfman. 97 See letter from STB. The commenter noted that many Schedule 13D filers are former Exempt Investors who became disqualified to file on Schedule 13G because they acquired more than 2% beneficial ownership in a 12-month period. Id. The commenter also noted that many Schedule 13D filers are investors who seek a minority position and potentially a board seat (given their desire to more actively monitor their sizeable investment), but seek to work cooperatively with the issuer, with the goal of building shareholder value for all investors, and possess no intent to replace a majority of the board of directors, launch a tender offer, or make an offer to take the company private. Id. 98 See letters from CIRCA IV; ICM. Some opposing commenters detailed the potential compliance burdens that the proposed amendments could impose. For example, some commenters expressed concern that the proposed five-day deadline would be unduly burdensome for smaller and non-institutional beneficial owners. 99 Other commenters asserted that the proposed amendments would present compliance challenges 100 and create significant reporting and monitoring burdens. 101 One commenter expressed concern that the proposed amendments could negatively impact the ability of investors and their advisors to draft meaningful disclosures and engage in thoughtful analysis. 102 99 See letters from A. Day; E. Fraser. 100 See letter from NVCA. 101 See letter from Perkins Coie; see also letter from Jennifer W. Han, Executive Vice President, Chief Counsel & Head of Global Regulatory Affairs, Managed Funds Association and National Association of Private Fund Managers (July 24, 2023) (“MFA & NAPFM”) (describing potential costs associated with the Proposed Amendments, but not expressly opposing the Proposed Amendments). 102 See letter from STB. For example, the commenter suggested that in order to avoid making a “late” filing with the Commission, beneficial owners may shift to boilerplate disclosures in their Schedule 13D filings, which can be prepared more quickly but are less useful to investors and regulators. Id. Other commenters raised various other concerns regarding the proposed amendments. For example, a number of commenters expressed concerns that the proposed amendments would increase management entrenchment and reduce shareholder engagement and corporate accountability. 103 One commenter stated that although “some purchasers may file within fewer than the required 10 days for Schedule 13D,” that “does not justify accelerating the reporting timeline.” 104 One commenter also noted that the proposed accelerated initial Schedule 13D filing deadline could result in activist investors relying more heavily on derivatives, such as total return swaps and call options. 105 One commenter asserted that the Commission has not provided a compelling justification for the proposed amendments or provided evidence to support its concerns regarding information asymmetries and reporting gaps that would warrant the proposed acceleration of the beneficial ownership reporting deadlines. 106 One commenter expressed concern that the proposed amendments would induce a front-running effect that would distort market pricing and increase market volatility. 107 Other commenters asserted that investors already have access to all of the volume and price data for publicly traded companies that they need to take appropriate action and, therefore, do not need additional information regarding holdings by significant beneficial owners. 108 103 See, e.g., letters from AIMA; CIRCA I; CIRCA III; Dodge & Cox; ICM; M. Frampton; MFA; Rice Management; TRP. 104 See letter from AIMA. According to the commenter, “[m]ost investors will have a total aggregate investment in mind,” and “[w]hen the investor reaches this level and exceeds the 5% threshold, she files her Schedule 13D,” but “[t]his standard market practice in no way suggests that all other holders who are continuing to accumulate shares should be required to file earlier.” Id. 105 See letter from Profs. Swanson, Young, and Yust. 106 See letter from ICI I. 107 See letter from Rice Management. 108 See letters from ICM; R. Parta. In addition, one commenter expressed concern that the Commission has not cited a market event or failure related to the existing beneficial ownership regime to support the proposed amendments. 109 That commenter distinguished the proposed amendments from other congressional efforts to accelerate public disclosures based on the fact that the proposed amendments apply to unrelated, third-party investors rather than issuers or insiders. 110 Finally, one commenter asserted that the proposed amendments conflict with contract law in the United States, which generally refrains from imposing disclosure obligations on buyers of property. 111 109 See letter from AIMA. 110 Id. The commenter also stated that although some beneficial owners file a Schedule 13D before the end of the 10-day deadline, this does not support shortening the deadline because the decision as to when to file is based on each investor's target accumulation level. Id. 111 See letter from Profs. Schwartz and Shavell I. Some of the commenters that generally supported the proposed amendments also made various recommendations to the Commission. For example, one commenter recommended that the Commission require that an initial Schedule 13D be filed by the end of the day on which a person acquires beneficial ownership of more than five percent of a covered class. 112 Another recommended that the Commission require that an initial Schedule 13D be filed within one calendar day of a person acquiring three percent, rather than more than five percent, of a covered class and that a person be prohibited from acquiring more than three percent until one business day after filing a Schedule 13D. 113 Similarly, one commenter recommended that the Commission require that an initial Schedule 13D be filed within one business day after crossing the five percent threshold and institute a moratorium on the acquisition of beneficial ownership of additional equity securities of an issuer by any acquirer required to file a Schedule 13D that would be in effect from the acquisition of a five percent beneficial ownership stake until two business days after filing the Schedule 13D. 114 112 See letter from Corey (Feb. 19, 2022) (“Corey”). 113 See letter from Prof. Steinberg. 114 See letter from WLRK I. The commenter asserted that the proposed five-day deadline will still substantially fail to serve the purpose of the Williams Act to require the timely release of information to the investing public with respect to the accumulation of substantial ownership of an issuer's voting securities. Id. According to the comment, this will “provide hedge funds and activist shareholders ample time to accrue significant stakes in an issuer and “improperly exploit, and profit from, information asymmetries at the expense of other public investors.” Id. The commenter also stated that the moratorium is necessary to address information asymmetries and ensure the markets have time to assess impact of Schedule 13D filing and likened it to the 10-business day cooling off period applicable to Passive Investors switching from Schedule 13G filers to Schedule 13D filers. Id. Other supporting commenters recommended that the Commission require that an initial Schedule 13D be filed within two business days, consistent with the filing deadline for a Form 4. 115 One supporting commenter recommended that the Commission require that an initial Schedule 13D be filed within three days rather than five days. 116 Other supporting commenters recommended that the Commission consider further shortening the beneficial ownership reporting deadlines without specifying an alternative filing deadline. 117 115 See, e.g., letters from NIRI; SCG; SCG & NIRI; see also Letter Type C; letter from PL Salvati (Aug. 9, 2023) (“PL Salvati”) (neither clearly supporting nor opposing the proposal, but recommending a two-business day deadline). 116 See letter from T. Reilly. 117 See, e.g., letters from AFREF; Freeport-McMoRan; HMA I. In addition, some of the commenters that generally opposed the proposed amendments made various recommendations to the Commission. For example, one recommended that rather than shortening the Schedule 13D filing deadline, the Commission should impose a prohibition on tipping by an activist as soon as it reaches the five percent threshold until it files a Schedule 13D. 118 Another recommended that the Commission include an assets under management-based threshold for the proposed accelerated Schedule 13D filing deadlines. 119 118 See letter from Prof. Gordon. 119 See letter from A. Day. Other opposing commenters recommended that the Commission consider a “tiered approach” to Rule 13d-1(a). 120 For example, one commenter suggested a tiered approach designed to vary the reporting deadline for an initial Schedule 13D based on the issuer's market capitalization without any limitation on acquisitions during the period between the time that the investor acquires more than five percent of a covered class and the time that the initial Schedule 13D is filed. 121 Another opposing commenter recommended that the Commission require those who cross certain thresholds ( e.g., 10 percent) or accumulate certain amounts after crossing five percent ( e.g., an additional three percent) to file on the more accelerated timeline, but allowing investors who trigger Schedule 13D filings for more technical reasons and who are not accumulating stock in connection with a potential activist engagement ( e.g., proxy contests or intended take-private activity) to continue filing under the current regime. 122 120 See letters from ICM; STB. 121 See letter from ICM. 122 See letter from STB. Some opposing commenters recommended that if the Commission revises the initial Schedule 13D filing deadline, it should adopt a different deadline than proposed. For example, one commenter recommended that the Commission consider extending the filing deadline ( e.g., to 15 or 30 days) rather than accelerating it. 123 One commenter recommended that the Commission require an initial Schedule 13D be filed within eight days rather than the proposed five days. 124 Other commenters recommended that the Commission require an initial Schedule 13D be filed in five business days rather than five calendar days. 125 Some of those commenters suggested that a five-business day deadline would be more appropriate in light of the steps required to prepare and file an accurate Schedule 13D, 126 and one commenter noted that most analogous securities laws governing reporting of material changes ( e.g., Form 8-K and Exchange Act section 16 filings) require filings within time periods designated in business days rather than calendar days. 127 123 See letter from E. Fraser. The commenter also recommended that the Commission consider a provision for when a shareholder's position goes over the 5% threshold because of ordinary corporate actions that result in the number of outstanding shares to drop such that the shareholder unwittingly holds over the 5% of outstanding shares and recommended that the Commission consider increasing the threshold from greater than 5% beneficial ownership to 10%. Id. 124 See letter from MFA. 125 See, e.g., letters from Dodge & Cox; ICI I; SIFMA AMG; STB; see also IAC Recommendations (recommending that the Commission adopt a five-business day deadline, rather than a five-calendar day deadline, for an initial Schedule 13D filing). 126 See letters from Dodge & Cox; ICI I. 127 See letter from STB; see also IAC Recommendations. Finally, some commenters that neither clearly supported nor opposed the proposed amendments made recommendations to the Commission. Several commenters recommended an alternative filing deadline than proposed, with some suggesting that the Commission require an initial Schedule 13D be filed within one day, 128 within two days, 129 five business days, 130 or on the same day as the event triggering the filing obligation. 131 Some commenters expressed a general preference for a deadline expressed in “business days” rather than “calendar days.” 132 And, one commenter recommended that to the extent the Commission is concerned about Schedule 13D filers acquiring additional shares after crossing the five percent threshold without public disclosure, it should prohibit trading after crossing the five percent threshold rather than accelerating the filing deadlines. 133 128 See, e.g., letters from Jason Dunlop, Software Developer for the FAA (Feb. 19, 2022) (“J. Dunlop”); John Kennedy, Tax Paying American Citizen (Feb. 22, 2022) (“J. Kennedy”); Phillip, Retail Investor (Feb. 19, 2022) (“Phillip”). These commenters suggested that all beneficial ownership reports should be filed within one day. See also letter from Juan B. (Aug. 14, 2023) (“Juan B.”) (recommending that the initial Schedule 13D and 13G filing deadlines under Rule 13d-1(a), (b), and (d) be shortened to one day). 129 See letter from Charles Jacobs, USCG (Feb. 20, 2022) (“C. Jacobs”). 130 See letters from IAA; Profs. Bishop and Partnoy II; Robert Bishop, Associate Professor, Duke Law School, and Frank Partnoy, Adrian A. Kragen Professor of Law, UC Berkeley School of Law, Berkeley Haas (Affiliated Faculty) (June 27, 2023) (“Profs. Bishop and Partnoy III”). One of these commenters asserted that five calendar days would be extremely challenging for filers to obtain and verify all the information needed to ensure the accuracy and completeness of an initial Schedule 13D filing. See letter from IAA. 131 See, e.g., letters from Chris McEntee, Retail Investor (Mar. 14, 2022) (“C. McEntee”); David Choate (Aug. 2, 2023) (“D. Choate”). These commenters suggested that all beneficial ownership reports should have a same-day filing deadline. 132 See, e.g., letters from IAA; Profs. Bishop and Partnoy III. One of these commenters recommended that the Commission use business days to give filers sufficient time to analyze and prepare Schedules 13D and 13G and make it more likely that the Commission, issuers, and the marketplace will receive beneficial ownership information that is accurate and complete and asserted that the use of business days instead of calendar days when establishing the filing deadlines will not have a detrimental impact on the proposed benefits of shorter deadlines. See letter from IAA. Another of these commenters expressed the belief that “there is now a broad consensus that the final rule should be framed in terms of business (or trading) days.” See letter from Profs. Bishop and Partnoy III. 133 See letter from Committee on Securities Law of the Business Law Section of the Maryland State Bar Association (Apr. 11, 2022) (“MSBA”). c. Final Amendments We are amending Rule 13d-1(a), (e), (f), and (g) to shorten the initial Schedule 13D filing deadline. We are adopting a five-business day 134 deadline, however, rather than the proposed five-calendar day deadline based on the input we received from commenters. 134 The term “business day” is not defined in section 13(d) or 13(g) or any rule of Regulation 13D-G. Accordingly, in the Proposing Release, the Commission proposed to define “business day” for purposes of Regulation 13D-G to mean any day, other than Saturday, Sunday, or a Federal holiday, from 6 a.m. to 10 p.m. Eastern Time. Proposing Release at 13847, n.5. One commenter addressed this proposal, expressing concern that the proposed definition of “business day” could raise confusion as to on which business day a material change occurred if the event took place outside of the hours set forth in that definition ( i.e., 6 a.m. to 10 p.m. Eastern Time). See letter from EIM I. Accordingly, the commenter recommended that the “business day” definition comprise the full 24-hour period of any given day based on the customary definition of the term. Id. To avoid the concern expressed by this commenter, we are adopting the commenter's recommendation. As such, the term “business day” for purposes of Regulation 13D-G will be defined to mean any day, other than Saturday, Sunday, or a Federal holiday, from 12:00 a.m. to 11:59 p.m. Eastern Time. We believe this will avoid any confusion as to the date on which a beneficial ownership report is due if, for example, a person incurs a filing obligation before 6 a.m. or after 10 p.m. on a day that is not a Saturday, Sunday, or Federal holiday. It is important to note, however, as stated at the outset of Regulation 13D-G, that Regulation S-T governs the preparation and submissions of filings in electronic format and should be read in conjunction with the rules contained within Regulation 13D-G, including Rules 13d-1 and 13d-2. Thus, even though the definition of “business day” encompasses an entire day, a Schedule 13D or 13G must be submitted by direct transmission to the Commission in accordance with the times set forth in Rule 13(a) of Regulation S-T in order to be deemed to have been filed on that day. See infra section II.A.5 for a more detailed discussion of Rule 13(a) of Regulation S-T, including the amendments we are adopting to extend the filing “cut-off” time for Schedules 13D and 13G. As noted above, Rule 13d-1(a) currently requires an initial Schedule 13D to be filed within 10 days after the date on which a person acquires beneficial ownership of more than five percent of a covered class. 135 We are amending Rule 13d-1(a) to require a Schedule 13D to be filed within five business days after the date 136 of such acquisition. Similarly, as discussed above, Rule 13d-1(e), (f), and (g) currently require an initial Schedule 13D to be filed within 10 days after the date on which a person loses its Schedule 13G eligibility. We are amending those rules to require such Schedule 13D to be filed within five business days after such date. 135 Under section 21 of the Exchange Act, the Commission has the authority to investigate and enforce violations of section 13(d)(1) and Rule 13d-1(a) and may seek to impose various remedies for late filings, such as injunctive relief, cease-and-desist orders or civil monetary penalties. Importantly, no state of mind requirement exists for violations of section 13(d)(1) and corresponding Rule 13d-1(a). See SEC v. Levy, 706 F. Supp. 61, 63-69 (D.D.C. 1989) (holding a defendant liable notwithstanding the defendant's assertion that his attorney “misinformed defendant about his obligation to disclose” information on Schedule 13D because scienter is not an element of such violations); see also SEC v. Savoy Indus., Inc., 587 F.2d 1149, 1167 (D.C. Cir. 1978) (“Indeed, the plain language of section 13(d)(1) gives no hint that intentional conduct need be found, but rather, appears to place a simple and affirmative duty of reporting on certain persons. The legislative history confirms that Congress was concerned with providing disclosure to investors, and not merely with protecting them from fraudulent conduct.”); Oppenheimer & Co., Inc., 47 SEC 286, 1980 WL 26901, at *1-2 (May 19, 1980) (“We have previously held that the failure to make a required report, even though inadvertent, constitutes a willful violation.”). To the extent a person willfully fails to comply with section 13(d), a beneficial owner also has exposure to criminal liability under section 32(a) of the Exchange Act. 136 We also are revising Rule 13d-1(a) to state that the initial Schedule 13D must be filed within five business days “after the date of such acquisition” rather than the current formulation of “after such acquisition.” This modification, which the Commission proposed, is intended to clarify that, for purposes of determining the filing deadline, the first day in the five-business day count towards reaching the deadline is the day after the date on which beneficial ownership of more than 5% is acquired (rather than the date of such acquisition). We also are adopting similar changes to Rule 13d-1(c) and (f)(1), as those rules currently contain language similar to the “after such acquisition” formulation currently in Rule 13d-1(a). We do not believe that a similar change is required for Rule 13d-1(e) and (g), as those rules use different formulations. See 17 CFR 240.13d-1(e)(1) and (g) (currently requiring an initial Schedule 13D be filed “within 10 days” of the filing trigger date). For purposes of determining the filing deadline under these amendments, the Commission must receive the filing by the fifth business day after the date on which the initial Schedule 13D filing obligation arises— i.e., the date on which a person acquires beneficial ownership of more than five percent of a covered class under Rule 13d-1(a) or the date on which a person loses eligibility to file on Schedule 13G under Rule 13d-1(e), (f), and (g)—in order for the filing to be considered timely. Pursuant to our amendment to Rule 13(a)(4) of Regulation S-T, discussed in section II.A.5 below, the filing will have to be submitted by direct transmission commencing on or before 10 p.m. Eastern Time on the due date. 137 137 See infra section II.A.5 for a discussion of our amendment to Rule 13(a)(4) of Regulation S-T, which extends the filing “cut-off” time for Schedules 13D and 13G from 5:30 p.m. Eastern Time to 10 p.m. Eastern Time. We believe the current 10-day filing deadline for an initial Schedule 13D filing should be revised to ensure investors receive material information in a manner that is considered timely in light of advancements in technology and developments in the financial markets that have occurred since that deadline was enacted in 1968. Those technological advancements include, for example, market professionals' use of information technologies to compile the necessary data and prepare a filing, 138 as well as their ability to submit filings electronically through the Commission's Electronic Data Gathering, Analysis, and Retrieval (“EDGAR”) system. 139 In addition, the use of modern information technology and other developments in the financial markets may facilitate an investor's accumulation of a large equity stake more quickly than at the time Congress enacted the Williams Act. 140 Before 1993, “the prevailing practice” was to “settl[e] securities transactions within five business days of trade date.” 141 Since then, the Commission has shortened the settlement cycle three times, most recently adopting rule amendments this year that require settlement of most transactions in securities within one business day after the trade date (with which compliance will be required by May 28, 2024). 142 Because a shortened settlement cycle enables investors to access the proceeds of their transactions more quickly, investors also may be able to acquire a significant equity stake more quickly than when settling their transactions within five business days of trade date. 143 Congress, in the Dodd-Frank Act, expressly empowered the Commission to shorten the deadline for filing the initial Schedule 13D. 144 Because of those advances in technology and developments in the financial markets, we are now exercising that authority to shorten the initial Schedule 13D filing deadline. 138 See, e.g., letters from Better Markets I (noting “technological advancements over the last 54 years [that] have reduced the need for a 10-day reporting period,” including “vastly more efficient data compilation methods”); SCG (noting that “[e]very fund manager with the resources to amass a 5% stake in a company should have sufficient record-keeping technology to determine” the amount of their beneficial ownership in a rapid manner); Leo E. Strine, Jr., Who Bleeds When the Wolves Bite? A Flesh-and-Blood Perspective on Hedge Fund Activism and Our Strange Corporate Governance System, 126 Yale L.J. 1870, 1895, 1960-61 (2017) (describing the “disclosure regime under Section 13 of the Securities Exchange Act” as “antiquated” and stating that “[i]t seems entirely clear to me that the idea of Section 13 was that an investor should come public as soon as reasonably possible after hitting the 5% threshold and that the reporting deadline was due to what it took to type up, proof, and deliver to Washington the required filing in 1968, when word processors and electronic filing with a button push did not exist”). 139 In mandating that all Schedules 13D and 13G be filed electronically, the Commission reasoned that such a transition was necessary to facilitate “more rapid dissemination of, and easier access to, financial and other material information . . . than under our current paper filing system” and cited to “increased efficiencies in the filing process, which will significantly reduce the filing time required under traditional methods of paper delivery.” See Rulemaking for EDGAR System, Release No. 34-35113 (Dec. 19, 1994) [59 FR 67752 (Dec. 30, 1994)]; Mandated EDGAR Filing for Foreign Issuers, Release No. 34-45922 (May 14, 2002) [67 FR 36678 (May 24, 2002)]; see also Adam O. Emmerich et al., Fair Markets and Fair Disclosure: Some Thoughts on the Law and Economics of Blockholder Disclosure, and the Use and Abuse of Shareholder Power, 3 Harv. Bus. L. Rev. 135, 143 (2013) (noting that the 10-day Schedule 13D filing deadline reflected “commercial and technological realities that existed in 1968, [which] would have included the time required to mail the Schedule 13D to the SEC's office”); letter from Wachtell, Lipton, Rosen & Katz to Elizabeth M. Murphy, Sec'y, U.S. Sec. & Exch. Comm'n (Mar. 7, 2011) (“Wachtell Petition”) at 1-7, available at https://www.sec.gov/rules/petitions/2011/petn4-624.pdf (petitioning the Commission to propose amendments to the beneficial ownership reporting rules to, among other things, shorten the Schedule 13D filing deadline from 10 days to one business day based, in part, on “[c]hanges in technology, acquisition mechanics and trading practices [that] have given investors the ability to make these types of reports with very little advance preparation time” and the fact that “the markets rely on the expectation that material information wil1 be disseminated promptly and widely, in no small part due to the impact of the internet and online information exchange”). 140 See, e.g., letter from SCG. This commenter noted, for example, that “investment managers [in 1968] didn't have access to email, instant messaging, fax machines, market data terminals, computer-assisted trading technology, or alternative `dark pool' trading venues that help facilitate the accumulation of significant positions.” Id. The commenter also noted that “[d]aily trading volumes on U.S. exchanges, which averaged 22 million shares in 1968, have grown by more than 1,000 times.” Id. 141 Shortening the Securities Transaction Settlement Cycle, Release No. 34-96930 (Feb. 15, 2023) [88 FR 13872, 13873 (Mar. 6, 2023)]. 142 Id. at 13873, 13916. 143 See letter from SCG (“Fifty-four years ago, there was no standard period for settling securities trades; today the settlement cycle is two business days and the Commission recently proposed shortening that period further to `T+1' (one business day) by 2024 to reduce risks to investors.”). See also infra text accompanying note 677 for further discussion of some ways in which investors may be able to acquire a significant equity stake more quickly in today's financial markets. 144 Public Law 111-203, 124 Stat. 1900 929R(a)(1)(A) (2010). We note that our shortening of the initial filing deadline for Schedule 13D is consistent with previous congressional and Commission efforts to accelerate public disclosures of material information to the market. 145 For example, in 2002, when the Commission accelerated the deadlines for issuers to submit their periodic reports, it reasoned that “[s]ignificant technological advances over the last three decades have both increased the market's demand for more timely corporate disclosure and the ability of companies to capture, process and disseminate this information.” 146 Similarly, the Commission has long recognized the benefits of more expedient reporting, stating, for example, that “a lengthy delay before . . . information becomes available makes the information less valuable to investors.” 147 145 For example, the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”) amended section 16(a) of the Exchange Act to require that change of beneficial ownership reports under section 16(a) of the Exchange Act be filed by officers, directors and beneficial owners of more than 10% of a covered class “before the end of the second business day following the day on which the subject transaction has been executed.” On Aug. 27, 2002, the Commission adopted amendments to implement the accelerated deadline for Form 4 filings, shortening the deadline from 10 days after the close of each calendar month to two business days after a filing obligation is triggered. See Ownership Reports and Trading by Officers, Directors and Principal Security Holders, Release No. 34-46421 (Aug. 27, 2002) [67 FR 56461 (Sept. 3, 2002)]. On Mar. 16, 2004, the Commission amended Form 8-K to generally require that such filings be made within four business days of a triggering event. In adopting the accelerated timeline, the Commission explained the amended requirement “should enhance investor confidence in the financial markets.” Additional Form 8-K Disclosure Requirements and Acceleration of Filing Date, Release No. 34-49424 (Mar. 16, 2004) [69 FR 15593 at 15611 (Mar. 25, 2004)]. The Commission further explained that “[t]he requirement of enhanced, timely disclosure should raise investors' expectations regarding the amount and timing of information that reporting companies must make available to the public” and that “[c]onfidence in the expectation of such enhanced disclosure should provide more certainty to those investors that they are making investment decisions in a more transparent market, which should reduce market volatility as a result of uncertainty of the availability of accurate timely information about public companies.” Id. 146 Acceleration of Periodic Report Filing Dates and Disclosure Concerning website Access to Reports, Release No. 34-46464 (Sept. 5, 2002) [67 FR 58479 (Sept. 16, 2002)]. We recognize that these accelerated deadlines applied to periodic filings made by issuers, whereas sections 13(d) and (g) relate to filings made by investors. See supra note 110 and accompanying text. We also recognize that the acceleration of these deadlines was prompted, in part, by section 409 of the Sarbanes-Oxley Act, which “added Section 13(l) of the Exchange Act . . . [to] require[ ] disclosure on a rapid and current basis of such additional information concerning material changes in the financial condition or operations of the issuer,” id. at n.15 and accompanying text (emphasis added), whereas no such “rapid and current” language exists in sections 13(d) and 13(g). Nonetheless, the technological advances that have increased both the market's demand for more timely disclosure and the ability of issuers to file more rapidly are equally applicable to the information disclosed on Schedule 13D and available to investors making Schedule 13D filings. For example, Congress recognized the market's demand for more timely disclosure of non-issuer filings by accelerating the deadline for section 16 filings in the Sarbanes-Oxley Act. See supra note 145. As such, we believe that these technological advances and market practices also support accelerating the initial Schedule 13D filing deadline. 147 Acceleration of Periodic Report Filing Dates and Disclosure Concerning Website Access to Reports, Release No. 34-46464 (Sept. 5, 2002) [67 FR 58479, 58483 (Sept. 16, 2002)]; see also H.R. Rep. 90-550 (1967) (“The persons seeking control, however, have information about themselves and about their plans which, if known to investors, might substantially change the assumptions on which the market price is based. The bill is designed to make relevant facts known so that shareholders have a fair opportunity to make their decision.”). Despite those efforts to accelerate various other reporting deadlines, the initial Schedule 13D filing deadline has remained unchanged since its enactment in 1968. As a number of commenters pointed out, there have been significant changes in technology and developments in the financial markets in the intervening years that have rendered the 10-day deadline “outdated.” 148 Commenters also highlighted some costs that the current 10-day deadline may be imposing on market participants ( i.e., by delaying the disclosure of potentially material information) 149 and identified some potential benefits of shortening that deadline, including increased timeliness of information and improved transparency and fairness in the financial markets. 150 We agree with those commenters that shortening the initial Schedule 13D filing deadline will increase the timeliness of the disclosure of material information, thereby improving market transparency, facilitating better-informed decision-making by investors, and enhancing the efficiency of resource allocation ( i.e., the direction of capital and other resources to their most productive uses) across the economy. 151 148 See supra notes 48-52 and accompanying text. 149 See supra notes 42-43 and accompanying text. 150 See supra notes 38-41 and accompanying text. 151 See infra section IV.C.1.a.ii. We recognize that several commenters opposed the proposed amendments to Rule 13d-1(a), (e), (f), and (g). Some commenters asserted that neither Congress nor the Commission previously suggested that technological ability to file should be the primary basis to determine the appropriate initial Schedule 13D filing deadline. 152 There is some indication, however, that when enacting the 10-day deadline, Congress considered the amount of time a beneficial owner would need to prepare and submit a filing. 153 As noted above, there have been significant technological advancements since 1968 that have made it easier to prepare and file a Schedule 13D more quickly. 154 There also is some indication that Congress enacted section 13(d), in part, to provide shareholders with material information regarding potential changes in control in a timely manner to facilitate their investment decisions. 155 Because changes in technology and developments in the financial markets since 1968 have facilitated investors' abilities to rapidly accumulate beneficial ownership, 156 we believe it is appropriate to shorten the initial Schedule 13D deadline so that the rate at which shareholders become aware of such accumulations keeps pace. 157 152 See supra note 92 and accompanying text. 153 See, e.g., Full Disclosure of Corporate Equity Ownership and in Corporate Takeover Bids: Hearing on S. 510 Before the Subcomm. on Securities of the S. Comm. on Banking and Currency, 90th Cong. 136 (1967) (statement of Stanley Kaplan, Professor, University of Chicago) (stating that “[r]equiring the filing . . . within seven days after acquisition of 10% of equity securities seems to provide an unduly short time for preparation of a document of that magnitude and significance” and noting that “[i]t will take longer to prepare and check such a document properly”). 154 See supra notes 138-139 and accompanying text. 155 See Full Disclosure of Corporate Equity Ownership and in Corporate Takeover Bids: Hearing on S. 510 Before the Subcomm. On Securities of the S. Comm. On Banking and Currency, 90th Cong. 25 (1967) (statement of Manuel F. Cohen, Chairman, Securities and Exchange Commission) (“We think that this bill would improve our ability to elicit . . . information [regarding changes of control] . . . in a timely way, that is necessary for appropriate investor information and judgment.”); see also id. at 70 (statement of Donald J. Calvin, Vice President, New York Stock Exchange) (noting that Senator Harrison A. Williams, Jr. stated that “[t]he primary objective of this bill . . . is to provide full and timely disclosure to stockholders” and stating that “[d]isclosure to stockholders of events which may affect investment decisions is and has been for many years a primary object of exchange policy” and that “[w]e consider timely disclosure . . . vital to the fair operation of a securities market”). 156 See supra note 140 and accompanying text. 157 We recognize that several commenters disagreed that technological advancements and other developments in the financial markets justify shortening the initial Schedule 13D deadline as proposed. See supra notes 91-95 and accompanying text. For example, some commenters noted that despite advances in technology, the filing process still has numerous operational components that take time to complete. See letter from IAA; see also letter from STB (stating that “calculation of beneficial ownership remains an extremely manual process, can involve significant judgment and relies on third party information”). Others described some ways in which it may be more difficult to accumulate a significant equity stake in today's financial markets. See infra notes 678-679 and accompanying text. As an initial matter, we expect that the change from the proposed five-calendar day deadline to a five-business day deadline should mitigate these concerns. See infra note 165 and accompanying text. In addition, for the reasons discussed infra notes 166-168 and accompanying text, we believe that our analyses of the current timing of Schedule 13D filings and accumulations of significant equity stakes demonstrate that Schedule 13D filers are capable, utilizing modern technology and in light of the characteristics of today's financial markets, of complying with the amended five-business day deadline. This is especially so given the sophistication and size of many Schedule 13D filers. See supra note 58 and accompanying text. Finally, some commenters expressed concerns about filers' ability to meet the proposed deadline (as well as the other Schedule 13D and 13G filing deadlines) given the amount of time it may take to obtain EDGAR filer codes. See, e.g., letters from MSBA; STB. To ensure they obtain their EDGAR filer codes in a timely manner, we generally expect filers to begin the process of applying for their EDGAR filer codes before they have incurred a filing obligation ( e.g., as they begin to acquire shares with a control intent but before crossing the 5% threshold). Filers should note that the Commission's staff reviews all Form ID applications, and filers should allow sufficient time for that review. Further, the Commission's staff works diligently to process Form IDs promptly upon receipt of an application. Many commenters also expressed concern that shortening the initial Schedule 13D filing deadline could, among other things, disincentivize shareholder activism by reducing the amount of time such shareholders have to accumulate positions in an issuer's covered class before filing a Schedule 13D. 158 According to those commenters, this reduction of time could deprive issuers and their shareholders of the positive benefits of such activism, thereby increasing management entrenchment and reducing shareholder engagement and corporate accountability. 159 158 See supra notes 77-83 and accompanying text. 159 See supra notes 77-83, 103 and accompanying text. Although we primarily are concerned with ensuring that investors receive material information in a timely manner, we agree that we should remain conscious of the competing interest that undue burdens not be imposed on shareholders engaging in change of control transactions. 160 In the Proposing Release, the Commission “recognize[d] the chilling effect that a shortening of the initial Schedule 13D filing deadline could have on a shareholder's ability . . . to effect changes at companies” if the shortened deadline increases the costs and reduces the incentives for shareholders attempting to effect a change of control. 161 Yet, the Commission further stated that it did not believe “that a shortening of the deadline would unduly disrupt that balance,” noting that “many Schedule 13D filers currently do not avail themselves of the full 10-day filing period.” 162 A number of commenters similarly asserted that the proposed five-day deadline would not significantly impede shareholder activism or impose significant costs or burdens on beneficial owners of more than five percent of a covered class. 163 160 See Full Disclosure of Corporate Equity Ownership and in Corporate Takeover Bids: Hearing on S. 510 Before the Subcomm. on Securities of the S. Comm. on Banking and Currency, 90th Cong. 1 (1967) (statement of Manuel F. Cohen, Chairman, Securities and Exchange Commission) (“It must be emphasized again that in establishing requirements which will make this important information available to stockholders, we must be careful not to tip the scales to favor either incumbent management or those who would seek to oust them. We believe that the provisions of the present bill . . . reflect an appropriate balance among competing interests which, at the same time, will fulfill the need of public stockholders to be fully informed about the control and potential control of the company in which they have invested.”); H.R. Rep. No. 1711, at 4 (1968) (“The bill avoids tipping the balance of regulation either in favor of management or in favor of the person making the takeover bid. It is designed to require full and fair disclosure for the benefit of investors while at the same time providing the offeror and management equal opportunity to fairly present their case.”); 113 Cong. Rec. 24, 664 (1967) (noting that “takeover bids should not be discouraged, since they often serve a useful purpose by providing a check on entrenched but inefficient management”) (statement of Sen. Harrison A. Williams, Jr.). 161 Proposing Release at 13851. The Commission noted academic research indicating that large blockholders may improve the share price and the corporate governance of the companies in which they invest and that all of a company's shareholders enjoy these benefits. Proposing Release at 13851, n.30. The Commission further recognized that shortening the initial Schedule 13D filing deadline could reduce the profitability of such investments, making large blockholders less inclined to make those investments or engage with the companies in ways that produce such benefits. Id. This is consistent with the concerns that many opposing commenters expressed. See supra notes 77-83 and accompanying text; see also infra section IV.C.1.b.i. 162 Id. 163 See supra notes 57-65 and accompanying text. Notwithstanding this support for the proposed five-calendar day deadline, we have decided to instead adopt a five-business day deadline. This change from the proposal comports with a recommendation that a number of commenters, including several that opposed the proposed amendments, made to the Commission. 164 Further, this shift to a “business days”-based deadline also will help to address a variety of concerns that commenters expressed about the burdens associated with the proposed five-day deadline. Specifically, five business days (as compared to five calendar days) gives beneficial owners additional time to accumulate positions in an issuer before filing a Schedule 13D and to prepare and file an accurate Schedule 13D. 165 As with the proposed five-calendar day deadline, we also note that many Schedule 13D filings currently are made within the amended five-business day deadline. 166 This demonstrates that at least some Schedule 13D filers are likely to be unaffected by the shortened deadline. And, many Schedule 13D filers are sophisticated, large investors that hav [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2023-22678. Public record. Not legal advice.