determining whether an amendment was due for a pre-existing Schedule
13D filing, and evaluating the availability of the section
13(d)(6)(B) exemption. See id.
    \567\ Proposing Release at 13870.
---------------------------------------------------------------------------

b. Comments Received
    The Commission did not receive any comments on proposed Rule 13d-
5(b)(1)(iii) and (b)(2)(ii).

c. Final Amendments
    For the reasons set forth in the Proposing Release,\568\ we are
adopting the text of Rule 13d-5(b)(1)(iii) and (b)(2)(ii) substantially
as proposed. We also are redesignating these provisions as Rule 13d-
5(b)(1)(ii) and (b)(2)(i) and slightly modifying them to account for
the possibility that group members may make acquisitions in furtherance
of the group's common purpose on the same day the group has been
formed. Accordingly, the rule text will now attribute acquisitions by
group members to the group at any time after the group has been formed
rather than after the date on which the group has been formed.
---------------------------------------------------------------------------

    \568\ See id.
---------------------------------------------------------------------------

3. Proposed Rule 13d-5(b)(1)(iv) and (b)(2)(iii)
a. Proposed Amendments
    The Commission proposed amendments to Rule 13d-5 to carve out from
the purview of proposed Rule 13d-5(b)(1)(iii) and (b)(2)(ii) intra-
group transfers of equity securities of a covered class.\569\
Specifically, proposed Rule 13d-5(b)(1)(iv) would provide that a group
under section 13(d)(3) will not be deemed to have acquired beneficial
ownership in a covered class if a member of the group becomes the
beneficial owner of additional equity securities in such covered class
through a sale by, or transfer from, another member of the group.
Proposed Rule 13d-5(b)(2)(iii) would contain nearly identical language,
with conforming changes to address circumstances in which a member of a
group under section 13(g)(3) becomes the beneficial owner of additional
equity securities in a covered class through a sale by, or transfer
from, another member of the group.
---------------------------------------------------------------------------

    \569\ Id. at 13870-71.
---------------------------------------------------------------------------

b. Comments Received
    The Commission did not receive any comments on proposed Rule 13d-
5(b)(1)(iv) and (b)(2)(iii).
c. Final Amendments
    For the reasons set forth in the Proposing Release, we are adopting
the text of Rule 13d-5(b)(1)(iv) and (b)(2)(iii) substantially as
proposed, but redesignating these provisions as Rule 13d-5(b)(1)(iii)
and (b)(2)(ii). We also are slightly modifying the rule text to account
for the possibility that group members may make intra-group transfers
on the same day but after the time at which the group has been formed
instead of ``after the date of group formation.''

D. Proposed Amendments to Rule 13d-6 To Create Certain Exemptions

    Congress granted the Commission the authority to issue exemptions
from the application of sections 13(d) and 13(g). The Commission can,
under section 13(d)(6)(D), exempt acquisitions ``as not entered into
for the purpose of, and not having the effect of, changing or
influencing the control of the issuer or otherwise as not comprehended
within the purposes of [section 13(d)].'' \570\ Congress similarly
granted the Commission authority, under section 13(g)(6), to exempt any
person or class of persons from section 13(g) ``as it deems necessary
or appropriate in the public interest or for the protection of
investors.'' \571\ The Commission exercised this authority when it
adopted Rule 13d-6, titled ``Exemption of certain acquisitions.'' Rule
13d-6 currently sets forth one exemption from section 13(d) for the
acquisition of securities of an issuer by a person who, prior to such
acquisition, was a beneficial owner of more than five percent of the
securities of the same class as those acquired, provided certain
conditions are met.\572\
---------------------------------------------------------------------------

    \570\ 15 U.S.C. 78(m)(d)(6).
    \571\ 15 U.S.C. 78(m)(g)(6).
    \572\ 17 CFR 240.13d-6.
---------------------------------------------------------------------------

1. Proposed Amendments
    In the Proposing Release, the Commission proposed to exempt certain
circumstances from resulting in a person being deemed to have acquired
beneficial ownership of, or otherwise to beneficially own, equity
securities of a covered class for purposes of sections 13(d) and 13(g).
Specifically, the Commission proposed to amend Rule 13d-6 to:
     Add new paragraph (c) to create an exemption from sections
13(d)(3) and 13(g)(3) for certain circumstances in which two or more
persons take concerted actions with respect to an issuer or a covered
class; and
     Add new paragraph (d) to create an exemption from sections
13(d)(3) and 13(g)(3) for certain circumstances in which two or more
persons enter into an agreement setting forth the terms of a derivative
security.
    The Commission proposed these amendments to Rule 13d-6 to exempt
certain actions taken by two or more persons from the scope of sections
13(d)(3) and 13(g)(3) if those actions do not have the purpose or
effect of changing or influencing the control of an issuer and thus are
not within the purpose of section 13(d).
    In light of the proposed amendments to Rule 13d-5, the Commission
proposed to add new paragraph (c) to Rule 13d-6 to avoid potentially
chilling communications among shareholders or impeding shareholders'
engagement with issuers where those activities are undertaken without
the purpose or effect of changing or influencing control of the issuer
(and are not made in connection with or as a participant in any
transaction having such purpose or effect).\573\ Proposed Rule 13d-6(c)
would provide that two or more persons would not be deemed to have
acquired beneficial ownership of, or otherwise beneficially own, an
issuer's equity securities as a group solely because of their concerted
actions related to an issuer or its equity securities, including
engagement with one another or the issuer, provided they meet certain
conditions. The Commission noted that such interactions, depending upon
the level of coordination and degree to which the persons advocated in
furtherance of a common purpose specified within the statutory
framework, could be found to satisfy the ``act as'' a group standard
under section 13(d)(3) or 13(g)(3) for the purpose of ``holding'' a
covered class.\574\ To help ensure that the exemption is available only
where such persons independently determine to take concerted actions,
the proposed exemption would be available only if such persons are not
obligated to take such actions (e.g., pursuant to the terms of a
cooperation agreement or joint voting agreement).\575\
---------------------------------------------------------------------------

    \573\ Proposing Release at 13872.
    \574\ Id. at 13873.
    \575\ Id.
---------------------------------------------------------------------------

    In addition, the Commission proposed to add new paragraph (d) to
Rule 13d-6, in light of proposed new Rule 13d-3(e), to avoid
impediments to certain financial institutions' ability to conduct their
business in the ordinary course.\576\ Proposed Rule 13d-6(d) would have
provided that two or more persons would not be deemed to have formed a
group under section 13(d)(3) or 13(g)(3) solely by virtue of their
entrance into an agreement governing the terms of a derivative
security. This exemption would have been available if the agreement is
a bona fide purchase and sale agreement entered into in the ordinary
course of business. Further, the exemption would have been available
only if such persons did not enter into the agreement with the purpose
or effect of changing or influencing control of the issuer, or in
connection with or as a

participant in any transaction having such purpose or effect.
---------------------------------------------------------------------------

    \576\ Id.
---------------------------------------------------------------------------

2. Comments Received
    Some commenters supported proposed Rule 13d-6(c),\577\ while others
generally supported the proposal's intent but expressed some
reservations regarding Rule 13d-6(c) as proposed.\578\ Some of those
commenters generally indicated that the exemption (as proposed or as
modified in accordance with their recommendations) could provide
clarity that would help prevent the chilling of communications among
shareholders and shareholder engagement with issuers.\579\ In addition,
one commenter appeared to support the inclusion of the ``no
obligation'' to act concept in the second prong of the proposed
exception and noted that when the institutional investors that are its
members act jointly, they are acting independently, consistent with
their fiduciary, legal, and other obligations to their fund
participants and beneficiaries.\580\
---------------------------------------------------------------------------

    \577\ See, e.g., letters from Anonymous (Mar. 13, 2022)
(``Anonymous 10''); Kerrie Waring, Chief Executive Officer, ICGN
(June 27, 2023) (``ICGN''); Kyle (Mar. 13, 2022) (``Kyle''); Perkins
Coie.
    \578\ See, e.g., letters from Ceres (generally supporting the
proposal, but stating that the rule, as proposed, could create some
ambiguity as to the circumstances under which a group is formed and
suggesting changes to the proposal); Jeff Mahoney, General Counsel,
Council of Institutional Investors (Apr. 8, 2022) (``CII'') (same);
ICI I (supporting the intent of the proposal, but stating that the
exemption, as proposed, would be too narrow and could create
additional uncertainty regarding the circumstances under which a
group is formed); Shareholder Rights Group, Interfaith Center on
Corporate Responsibility and The Shareholder Commons (Apr. 11, 2022)
(``Interfaith Center, et al.'') (endorsing the comments in the
letter from Ceres).
    \579\ See letters from Ceres; CII; ICGN; ICI I; Perkins Coie.
    \580\ See letter from CII.
---------------------------------------------------------------------------

    Other commenters opposed the proposed Rule 13d-6(c) exemption.\581\
Some commenters appeared to base their opposition on the argument that
such an exemption would impliedly define what a group is by stating
what it is not.\582\ Several commenters said that ambiguity in the
proposed exemption could inhibit market participants' ability to
readily discern when a ``purpose or effect of changing or influencing
control'' has been manifested.\583\ One commenter further submitted
that the subjective ``control intent'' standard likely will create more
uncertainty and confusion than it will resolve.\584\ One commenter
indicated, in light of its comments on the proposed amendments to Rule
13d-5, that ``[t]his rule [exemption] would chill the kind of
shareholder communications that are central to a proxy contest'' and
stated that ``[c]onsultation among fellow shareholders and discussion
with the activist are . . . essential.'' \585\
---------------------------------------------------------------------------

    \581\ See, e.g., letters from B. Mason; CIRCA I; Dennis and Mary
Spohn (June 25, 2023); EIM I; NBG; Prof. Edwards, et al.; Prof.
Gordon; Prof. Webber; see also letter from SIFMA AMG (describing the
proposed exemption as ``problematic'' and recommending that it not
be adopted if the Commission also does not adopt the proposed
amendments to Rule 13d-5).
    \582\ See letters from CIRCA I; Prof. Edwards, et al.; Prof.
Webber. These commenters characterized the proposed exemption as
setting forth the exclusive circumstances under which two or more
persons may engage with one another or an issuer without being
regulated as a group. One of these commenters further said that the
Commission's description of proposed Rule 13d-6(c) ``indicate[d]
that two shareholders of the same Covered Security that coordinate
in any manner regarding the holding would be deemed to be a group''
unless those shareholders qualify for the proposed exemption and
that ``[t]his is not consistent with the legislative history
underlying the Williams Act.'' See letter from CIRCA I. And, one of
these commenters asserted that the effect of proposed Rule 13d-6(c),
in tandem with the proposed amendments to Rule 13d-5, on shareholder
communications could raise concerns under the First Amendment. See
letter from Prof. Edwards, et al.; see also supra note 503 and
accompanying text.
    \583\ See letters from EIM I; SIFMA AMG.
    \584\ See letter from EIM I.
    \585\ See letter from Prof. Gordon.
---------------------------------------------------------------------------

    A number of commenters made recommendations regarding proposed Rule
13d-6(c).\586\ Some commenters requested that coordination with respect
to Rule 14a-8 shareholder proposals be expressly made exempt.\587\
Several commenters requested that coordination with respect to ``vote
no'' campaigns be expressly made exempt.\588\ Other commenters
requested that it be made clear that the state of mind of one person
would not be imputed to another for purposes of determining the
availability of the exemption.\589\ Some commenters asked that the ``in
connection with [any change of control] transaction'' language be
removed from the exemption.\590\ One of those commenters stated that
the ``in connection with'' language ``might be read too broadly and
have an unintended chilling effect of the sort of communications that
routinely occur today.'' \591\ Some commenters indicated that the
``indirectly obligated to act'' standard was in need of clearly defined
boundaries and/or should be deleted.\592\ One of these commenters
asserted that the ``indirectly obligated'' standard is vague and would
engender additional uncertainty, and recommended that the Commission
eliminate the proposed condition that ``[s]uch persons, when taking
such concerted actions, are not directly or indirectly obligated to
take such actions.'' \593\ One commenter stated the Commission should
consider the circumstances under which investors advocating for
specific changes (e.g., board composition or diversity) might later be
subjected to an inquiry about whether their communications or
activities were protected by the exemptions given the terms in the
proposal such as ``solely,'' ``only,'' ``indirectly,'' ``purpose,''
``effect,'' and ``contemplated.'' \594\
---------------------------------------------------------------------------

    \586\ See letters from AFREF; Ceres; CII; IAA; ICGN; ICI I;
Interfaith Center, et al.; NBG; Prof. Edwards, et al.; SSC; STB.
    \587\ See letters from AFREF; Ceres; ICI I; Interfaith Center,
et al.
    \588\ See letters from AFREF; Ceres; CII; Interfaith Center, et
al. For example, one commenter expressed support for the
recommendations of another commenter that ``the Commission [should]
clarify the Rule 13d-6(c) exception to ensure it covers launching
and participating in `vote no' campaigns and communications with
Schedule 13D filers post-filing.'' See letter from AFREF (indicating
support of a corresponding recommendation in the letter from CII).
    \589\ See letters from ICI I; Interfaith Center, et al.; SSC.
    \590\ See letters from Ceres; CII.
    \591\ See letter from CII. The commenter stated ``that the
positive step taken by adopting Rule 13d-6(c) could be undercut if
there is a concern among investors that communicating with a Rule
13D `group' could expose investors to being considered as a part of
that `group.' '' Id.
    \592\ See letters from Ceres; CII; ICI I.
    \593\ See letter from ICI I.
    \594\ See letter from Prof. Edwards, et al.
---------------------------------------------------------------------------

    In response to the Commission's solicitation for comments on
proposed Rule 13d-6(d), several commenters expressed support for the
proposal.\595\ One commenter stated that the proposal would ``help
investors understand when they could become subject to regulation as a
`group' under these circumstances and avoid costly regulatory filings
for activity in the ordinary course of business.'' \596\
---------------------------------------------------------------------------

    \595\ See letters from ICGN; O'Melveny & Myers; Perkins Coie.
    \596\ See letter from ICGN.
---------------------------------------------------------------------------

    Several other commenters opposed the proposed Rule 13d-6(d)
exemption.\597\ Some of those commenters questioned whether the
proposed exemption is necessary, and implied that the proposal's
inclusion in this rulemaking intimates that ordinary course of business
transactions currently present risks of group formation.\598\ One of
those commenters said that it was fairly settled that a bilateral
transaction, negotiated at arm's length, would not by itself be
sufficient to create a group absent other indicia of group status such
as agreements to vote and other factors.\599\ Another of these
commenters questioned whether this

proposed provision or any explicit exemption is necessary or would
instead create further uncertainty given that market participants have
been entering into ordinary course derivatives transactions for years
without treating these transactions as creating a group.\600\ One
commenter expressed concerns regarding potential negative collateral
effects of the exemption.\601\ This commenter said that proposed Rule
13d-6(d) suggests that, ``outside of the safe harbor,'' the parties to
a derivative security transaction may be deemed to form a ``group'' and
implied that the exemption's existence would create a risk of eroding
the confidence of parties to any ``ordinary'' securities purchase and
sale transactions that they do not constitute a ``group.'' \602\
---------------------------------------------------------------------------

    \597\ See letters from ABA; EIM I; Engineer; Gabriel Morales,
Retail Investor (Feb. 23, 2022) (``G. Morales''); IAA; ICI I; J.
Kennedy; PSCM; SIFMA AMG; STB.
    \598\ See letters from ABA; ICI I; STB.
    \599\ See letter from STB.
    \600\ See letter from ICI I.
    \601\ See letter from ABA.
    \602\ See id.
---------------------------------------------------------------------------

    Some commenters indicated that few dealers or market participants
would be able to rely on the exemption or that it would not serve its
intended purpose.\603\ Another commenter similarly implied the
exemption should not be adopted because ``financial institutions would
not just be apprehensive about, or marginally disincentivized from,
entering into transactions with an activist counterparty'' but instead
``would avoid the risk altogether, and wholly refrain from engaging in
these transactions that are economically useful and unrelated to the
purposes of Section 13.'' \604\ Another commenter echoed the concerns
regarding the projected heightened level of risk arising in relation to
the exemption and stated that the exemption would significantly impair
ordinary-course derivatives transactions by dealers and financial
institutions, even with counterparties who do not have any control
intent.\605\ A similar criticism was offered by a commenter who
explained that if the proposed exemption were adopted, an implication
would be created that counterparties to a derivative transaction
agreement that did not qualify for the exemption would be viewed as
having formed a group.\606\
---------------------------------------------------------------------------

    \603\ See letters from EIM I; IAA; STB. One of these commenters
further reasoned that the exemption is arbitrary and capricious
because it would treat similarly situated parties differently
inasmuch as only a subset of dealer transactions may be viewed as
having contributed to an activist's goals. See letter from EIM I.
    \604\ See letter from PSCM.
    \605\ See letter from STB. The commenter added that ``the
uncertainty caused by proposed Rule 13d-6(d) may increase risks for
market participants in otherwise established financial transactions
which may inhibit such activity.'' Id.
    \606\ See letter from ABA.
---------------------------------------------------------------------------

    Some commenters expressed doubt that proposed Rule 13d-6(d) would
operate to only exempt legitimate business activity, suggesting the
purpose of the proposed amendments regarding group formation and
derivatives would be undermined.\607\ One of these commenters said that
the proposal ``sounds like this is an open invitation for high profile
firms to actually work together as a group without [repercussion] of
regulation.'' \608\ Another of these commenters appeared to refer to
proposed Rule 13d-6(d) and expressed concern that the proposed
exemption ``will get taken advantage of too easily and will obscure
transactions that might substantially and singlehandedly affect a
security.'' \609\ A different commenter impliedly alluded to the
undermining of the proposed change to Rule 13d-5(b) and speculated that
no benefit of other proposed rule changes will be received if
derivative position holders can claim an exemption under a different
law.\610\
---------------------------------------------------------------------------

    \607\ See letters from Engineer; G. Morales; J. Kennedy.
    \608\ See letter from J. Kennedy.
    \609\ See letter from Engineer.
    \610\ See letter from G. Morales.
---------------------------------------------------------------------------

3. Final Amendments
    We are adopting the proposed redesignation of current Rules 13d-6
and 13d-5(b)(2) as Rule 13d-6(a) and (b), respectively, for the reasons
set forth in the Proposing Release and as discussed above.\611\ As
discussed in more detail below, however, we are not adopting proposed
Rule 13d-6(c) or (d).
---------------------------------------------------------------------------

    \611\ See supra note 22 for a discussion of our redesignation of
current Rules 13d-6 and 13d-5(b)(2) as Rule 13d-6(a) and (b),
respectively.
---------------------------------------------------------------------------

    The Commission proposed Rule 13d-6(c) in connection with proposed
Rule 13d-5(b)(1)(i) and (b)(2)(i).\612\ As discussed above, we are not
adopting those amendments.\613\ Proposed Rule 13d-6(c) was intended to
avoid potentially chilling communications among shareholders or
impeding shareholders' engagement with issuers where those activities
are undertaken without the purpose or effect of changing or influencing
control of the issuer (and are not made in connection with or as a
participant in any transaction having such purpose or effect).\614\
Some commenters, however, expressed concern that the exemption would in
fact have the opposite effect.\615\ This concern appears to be based on
their view that the exemption would be too narrow and impliedly define
what actions would be sufficient to constitute ``acting as a group''
(i.e., any actions that would not qualify for the proposed
exemption).\616\ To address those concerns, and in light of the fact
that we are not adopting the amendments to Rule 13d-5 that prompted the
proposal of the exemption in Rule 13d-6(c), we are not adopting Rule
13d-6(c). We also believe that the discussion and guidance we provided
in section II.C.1.c above will help to address the Commission's goals
of preserving shareholder communications and engagement with issuers
that are undertaken without the purpose or effect of changing or
influencing control.
---------------------------------------------------------------------------

    \612\ Proposing Release at 13872.
    \613\ See supra section II.C.1.
    \614\ Proposing Release at 13872.
    \615\ See supra notes 585-591 and accompanying text.
    \616\ See supra notes 582-584 and accompanying text.
---------------------------------------------------------------------------

    Similarly, after considering the comments received regarding
proposed Rule 13d-6(d),\617\ we also do not believe adoption of that
exemption is necessary. Under sections 13(d)(3) and 13(g)(3), formation
of a group requires that two or more persons be found to have acted as
a group for the purpose of acquiring, holding, or disposing ``of
securities of an issuer.'' Many cash-settled derivatives, including
those that were intended to be covered by proposed exemption, are not
considered ``securities of [the] issuer.'' Those derivatives originate
with persons other than the issuer and simply reference a class of an
issuer's securities. The holders of such cash-settled derivative
securities are, therefore, generally not owed a fiduciary duty by the
issuer and do not generally have legal standing to bring a claim
against the issuer. Moreover, holders of such derivative securities are
not, by virtue of those instruments, debt or equity holders of the
issuer and are not entitled to a right to vote or dispose of any
security ``of an issuer'' based on their investment in these
derivatives. Absent the circumstances in which a holder of a derivative
settled exclusively in cash that did not originate with the issuer
could become a beneficial owner of the reference security,\618\ the
Commission does not believe that persons who, in the ordinary course of
business, acquire derivative securities settled exclusively in cash
would generally be deemed to ``act as a . . . group'' under sections
13(d)(3) and 13(g)(3) with the financial

institutions that sell such derivatives. Simply put, such persons
cannot be found, as a matter of law, to have acquired, held, or
disposed ``of securities of an issuer'' as that term is used in
sections 13(d)(3) and 13(g)(3).
---------------------------------------------------------------------------

    \617\ See supra notes 595-610 and accompanying text.
    \618\ See supra section II.B.3 for a discussion of those
circumstances.
---------------------------------------------------------------------------

    While investors in a cash-settled equity-based derivative security,
in order to acquire the derivative security, may need to enter into an
agreement governing the terms of such instrument with a financial
institution that, in the ordinary course of its business, acts as a
counterparty to such investors, that agreement, without more, does not
result in group formation. We believe that a bilateral transaction,
negotiated at arm's length and entered into solely for commercial
purposes, as described, would not by itself introduce facts sufficient
to find that a group exists. In our view, an agreement between an
investor in a cash-settled derivative security and a counterparty
entered into for the ordinary course of business would fail to satisfy
the ``act as a . . . group'' element in sections 13(d)(3) and 13(g)(3)
absent other indicia of group status such as agreements to vote or
other factors.
    To offset any risk exposure to that derivative security, including
any obligations that may arise at settlement, the financial institution
counterparty may, in practice, purchase securities in the reference
covered class and hold such reference security for the duration of the
agreement. While it may be true that but for the joint actions of the
parties in entering into the agreement, that specific acquisition of
beneficial ownership in the covered class by the financial institution
would not have occurred, we believe that if the counterparty acts on
its own initiative and not at the direction of the investor or
otherwise on its behalf, there is no basis to assert that the investor
and counterparty acted in concert and thus subjected themselves to
regulation as a group. As such, entry into such an agreement will not
implicate sections 13(d)(3) and (g)(3) because the two persons cannot
be viewed as acting as a group even given the financial institution's
foreseeable acquisition of securities of a covered class. Assuming that
the investor and the financial institution did not enter into the
agreement with the purpose or effect of changing or influencing control
of the issuer, the regulatory purposes of sections 13(d) and 13(g)
would not be furthered by treating the investor and the financial
institution as members of a group under section 13(d)(3) or section
13(g)(3) solely by virtue of their entrance--for strictly commercial
purposes and not for purposes of acquiring, holding, or disposing of a
covered class--into that agreement. Accordingly, we have elected not to
adopt proposed Rule 13d-6(d) as the exemption is not needed in order
for such ordinary course of business transactions in derivative
securities to freely occur.

E. Amendment to Schedule 13D To Clarify Disclosure Requirements
Regarding Derivative Securities

    Schedule 13D sets forth the information that beneficial owners
reporting pursuant to section 13(d)(1) and Rule 13d-1(a) must disclose.
Item 6 of Schedule 13D requires beneficial owners to ``[d]escribe any
contracts, arrangements, understandings or relationships (legal or
otherwise) among the persons named in Item 2 [of Schedule 13D] and
between such persons and any person with respect to any securities of
the issuer'' and sets forth a non-exclusive list of examples of such
contracts, arrangements, understandings or relationships.\619\ Because
cash-settled derivative securities were not expressly included among
these examples, questions may arise as to whether beneficial owners
should report their holdings of these derivative securities as
contracts ``with respect to'' an issuer's securities under the
rationale that (1) only a purely economic, but no legal, interest is
generally held through such derivatives in any class of an issuer's
securities and (2) the issuer's securities are only used as a reference
security. Further, as discussed below, the current requirement could be
interpreted as excluding the disclosure of cash-settled options not
offered or sold by the issuer, or other derivatives not originating
with the issuer, including other cash-settled derivatives such as SBS.
---------------------------------------------------------------------------

    \619\ 17 CFR 240.13d-101, Item 6.
---------------------------------------------------------------------------

1. Proposed Amendment
    In the Proposing Release, the Commission proposed to amend Schedule
13D to clarify the disclosure requirements with respect to derivative
securities held by a person reporting on that schedule. The Commission
noted that, at present, the formulation ``with respect to securities of
the issuer'' in Item 6 might be read to suggest that contracts,
arrangements, understandings or relationships that only create economic
exposure to the issuer's equity securities or are otherwise considered
synthetic could be excluded.\620\ Accordingly, to remove any ambiguity
as to the scope of the required disclosures, the Commission proposed to
revise Item 6 to expressly state that the use of derivative securities,
including cash-settled SBS and other derivatives settled exclusively in
cash, which use the issuer's securities as a reference security are
included among the types of contracts, arrangements, understandings and
relationships which must be disclosed.\621\ The Commission also
proposed the amendment to clarify that the derivative security need not
have originated with the issuer or otherwise be part of its capital
structure in order for a disclosure obligation to arise.\622\ The
proposed amendment thus specified that a person filing a Schedule 13D
would be required to disclose interests in all contracts, arrangements,
understandings, or relationships, including derivative securities, that
use the issuer's equity security as a reference security.
---------------------------------------------------------------------------

    \620\ Proposing Release at 13874.
    \621\ Id. To further minimize any potential ambiguity regarding
what interests need to be disclosed, the Commission also proposed to
eliminate the ``including but not limited to'' regulatory text that
precedes the itemization of the instruments or arrangements covered.
Id.
    \622\ Id.
---------------------------------------------------------------------------

2. Comments Received
    Commenters expressed various views on the proposed amendment to
Item 6 of Schedule 13D. Some commenters supported the proposed
amendment.\623\ One commenter, which did not clearly support or oppose
the proposal with respect to Item 6, appeared to indicate, in
connection with a response to a request for comment with respect to
Item 7, Exhibits, that Item 6 may already apply to cash-settled
derivatives.\624\
---------------------------------------------------------------------------

    \623\ See, e.g., letters from AFL-CIO; D. Pierce; Mark C.
    \624\ See letter from STB. Specifically, the commenter said that
the filing of the cash-settled derivative instruments as an exhibit
to Schedule 13D is unnecessary because the ``material terms of such
arrangements . . . can be described in'' Item 6. Id. The commenter
also stated that the filing of such instruments as exhibits would
present logistical difficulties if the proposed ``compressed''
timeframes for reporting Schedule 13D amendments are adopted. Id.
---------------------------------------------------------------------------

    Other commenters opposed the proposed amendment to Item 6 of
Schedule 13D, stating that requiring disclosure of SBS arrangements in
Item 6 would be confusing and indicating that it did not believe this
disclosure would serve any additional purpose.\625\ One commenter
explained that determining which type of derivative security to include
in different parts of Schedule 13D would present a logistical
challenge.\626\ The commenter anticipated that the compliance-related
challenge would arise, from an operational point of view, because of
the

regulatory inconsistency created by the exclusion of SBS from the
beneficial ownership calculation under proposed Rule 13d-3(e) but the
inclusion of SBS under Item 6 (to the extent they use the issuer's
equity security as a reference security).\627\ The commenter expressed
additional concern that requiring disclosure of SBS arrangements under
Item 6 would negate the benefits to these holders of non-disclosure of
counterparties in proposed Schedule 10B.\628\
---------------------------------------------------------------------------

    \625\ See, e.g., letters from IAA; Slade Thornburg (June 25,
2023) (``S. Thornburg'').
    \626\ See letter from IAA.
    \627\ Id. According to the commenter, ``[n]ot only would this be
confusing, but we do not believe such disclosure would serve any
additional purpose.'' Id.
    \628\ Id. Specifically, the commenter noted that proposed
``Schedule 10B . . . would not require identification of the swap
counterparty'' while ``the instruction to Item 6 requires `naming
the persons with whom such contracts, arrangements, understandings,
or relationships have been entered into.''' Id. Schedule 10B is a
proposed disclosure statement containing information regarding large
SBS positions and other information that would be required by
proposed 17 CFR 240.10B-101. The Commission proposed this disclosure
statement in a proposing release titled Prohibition Against Fraud,
Manipulation, or Deception in Connection with Security-Based Swaps;
Prohibition against Undue Influence over Chief Compliance Officers;
Position Reporting of Large Security-Based Swap Positions, Release
No. 34-93784 (Dec. 15, 2021) [87 FR 6652 (Feb. 4, 2022)] (``Schedule
10B Proposal'').
---------------------------------------------------------------------------

3. Final Amendment
    We are adopting the amendment to Item 6 of Schedule 13D as
proposed. Specifically, we are amending Rule 13d-101 to expressly state
that derivative contracts, arrangements, understandings, and
relationships with respect to an issuer's securities, including cash-
settled SBS and other derivatives which are settled exclusively in
cash, would need to be disclosed under Item 6 of Schedule 13D in order
to comply with section 13(d)(1) and Rule 13d-1(a). We also are
eliminating the ``including but not limited to'' language in Item 6
that currently precedes the itemization of the instruments or
arrangements covered to remove any implication that additional
interests may need to be disclosed.
    We believe that investors could benefit from a more complete
disclosure of a Schedule 13D filer's economic interests in the relevant
issuer, including economic interests via positions in cash-settled
derivatives. For example, disclosure of any such cash-settled
derivatives may help investors evaluate whether their interests with
respect to the issuer's securities are aligned with the Schedule 13D
filer's. In addition, disclosure of this information is consistent with
other interests required to be disclosed under Item 6, such as, for
example, ``division of profits or loss.''
    Our adoption of the amendment also furthers the congressional
purpose of section 13(d)(1), as demonstrated by the legislative history
accompanying Congress' enactment of this provision.\629\ The
disclosures required under Item 6 of Schedule 13D originated with a
congressional mandate. Congress specified certain information within
sections 13(d)(1)(A) through (E) that beneficial owners must report
once they incur a filing obligation. In addition to the disclosure
required under sections 13(d)(1)(A) through (E), Congress also
authorized the Commission to require disclosure of ``such additional
information'' it prescribes as ``necessary or appropriate in the public
interest or for the protection of investors.'' \630\ Under section
13(d)(1)(E), Congress provided that a beneficial owner must report
``information as to any contracts, arrangements, or understandings with
any person with respect to any securities of the issuer, including
[the] transfer of any of the securities, joint ventures, loan or option
arrangements, puts or calls, guaranties of loans, guaranties against
loss or guaranties of profits, division of losses or profits, or the
giving or withholding of proxies.'' \631\ Consistent with the mandate
of section 13(d)(1)(E), which forms part of the basis for the
disclosure requirements of existing Item 6, this baseline disclosure
requirement has existed in Schedule 13D since 1968.
---------------------------------------------------------------------------

    \629\ See Disclosure of Corporate Equity Ownership, H.R. Rep.
No. 1711, at 8 (1968) (``The purpose of section 13(d) is to require
disclosure of information by persons who have acquired a substantial
interest, or increased their interest in the equity securities of a
company by a substantial amount, within a relatively short period of
time.'' (Emphasis added)).
    \630\ 15 U.S.C. 78m(d)(1).
    \631\ Id.
---------------------------------------------------------------------------

    We note that one commenter opposed the proposed amendment to Item
6. The commenter stated, among other things, that requiring disclosure
of SBS holdings in Item 6 would be confusing.\632\ Specifically, the
commenter pointed out that proposed Rule 13d-3(e) would have excluded
SBS and stated that there would be a ``logistical challenge''
associated with excluding SBS from the beneficial ownership calculation
but including them in the narrative disclosure in response to Item
6.\633\ We disagree. Item 6 (as well as the other items in Schedule
13D) already requires disclosure of various information that does not
factor into calculating a Schedule 13D filer's beneficial
ownership.\634\ We do not believe that requiring disclosure in Item 6
of SBS that may be excluded from a Schedule 13D filer's beneficial
ownership calculation would present any unique complications or be more
complex than disclosure of this other information, and the commenter
did not present any specific ``logistical challenges'' that could arise
from this requirement. Moreover, we are not adopting proposed Rule 13d-
3(e),\635\ further diminishing this concern about potential confusion.
---------------------------------------------------------------------------

    \632\ See supra notes 626-627 and accompanying text.
    \633\ See id.
    \634\ For example, Item 6 requires a description of ``any
contracts, arrangements, understandings or relationships . . . with
respect to any securities of the issuer, including . . . puts or
calls.'' 17 CFR 240.13d-101, Item 6. If any such ``puts or calls''
include call options with respect to the issuer's covered class that
are not exercisable within 60 days (and were not acquired with a
change of control purpose or effect), then they would be required to
be disclosed in response to Item 6, but they would not factor into
the Schedule 13D filer's beneficial ownership. See Rule 13d-
3(d)(1)(i). Similarly, Item 4(a) of Schedule 13D requires a
description of ``any plans or proposals which the reporting persons
may have which relate to or would result in . . . [t]he acquisition
by any person of additional securities of the issuer, or the
disposition of securities of the issuer.'' 17 CFR 240.13d-101, Item
4(a). Although such plans for potential future acquisitions or
dispositions of securities of the issuer could, if consummated,
result in changes to the Schedule 13D filer's beneficial ownership,
they generally would not factor into the beneficial ownership amount
reflected in the Schedule 13D filing in which such plans are
disclosed.
    \635\ See supra section II.B.3.
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    The commenter also noted that the proposed amendment to Item 6
would be unnecessary in light of, and could conflict with, the
disclosure of SBS positions in proposed Rule 10B-1.\636\ While the
Commission will consider concerns about a potential conflict if it
takes any final action with respect to proposed Rule 10B-1, we note
that proposed Rule 10B-1 (along with proposed Schedule 10B) is intended
to serve a purpose different from Item 6 of Schedule 13D. The
Commission proposed Rule 10B-1 to, among other things, provide market
participants (including counterparties, issuers, and issuers'
stakeholders) and regulators with access to information that may
indicate that a person (or a group of persons) is building up a large
SBS position, and to alert market participants and regulators to the
existence of concentrated exposures to a limited number of
counterparties, which should inform those market participants and
regulators of the attendant risks, allow counterparties to risk manage
and lead to better pricing of the SBS with respect to transactions with
persons holding large positions in those SBS (as a result of all market
participants having

access to the information about the positions).\637\ Item 6 of Schedule
13D, on the other hand, is intended to implement section 13(d)(1)(E),
where Congress specifically mandated that the disclosure statement
filed would include information as to any contracts, arrangements, or
understandings with any person with respect to any securities of the
issuer, including the names of relevant parties, as part of its intent
to require disclosures to security holders regarding persons with
significant holdings. Thus, in light of that congressional mandate, we
believe it is appropriate to require disclosure of such information
pursuant to Item 6 of Schedule 13D.
---------------------------------------------------------------------------

    \636\ See supra note 628 and accompanying text.
    \637\ Prohibition Against Fraud, Manipulation, or Deception in
Connection with Security-Based Swaps; Prohibition against Undue
Influence over Chief Compliance Officers; Position Reporting of
Large Security-Based Swap Positions, Release No. 34-93784 (Dec. 15,
2021) [87 FR 6652, 6667, 6678 (Feb. 4, 2022)].
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F. Structured Data Requirement for Schedules 13D and 13G

    Currently, the EDGAR Filer Manual requires Schedules 13D and 13G to
be filed electronically on the Commission's EDGAR system in HTML or
ASCII format.\638\ HTML and ASCII are both unstructured data languages;
thus, the disclosures reported on Schedules 13D and 13G are not
currently machine-readable.\639\ As a result, information disclosed on
Schedules 13D and 13G is generally more difficult for investors and
other market participants to access, compile, and analyze as compared
to information that is submitted in a machine-readable data language.
---------------------------------------------------------------------------

    \638\ EDGAR Filer Manual (Volume II) version 67 (Sept. 2023)
(``EDGAR Filer Manual''), at 5-1 (requiring EDGAR filers generally
to use ASCII or HTML for their document submissions, subject to
certain exceptions). Schedule 13D and 13G filers are required, by
rule, to comply with the requirements of the EDGAR Filer Manual. See
17 CFR 232.301 (``Filers must prepare electronic filings in the
manner prescribed by the EDGAR Filer Manual, promulgated by the
Commission, which sets forth the technical formatting requirements
for electronic submissions.'').
    \639\ The term ``machine-readable'' is defined in 44 U.S.C. 3502
as ``data in a format that can be easily processed by a computer
without human intervention while ensuring no semantic meaning is
lost.''
---------------------------------------------------------------------------

    While the majority of EDGAR filings under the Commission's rules
are submitted in HTML or ASCII, certain EDGAR filings are submitted
using machine-readable, XML-based languages that are each specific to
the particular EDGAR document type being submitted.\640\ This includes
filings that, like Schedules 13D and 13G, are submitted by individuals
and entities other than the registrant of the class of securities.\641\
For these EDGAR XML filings, filers are typically provided the option
to either submit the filing directly to EDGAR in XML, or manually input
their disclosures in a fillable web form as part of an online web
application developed by the Commission that converts the completed
form into an EDGAR-specific XML document.
---------------------------------------------------------------------------

    \640\ See Securities and Exchange Commission, Current and Draft
Technical Specifications, available at https://www.sec.gov/edgar/filer-information/current-edgar-technical-specifications.
    \641\ Examples include the section 16 beneficial ownership
reports (Forms 3, 4, and 5) and Form 13F. See id.
---------------------------------------------------------------------------

1. Proposed Amendment
    In the Proposing Release, the Commission proposed to require that
beneficial ownership reports on Schedules 13D and 13G be filed using a
structured, machine-readable data language. In particular, the
Commission proposed to require that Schedules 13D and 13G be filed in
part using an XML-based language specific to Schedules 13D and 13G
(``13D/G-specific XML'').\642\ For both Schedules, all disclosures,
including quantitative disclosures, textual narratives, and
identification checkboxes, would be structured in 13D/G-specific XML
under the proposal, with the exception of the exhibits to the
Schedules, which would remain unstructured. The Commission stated that
a structured data requirement for the disclosures reported on Schedules
13D and 13G would greatly improve the accessibility and usability of
the disclosures, allowing investors to access, aggregate and analyze
the reported information in a much more timely and efficient
manner.\643\
---------------------------------------------------------------------------

    \642\ The Commission noted that this would be consistent with
the approach used for other XML-based structured data languages
created by the Commission for certain EDGAR Forms, including the
data languages used for reports on each of Form 13F, Form D and the
section 16 beneficial ownership reports (Forms 3, 4, and 5).
Proposing Release at 13874, n. 154.
    \643\ Id. at 13875. These considerations are generally
consistent with objectives of the Financial Data Transparency Act of
2022, which directs the establishment by the Commission and other
financial regulators of data standards for collections of
information. Such data standards must meet specified criteria
relating to openness and machine-readability and promote
interoperability of financial regulatory data across members of the
Financial Stability Oversight Council. See James M. Inhofe National
Defense Authorization Act for Fiscal Year 2023, Public Law 117-263,
tit. LVIII, 136 Stat. 2395, 3421-39 (2022).
---------------------------------------------------------------------------

2. Comments Received
    Commenters largely supported the proposed structured data
requirement for Schedules 13D and 13G.\644\ Other commenters objected
to the proposed structured data requirement for Schedules 13D and 13G,
with one commenter expressing concern that the proposed structured data
requirement would be unduly burdensome for small beneficial
owners.\645\
---------------------------------------------------------------------------

    \644\ See, e.g., letters from Aaron Leonard (June 28, 2023);
Anonymous 12; Benjamin Ng (Feb. 21, 2022) (``B. Ng''); Convergence;
David Kraft (June 26, 2023); FundApps; HMA I; IAA; ICI I; J.
Kennedy; J. Pieper; J. Soucie; Mike Slavens, Retail Investor and
Mechanical Engineer (Feb. 19, 2022) (``M. Slavens''); Mark C.; P.
Worts; Todd; XBRL US (Apr. 11, 2022) (``XBRL'').
    \645\ See, e.g., letter from A. Day; see also letters from B.
Mason; S. Thornburg.
---------------------------------------------------------------------------

    Some of the supporting commenters asserted that the proposed
structured data requirement would improve the fairness and transparency
of the markets.\646\ One commenter asserted that the proposal would be
a fundamental step toward ensuring that the beneficial ownership
reporting requirements remain modern and comprehensible.\647\ One
commenter noted that the proposed structured data requirement would not
impose significant costs to beneficial owners of more than five percent
of a covered class and stated that the requirement would allow the
Commission to make use of advancing technologies in order to reduce
costs to taxpayers and more speedily provide the public with the
information it needs to accurately assess the conditions of the
market.\648\ Another commenter asserted that the proposal would enable
the Commission to process filings instantaneously and therefore allow
for real-time analysis and if necessary, remedial action and stated
that any data which cannot be easily processed by machines will become
largely useless as the century progresses.\649\ In addition, one
commenter agreed with the Commission that tagging the data reported on
Schedules 13D and 13G will make it easier for investors and other
market participants to access, compile, and analyze this information
and expressly supported the Commission's development of electronic
``style sheets'' that, when applied to the reported XML data, would
represent that data in ``human readable'' format.\650\
---------------------------------------------------------------------------

    \646\ See letters from Anonymous 12; J. Kennedy; M. Slavens.
    \647\ See letter from B. Ng.
    \648\ See letter from J. Soucie.
    \649\ See letters from Convergence; FundApps.
    \650\ See letter from ICI I.
---------------------------------------------------------------------------

    Some of the supporting commenters also made recommendations to the
Commission regarding the proposed structured data requirement. One
commenter requested that the Commission release the taxonomy at least
six months in advance of the date by which any revised Schedules 13D or
13G must be filed so that reporting

persons can incorporate the taxonomy into their filing system.\651\
Similarly, other commenters recommended that the Commission provide for
a test period in which reporting persons can make test filings using
the taxonomy in advance of the date by which the revised schedules must
be filed.\652\ Finally, one commenter suggested that the Commission opt
for the XBRL data language, rather than creating an XML schema designed
specifically for beneficial ownership reporting as proposed.\653\
---------------------------------------------------------------------------

    \651\ Id.
    \652\ See letters from IAA; ICI I.
    \653\ See letter from XBRL. The commenter asserted that, among
other purported benefits, an XBRL-based standard will result in
significantly lower costs and efficiencies across both reporting
entities and data users, consistent datasets that can be easily
commingled with other datasets, and enhanced validation capabilities
to improve data quality. Id.
---------------------------------------------------------------------------

3. Final Amendment
    We are adopting the structured data requirement for Schedules 13D
and 13G as proposed. Specifically, we are replacing the current HTML or
ASCII requirement for Schedules 13D and 13G in the EDGAR Filer Manual
with a requirement to use 13D/G-specific XML for the disclosures
reported on those Schedules.\654\ As is the case with other EDGAR XML
filings, reporting persons will be able to, at their option, submit
filings directly to EDGAR in 13D/G-specific XML or use a web-based
reporting application developed by the Commission that will generate
the Schedule in 13D/G-specific XML in connection with the submission of
the filing to EDGAR.\655\
---------------------------------------------------------------------------

    \654\ Section 13(g)(5) of the Exchange Act provides, in part,
that ``the Commission shall take such steps as it deems necessary or
appropriate in the public interest or for the protection of
investors . . . to tabulate and promptly make available the
information contained in any report filed pursuant to this
subsection in a manner which will, in the view of the Commission,
maximize the usefulness of the information to . . . the public.'' 15
U.S.C. 78m(g)(5). The requirement proposed in this section would be
consistent with this mandate. Although this statutory language
applies only to beneficial ownership reports filed pursuant to
section 13(g)--i.e., a Schedule 13G filed by an Exempt Investor--we
believe these public benefits would be furthered by applying the
requirement proposed in this section to all Schedule 13D and 13G
filers.
    \655\ In addition, the Commission's staff intends to develop
electronic ``style sheets'' that, when applied to the reported XML
data, will represent that data in human-readable form on EDGAR.
---------------------------------------------------------------------------

    In adopting the structured data requirement as proposed, we note
that commenters overwhelmingly supported the proposal.\656\ Although
one commenter opposed the proposed structured data requirement on the
basis that it would be unduly burdensome for small beneficial
owners,\657\ we believe the web-based reporting application that will
generate the Schedule in 13D/G-specific XML should serve to reduce the
burden of preparing a Schedule 13D or 13G for small beneficial owners
(and other Schedule 13D and 13G filers), as compared to the current
system whereby beneficial owners generally use third-party software to
prepare their Schedule 13D or 13G.\658\ In addition, because 13D/G-
specific XML lends itself more readily to the development of a web-
based reporting application on EDGAR than XBRL does, we believe 13D/G-
specific XML is more suitable than XBRL for structuring Schedules 13D
and 13G.\659\ In response to commenters requesting a test period for
the revised Schedules and requesting a taxonomy (i.e., schema) release
at least six months before compliance is required, we are providing an
extended voluntary compliance period during which the schema will be
publicly available.\660\ The compliance period is discussed in further
detail in section II.G below.
---------------------------------------------------------------------------

    \656\ See supra section II.F.2.
    \657\ See supra note 645 and accompanying text.
    \658\ For example, this web-based reporting application will
contain and prompt a beneficial owner to respond to the Schedule 13D
and 13G disclosure requirements, as set forth in Rules 13d-101 and
13d-102, respectively, which should make the preparation process
more streamlined and convenient.
    \659\ See also infra section IV.D.3.
    \660\ See supra notes 651-652 and accompanying text.
---------------------------------------------------------------------------

G. Compliance Dates

    The Commission did not propose a transition period for any of the
Proposed Amendments. Some commenters suggested, however, that the
Commission should provide for an extended compliance period with
respect to the proposed structured data requirement for Schedules 13D
and 13G.\661\ Based on this feedback, we believe that an extended
transition period for compliance with the structured data requirement
is appropriate. As such, compliance with the structured data
requirement for Schedules 13D and 13G will not be required until
December 18, 2024. We welcome, however, early compliance with this
requirement, and Schedule 13D and 13G filers may begin to voluntarily
comply with the structured data requirement on December 18, 2023.
---------------------------------------------------------------------------

    \661\ See id.
---------------------------------------------------------------------------

    In order to further reduce some of the potential burdens that
commenters described, compliance with the revised Schedule 13G filing
deadlines under Rules 13d-1 and 13d-2 will not be required before
September 30, 2024. Thus, notwithstanding the fact that the final
amendments will become effective on February 5, 2024, beneficial owners
will continue to be required to comply with the current Schedule 13G
filing deadlines through September 29, 2024. Beginning on September 30,
2024, however, beneficial owners will be required to comply with the
revised Schedule 13G filing deadlines. For example, under Rule 13d-
2(b), as amended, a Schedule 13G filer will be required to file an
amendment within 45 days after September 30, 2024, if, as of end of the
day on that date, there were any material changes in the information
the filer previously reported on Schedule 13G.

III. Other Matters

    If any of the provisions of these amendments, or the application
thereof to any person or circumstance, is held to be invalid, such
invalidity shall not affect other provisions or the application of such
provisions to other persons or circumstances that can be given effect
without the invalid provision or application.
    Pursuant to the Congressional Review Act, the Office of Information
and Regulatory Affairs has designated these amendments a ``major
rule,'' as defined by 5 U.S.C. 804(2).

IV. Economic Analysis

A. Overview

    As discussed in section II, the final amendments generally shorten
the filing deadlines for initial Schedule 13D and 13G filings, together
with other changes described below. These filings are required in
accordance with sections 13(d) and 13(g) of the Exchange Act. Section
13(d) was enacted in 1968 with the intent to alert issuers and the
marketplace to rapid accumulations of equity securities by persons who
would then have the potential to change or influence control of the
issuer.\662\ Section 13(g), subsequently enacted in 1977, was intended,
together with section 13(d), to provide a ``comprehensive disclosure
system of corporate ownership'' applicable to all persons who are the
beneficial owners of more than five percent of a covered class.\663\
---------------------------------------------------------------------------

    \662\ See H.R. Rep. No. 1711, at 8 (1968).
    \663\ See S. Rep. No. 114, at 14 (1977).

---------------------------------------------------------------------------

    The efficiency of financial markets rests on material information
becoming public in a timely fashion. In addition to protecting
investors, greater availability of information allows securities prices
to better reflect their issuers' fundamental value, and ultimately
promotes capital formation. The widespread enactment of laws and
regulations that restrict the use of information obtained by virtue of
insider status, as well as regulations that restrict selective
disclosure to certain persons in the absence of public disclosure,
point to the public-good nature of rules requiring public disclosure.
    This same principle motivates the requirement to disclose
beneficial ownership of significant shareholders with the potential to
change or influence control of the issuer. Knowledge of who is
influencing control is highly material.\664\ Investors benefit from
this information just as they benefit from material information
regarding their investments more broadly. The five-business day
deadline balances the interest of investors to be in possession of
material information with the interest of investors seeking changes in
control that may benefit shareholders, and is longer than the filing
deadline for other settings involving ownership changes, such as for
Form 4 under Exchange Act section 16 reporting.\665\
---------------------------------------------------------------------------

    \664\ For the purpose of this economic analysis, the term
``significant shareholders'' is used to represent persons with a
large shareholding in a particular issuer. The terms
``blockholders'' and ``significant stockholders'' were used to
represent such persons in the Proposing Release.
    \665\ Some commenters indicated that the Commission failed to
appropriately justify the shortened filing deadlines or identify an
associated market failure, or stated that the information asymmetry
between a filer and the market is not a market failure or otherwise
problematic. See, e.g., letters from AIMA; EIM I; IAA; ICM; Profs.
Bishop and Partnoy I; Profs. Eccles and Rajgopal; Profs. Swanson,
Young, and Yust; SIFMA; SIFMA AMG; TIAA. We agree that the initial
information asymmetry between a prospective filer and the market is
not a market failure because in its absence, the filer may not be
sufficiently rewarded for the expenses of its efforts expended in
information acquisition and in pursuing changes at the issuer, which
often have market-level benefits. Nevertheless, an earlier
resolution of this information asymmetry is expected to have the
benefits discussed in this economic analysis.
---------------------------------------------------------------------------

    Moreover, as we discuss below, studies suggest that traders other
than the filer may be in a position to become aware of a potential
activist campaign and buy stock of the target issuer immediately prior
to a Schedule 13D filing, thereby benefiting directly from
foreknowledge of the filing rather than their own efforts.\666\
Shortened filing deadlines may lessen the opportunity for these traders
to gain such an advantage, as discussed below, which could enhance
trust in markets and thereby capital formation. Finally, shortening the
deadline is expected to reduce overall informational asymmetries in the
market. Both theoretical and empirical studies have connected
information asymmetry, and in particular the presence of informed
traders, to wider bid-ask spreads.\667\ We therefore expect shortening
the initial Schedule 13D filing deadline to improve liquidity.\668\
---------------------------------------------------------------------------

    \666\ See infra section IV.C.1.a.iii.
    \667\ See infra section IV.C.1.a.iv.
    \668\ See id.
---------------------------------------------------------------------------

    Shortening the initial Schedule 13D filing deadline will have
costs. Specifically, activist investors will have less time in which to
accumulate shares before the filing deadline and, therefore, before the
price of the stock reflects their plans. This may reduce their expected
profit, and accordingly some of the incentives for activism. However,
although we cannot predict with precision the magnitude of the ultimate
effect on activism and how the overall markets and activists themselves
will respond to these changes, we believe it is likely that the
shortened deadline will not significantly reduce the level of activism
as we expect most campaigns will not be affected by the amended
deadline, based on our analysis of historical campaigns, and most
activists will have ability to adapt to the shortened deadline through
various alternatives.
    We are also, among other things, revising the filing deadlines for
Schedule 13D and 13G amendments and amending Item 6 of Schedule 13D,
which requires the disclosure of certain contracts, arrangements,
understandings, and relationships, 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. Each of
these final amendments may allow investors and other market
participants to make better-informed decisions by accelerating the
disclosure of information or expanding the amount of information
disclosed. The final amendments also require that Schedule 13D and
Schedule 13G be filed using a structured, machine-readable data
language, which may facilitate the extraction and analysis of
information in the filings, and make technical changes to Regulation S-
T associated with extending the filing ``cut-off'' time from 5:30 p.m.
to 10 p.m., which may ease the compliance costs for filers.
    We are mindful of the costs and benefits of the final
amendments.\669\ Below, we discuss in more detail the economic effects
of the final amendments, including their anticipated costs and benefits
and, integrated into that discussion, the likely effects of the final
rules on efficiency, competition, and capital formation.\670\ We also
analyze the potential costs and benefits of significant alternatives to
the final amendments.
---------------------------------------------------------------------------

    \669\ Section 3(f) of the Exchange Act [17 U.S.C. 78c(f)]
requires the Commission, when engaging in rulemaking where it is
required to consider or determine whether an action is necessary or
appropriate in the public interest, to consider, in addition to the
protection of investors, whether the action will promote efficiency,
competition, and capital formation. Further, section 23(a)(2) of the
Exchange Act [17 U.S.C. 78w(a)(2)] requires the Commission, when
making rules under the Exchange Act, to consider the impact that the
rules would have on competition, and prohibits the Commission from
adopting any rule that would impose a burden on competition not
necessary or appropriate in furtherance of the Exchange Act.
    \670\ Several commenters raised concerns about the Proposing
Release's discussion of potential effects on efficiency,
competition, and/or capital formation. See, e.g., Craig Lewis,
Review of the Economic Analysis for Proposed Rule Amendments to
Modernize Beneficial Ownership Reporting, exhibit to letter from EIM
I (``Lewis Study I (exhibit to letter from EIM I)'') (stating that
the discussion of efficiency, competition, and capital formation in
the Proposing Release ``appears to be an afterthought and glosses
over or fails to address many important points''); see also letters
from AIMA; B. Sharfman; Profs. Schwartz and Shavell I; Profs.
Schwartz and Shavell II. Our analysis of potential effects on
efficiency, competition, and capital formation has been revised and
expanded from the Proposing Release and has been integrated into the
discussion of the benefits and costs of the final amendments.
---------------------------------------------------------------------------

B. Baseline

    The baseline against which the costs, benefits, and the effects on
efficiency, competition, and capital formation of the final amendments
are measured consists of the current state of the market and the
current regulatory framework. The economic analysis considers existing
regulatory requirements, including recently adopted rules, as part of
its economic baseline against which the costs and benefits of the final
amendments are measured.\671\
---------------------------------------------------------------------------

    \671\ See, e.g., Nasdaq v. SEC, 34 F.4th 1105, 1111-15 (D.C.
Cir. 2022). This approach also follows Commission staff guidance on
economic analysis for rulemaking. See Staff's ``Current Guidance on
Economic Analysis in SEC Rulemaking'' (Mar. 16, 2012), available at
https:/www.sec.gov/divisions/riskfin/
rsfi_guidance_econ_analy_secrulemaking.pdf (``The economic
consequences of proposed rules (potential costs and benefits
including effects on efficiency, competition, and capital formation)
should be measured against a baseline, which is the best assessment
of how the world would look in the absence of the proposed
action.''); Id. at 7 (``The baseline includes both the economic
attributes of the relevant market and the existing regulatory
structure.''). The best assessment of how the world would look in
the absence of the proposed or final action typically does not
include recently proposed actions, because that would improperly
assume the adoption of those proposed actions.

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1. Current Schedule 13D and 13G Filing Requirements
    The current Schedule 13D and Schedule 13G filing requirements are
discussed in detail in section II.A above.\672\ Briefly, an initial
Schedule 13D is currently required to be filed within 10 days after any
acquisition of beneficial ownership of a covered class that results in
a person directly or indirectly being the beneficial owner of more than
five percent of the covered class. Among other disclosures, the
reporting person must describe, pursuant to Item 6 of Schedule 13D, any
contracts, arrangements, understandings, or relationships among the
reporting persons or between the reporting persons and any other person
with respect to any securities of the issuer. In addition, a Schedule
13D amendment must be filed ``promptly'' upon any material change in
the facts reported in the Schedule 13D filing, inclusive of any
amendments thereto.\673\
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    \672\ Other disclosure requirements may also apply to
significant shareholders. For example, persons deemed beneficial
owners of more than 10% of any class of equity securities (other
than certain exempted securities) registered under Exchange Act
section 12 are also considered to be insiders for the purpose of
Exchange Act section 16 and subject to the associated disclosure
requirements. For example, these persons must file with the
Commission an initial report on Form 3 either within 10 days after
becoming an insider of an issuer that already has a class of equity
securities registered under section 12, or upon the issuer's initial
registration of the class of equity security under section 12. 15
U.S.C. 78p(a)(2)(A)-(B). Also, acquisitions of ownership stakes
exceeding certain dollar thresholds trigger the premerger
notification requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976. Public Law 94-435, 90 Stat. 1383 (1976),
as administered by the Federal Trade Commission and Department of
Justice. In general, we do not expect these additional disclosure
requirements to significantly affect the costs and benefits of the
final rules.
    \673\ As noted supra in section II.A.3 the Commission has
expressed that under the current standard, ``[a]ny delay beyond the
date the filing reasonably can be filed may not be prompt'' and an
amendment to a Schedule 13D reasonably could be filed in as little
as one day following the change (citing In re Cooper Laboratories,
Release No. 34-22171 (June 26, 1985)). Some commenters indicated
that the requirement for Schedule 13D amendments to be made
``promptly'' has generally been understood to mean within two
business days. See letters from EIM I; IAA.
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    The initial filing deadline for the initial Schedule 13G varies by
investor category. QIIs and Exempt Investors must file an initial
Schedule 13G within 45 days after the end of the calendar year in which
their beneficial ownership exceeds five percent of a covered class at
the end of the last day of that calendar year. Further, if a QII
beneficially owns more than 10 percent of a covered class as of the
last day of any month, then the initial Schedule 13G must be filed
within 10 days after the end of that month. Passive Investors must file
an initial Schedule 13G within 10 days of acquiring beneficial
ownership of more than five percent of a covered class.
    For all Schedule 13G filers, if, as of the end of the calendar
year, there are any changes in the information previously reported in a
Schedule 13G filing, a Schedule 13G amendment must be filed within 45
days after the end of that calendar year. In addition, QIIs must file a
Schedule 13G amendment within 10 days after the end of the first month
in which their beneficial ownership either exceeds 10 percent of a
covered class, or, once across that threshold, increases or decreases
by more than five percent of the covered class. Similarly, Passive
Investors must ``promptly'' file a Schedule 13G amendment upon
acquiring beneficial ownership of more than 10 percent of a covered
class, or, once across that threshold, if they increase or decrease
their beneficial ownership by more than five percent of the covered
class.
2. Market Trends
    There have been significant changes in the technological, financial
market, and regulatory environment since the enactment of the Williams
Act.\674\ In particular, various new technologies developed over this
time period facilitate the filing process, including both the
preparation and submission of a filing. For example, communications
have become easier and faster over this time, facilitating the
gathering of information to be disclosed and any necessary coordination
among parties. Further, information technologies used to compile the
necessary data and prepare and transmit filings may have helped to
reduce the time required to produce and submit filings. Also,
electronic submission relieves filers of the need to mail or hand
deliver filings. On the other hand, as some commenters noted, some of
the tasks necessary for filers' preparation and submission of filings
have not been automated or otherwise accelerated.\675\ Further, as one
commenter noted, information technologies have also facilitated easier
and faster access to filings, which may reduce the time for the
information in filings to reach market participants even under the same
deadline.\676\ Modern information technologies and the faster pace of
communication may also allow investors and other market participants to
react more quickly to disclosures, such that they may benefit more from
disclosures being made a few days earlier than they might have in
earlier decades, when decision-making may have proceeded at a slower
pace.
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    \674\ See Proposing Release at 13851. Several commenters
identified trends that were not discussed in the Proposing Release
or indicated that the economic analysis in the Proposing Release
could have been enhanced by considering additional evidence
regarding changes over time. See letters from Charlie Penner and Bob
Eccles (Apr. 12, 2022) (``C. Penner and Prof. Eccles''); CIRCA I;
CIRCA IV; ICM; Prof. Gordon; PSCM; SCG; Lewis Study I (exhibit to
letter from EIM I) (requesting ``evidence that efficiency
enhancements have increased the pace at which investors build
beneficial ownership positions''). In response to these comments,
this discussion has been expanded relative to the discussion in the
Proposing Release with respect to changes since the enactment of the
Williams Act. See supra notes 138-141 and accompanying text.
    \675\ See infra notes 866-867 and accompanying text.
    \676\ See letter from CIRCA IV.
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    In addition to the ease of communication, the introduction of
electronic trading, new types of financial contracts and instruments,
and advances in order-splitting and other trade execution optimization
techniques, as well as the rise of dark pools,\677\ may facilitate an
investor accumulating a large equity stake more quickly than at the
time of the enactment of the Williams Act. On the other hand, we also
recognize that accumulating significant ownership could instead be more
difficult in the face of modern algorithmic and high-frequency trading,
more sophisticated surveillance of equity trading and ownership by
other traders, market participants, and issuers,\678\ and the defenses
and tactics currently used by issuers with respect to potential
unsolicited takeover bids or shareholder activism.\679\
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    \677\ See letter from SCG. A dark pool is a private forum for
trading securities. See also Order Competition Rule, Release No. 34-
96495 (Dec. 14, 2022) [88 FR 128 (Jan. 3, 2023)] (for further
discussion on dark pools).
    \678\ See letter from ICM.
    \679\ Researchers have found that the increased use of low-
threshold poison pills within the last decade or two could increase
the difficulty of accumulating an equity stake beyond a certain
size. See, e.g., Ofer Eldar et al., The Rise of Anti-Activist Poison
Pills (Working Paper, Jan. 2023), available at https://ssrn.com/abstract=4198367; Nicole Boyson & Pegaret Pichler, Hostile
Resistance to Hedge Fund Activism, 32 Rev. Fin. Stud. 771 (2019)
(``Boyson & Pichler 2019 Study''). Commenters discussed an increased
use of poison pills as well as a more general increase in anti-
takeover or ``anti-activist'' defenses. See letters from CIRCA I;
EIM III; ICM; Prof. Gordon; PSCM.
---------------------------------------------------------------------------

    At least one study presents evidence that, despite variations in
the number of filings from month to month and from year to year, the
absolute number of initial or total Schedule 13D filings

made per year did not increase overall from 1985 to 2012.\680\
Commission staff analysis of more recent filings supports the
observation that the number of total filings made per year has not
increased over recent decades; in fact, the number of Schedule 13D
filings has decreased somewhat in the most recent decade.\681\ Further,
according to academic research examining different time periods and
subsets of filings from 1985 through 2018, there has been no
significant change in the average level of beneficial ownership of a
covered class reported in individual initial Schedule 13D filings over
that time horizon.\682\ Commission staff analysis of more recent
filings supports the observation that the average level of beneficial
ownership reported in initial Schedule 13D filings has not meaningfully
changed in recent decades.\683\
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    \680\ See, e.g., Ulf von Lilienfeld-Toal & Jan Schnitzler, What
is Special About Hedge Fund Activism? Evidence from 13-D Filings,
Swedish House of Fin. Rsch. Paper No 14-16 (June 4, 2014), available
at https://ssrn.com/abstract=2506704 (``Lilienfeld-Toal and
Schnitzler 2014 Study'') (plotting, in Figure 1 therein, the number
of initial and total Schedule 13D filings per month from 1985
through 2012, and demonstrating substantial month-to-month variation
and a slight overall downward trend overall in initial and total
Schedule 13D filings).
    \681\ Staff reviewed the number of Schedule 13D and 13D/A
filings on EDGAR each year from 1997 (the first full year after the
phase-in of electronic filing was complete) through 2022, available
at https://www.sec.gov/dera/data/dera_edgarfilingcounts, and found
no clear trend in the number of these filings per year over the last
decade, but found that the rate of Schedule 13D filings over the
last decade was somewhat lower than the rate in the earlier part of
the sample period. For example, for the years 1997 through 2010, the
average number of filings per year were approximately 2,800 and
5,200 for initial and amended Schedule 13D filings respectively,
which are generally consistent with the monthly rates of filings
reported for 1985 through 2012 in the Lilienfeld-Toal and Schnitzler
2014 Study. In contrast, for the years 2011 through 2022, the
average number of filings per year were roughly 1,400 and 4,100 for
initial and amended Schedule 13D filings respectively. This decline
is roughly commensurate with the decline in the number of publicly
listed companies. Staff also reviewed the number of Schedule 13G
filings on EDGAR each year from 1997 through 2022, from the same
source, and found no clear trend in the number of such filings per
year over this period.
    \682\ See, e.g., Lilienfeld-Toal and Schnitzler 2014 Study
(based on data from all Schedule 13D filings from 1985 through 2005,
including data from paper filings obtained via Thomson Research);
Lucian Bebchuk et al., Pre-Disclosure Accumulations by Activist
Investors: Evidence and Policy, 39 J. Corp. L. 1, 14-17 (2013)
(``Bebchuk et al. 2013 Study'') (based on data from Schedule 13D
filings by hedge funds from 1994, the advent of electronic trading,
through 2007). Subsequent research on more recent samples of
Schedule 13D filings by hedge funds shows reported average ownership
levels consistent with the Bebchuk et al. 2013 Study. See, e.g.,
Alon Brav et al., Governance by Persuasion: Hedge Fund Activism and
Market-Based Shareholder Influence, Oxford Rsch. Encyclopedia of
Econ. and Fin. (2022) (``Brav et al. 2022 Study'') (based on data
from Schedule 13D filings by hedge funds from 1994 through 2018).
    \683\ See sections IV.B.3.a.i and ii below for details on the
filings analyzed by staff.
---------------------------------------------------------------------------

    There is also research that addresses whether other developments
may have changed the significance of lower ownership stakes in an
issuer's securities over time. For example, some observers have stated
that the increase in stock ownership by institutional investors, the
rise of proxy advisory services,\684\ and regulatory and legal
developments regarding shareholder communications may have made it
easier for an investor with a lower ownership stake to influence other
shareholders, and, ultimately, the issuer.\685\ On the other hand,
others have stated that the increased presence of institutional
investors may make it more difficult for an investor with a lower
ownership stake to exert control, without the support of these
institutional investors.\686\ Overall, it is unclear whether
regulatory, legal, and market developments have led activist campaigns
by investors with lower ownership stakes to become more or less
effective over time.\687\ That said, researchers have noted that
today's market for corporate control, in contrast to that at the time
of the enactment of the Williams Act and the Commission's original
adoption of the related rules, prominently features investors with
minority interests in issuers who seek to influence these issuers'
governance or corporate policies by convincing other shareholders to
support their causes instead of pursuing direct control of issuers
through majority ownership.\688\
---------------------------------------------------------------------------

    \684\ Proxy advisory firms (or proxy voting advice businesses)
provide voting services that can help shareholders, primarily
investment advisers and institutional investors, manage their
substantive and procedural proxy voting needs with respect to the
public companies they own, including assisting these shareholders in
making their voting determinations on behalf of their own clients
and handling other aspects of the voting process. See, e.g.,
Exemptions from the Proxy Rules for Proxy Voting Advice, Release No.
34-89372 (July 22, 2020) [85 FR 55082 (Sept. 3, 2020)].
    \685\ See, e.g., John C. Coffee, Jr. & Darius Palia, The Wolf at
the Door: The Impact of Hedge Fund Activism on Corporate Governance,
41 J. Corp. L. 545, 553-71 (2016); see also letter from SCG (stating
that ``activists today have more resources, often win the support of
highly influential proxy advisors, can readily share their views on
financial news networks, and have access to . . . modern financial
instruments that they can use to postpone disclosure'').
    \686\ See, e.g., Ian Appel et al., Standing on the Shoulders of
Giants: The Effect of Passive Investors on Activism, 32 Rev. Fin.
Stud. 2720 (2019) (``Appel et al. 2019 Study'').
    \687\ It is difficult to measure how the effectiveness of
activist campaigns may have changed over time because, among other
things, the outcomes of campaigns are heterogeneous and thus
difficult to compare, the costs of most campaigns are not
observable, and the threat of a campaign can have significant
effects without being associated with an observable campaign.
Commenters expressed mixed views on whether activist campaigns have
become more or less effective over time. See, e.g., letters from
WLRK II (describing an ``increasing effectiveness of activist
campaigns and their decreased cost''); Profs. Bishop and Partnoy I
(stating that ``the impact that shareholder activists are having on
corporate America is modest and in decline'' and citing a
practitioner study ``describing the number of board seats secured by
activists as `lower than in recent years''' and ``describing the
number of activist campaigns in 2021 as `in line with 2020's slower
pace''').
    \688\ See, e.g., Brav et al. 2022 Study; see also letter from
Profs. Bishop and Partnoy I (stating that ``public company boards
are no longer monitored by hostile takeovers, so activism is the
remaining recourse'').
---------------------------------------------------------------------------

3. Affected Parties and Current Market Practices \689\
---------------------------------------------------------------------------

    \689\ Commenters specifically suggested the Commission consider
the interaction between the final amendments and the Short Position
Reporting Proposal, its proposal relating to the reporting of
securities loans, and the security-based swap reporting portion of
the Schedule 10B Proposal. See letters from Profs. Bishop & Partnoy
I; EIM IV at 4-5; ICI II at 7 n. 13; see also Reporting of
Securities Loans, Release No. 34-94315 (Feb. 25, 2022) [87 FR
11659]. These proposals, or portions of proposals, have not been
adopted and thus have not been considered as part of the baseline
here. To the extent those proposals or portions of proposals are
adopted in the future, the baseline in those subsequent rulemakings
will reflect the regulatory landscape that is current at that time.
---------------------------------------------------------------------------

    The parties affected by the final amendments include: all investors
that are required or potentially required to report their beneficial
ownership of covered classes on Schedules 13D and 13G; the issuers of
covered classes; shareholders of these issuers who are not Schedule 13D
or 13G filers; and other investors, market participants, and issuers.
Below we provide information about the current nature of Schedule 13D
and Schedule 13G filings and filers, which has not changed markedly
since publication of the Proposing Release.
a. Schedule 13D Filings
i. Number of Filings, Filer Types, and Time To File
    During calendar year 2022, the Commission received a total of 5,179
Schedule 13D filings, including 1,161 initial filings and 4,018
amendments.\690\

Overall, these initial filings and amendments involved 2,194 unique
lead filers.\691\ Additional details specific to the initial filings,
including their breakdown and characteristics by filer type, are
presented in Table 1.\692\
---------------------------------------------------------------------------

    \690\ These estimates are based on staff analysis of EDGAR
filings. The Proposing Release reported that the Commission received
10,542 Schedule 13D filings (2,288 initial filings and 8,254
amendments) in calendar year 2020. As noted in the DERA Memorandum,
based on further staff review of these reported statistics, we
believe they included duplicate records, and that the actual number
of unique Schedule 13D filings received in 2020 was 5,288 filings
(1,148 initial filings and 4,140 amendments), which is similar to
the counts provided for 2022 above. One commenter addressing the
DERA Memorandum questioned whether data pertaining to other filing
years used in the analyses in that memorandum include ``similar
double counting.'' See letter from EIM IV. Staff reviewed to verify
that duplicate records were not included in the statistics and
analyses in the DERA Memorandum or in this economic analysis.
    \691\ This estimate is based on staff analysis of EDGAR filings.
``Lead filer'' indicates the filer that submits a filing to the
Commission, though the same filing may include information about
additional co-filers and their beneficial ownership of securities.
    \692\ These estimates are based on staff analysis of EDGAR
filings. The ``Prominent Activists'' category is based on the
classification of the filer as either (or both) (i) a member of the
Insightia (previously Activist Insight) ``Activist Top Ten'' list in
any of the 10 years (2014 to 2023) that this list has been
published, which represent Insightia's ranking of the most
influential activists over the past year, based on the quantity,
size, and performance of their activist investments; or (ii) a
``Sharkwatch 50'' activist in the FactSet SharkRepellent database as
of 2021, which represents FactSet's compilation of the 50 most
significant activists based on, e.g., the number and impact of their
campaigns as of that date. The ``Other Institutions'' category is
based on filings by institutions (primarily partnerships,
corporations, investment advisors, and banks) that do not fall in
the ``Prominent Activist'' category. The ``Other Individuals''
category is based on filings that report holdings of individuals and
no other filer type and that do not fall in the ``Prominent
Activist'' category; filings that report holdings of individuals who
are co-filing as affiliates or part of a group with institutions
(none of whom fall in the ``Prominent Activist'' category) are
included in the ``Other Institutions'' category. Information about
the number of days from the trigger date to the filing date of the
Schedule 13D and the beneficial ownership percentage reported in the
Schedule 13D, respectively, are based on a subset of filings (about
98% of the filings) for which we were able to extract the required
information. The ``median ownership reported in filing'' row
represents the median, across filings, of the maximum beneficial
ownership percentage separately reported in a filing and may thus
understate the aggregate ownership of a group of co-filers. Based on
hand-collection of aggregate ownership in a random subsample of 2021
filings, we estimate that this approach does not fully aggregate all
of the ownership reported by a group of co-filers in approximately
7% of the filings. In contrast, alternative algorithms we considered
to aggregate ownership reported in different fields in a given
filing very often vastly overstated ownership due to the double-
counting of shares whose beneficial ownership could be attributed to
multiple affiliates.

                           Table 1--Initial Schedule 13D Filings in 2022 by Filer Type
----------------------------------------------------------------------------------------------------------------
                                                     Prominent         Other           Other
                                                     activists     institutions     individuals     All filings
----------------------------------------------------------------------------------------------------------------
Number of unique lead filers....................              22             720             252             994
Number of initial filings.......................              60             843             258           1,161
Median calendar days from trigger date * to                    9              10              11              10
 filing date....................................
Median ownership reported in filing.............            6.6%           15.0%           10.5%           13.0%
----------------------------------------------------------------------------------------------------------------
* The trigger date is the date on which the investor has acquired beneficial ownership of more than 5% of a
  class of equity securities described in section 13(d)(1) of the Exchange Act and Rule 13d-1(i), or, for an
  investor previously eligible to file a Schedule 13G in lieu of a Schedule 13D pursuant to Rule 13d-1(b) or
  (c), the date on which the investor becomes ineligible to report on Schedule 13G.

    We present the breakdown of filer type in the initial Schedule 13D
filings under the baseline in Table 1 to characterize the affected
parties. We did not limit our analyses of costs and benefits to any of
these categories.\693\
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    \693\ See letter from EIM IV (stating that the categorization of
filers by type in the DERA Memorandum implied that ``activists
(prominent or otherwise) warrant separate regulatory scrutiny'').
This commenter also raised concerns about the reliability of the
FactSet SharkRepellent database used to identify ``prominent
activists,'' including whether the data is ``accurate and current.''
We note that the FactSet SharkRepellent database including the
``Sharkwatch 50'' is used, currently, by both academics (see, e.g.,
Ian Appel & Vyacheslav Fos, Short Campaigns by Hedge Funds (Working
Paper, Feb. 2023), available at https://ssrn.com/abstract=3242516)
and practitioners (see, e.g., the activist surveillance tool offered
at Activist Surveillance, The Conference Board, https://www.conference-board.org/proxyvoting) to identify prominent
activists. We also note that the categorization ``prominent
activist'' is used in the production of descriptive statistics that
characterize Schedule 13D filings and the affected parties but does
not contribute to key results or estimates of our analyses.
Nevertheless, given this commenter's concerns, staff revised its
approach to identifying ``prominent activists'' by supplementing the
``Sharkwatch 50'' with an annual ranking of top activists published
by Insightia (including a total of 34 ``top ten'' activists over 10
years) to compile a broader list of ``prominent activists.'' See
supra note 692. This revision resulted in the addition of five
Schedule 13D filers from our 2011-2021 sample to the category of
``prominent activists.''
---------------------------------------------------------------------------

    A detailed day-by-day breakdown of the percentage of the filings
made each day after the trigger date is provided in Figure 1
below.\694\
---------------------------------------------------------------------------

    \694\ This figure is based on staff analysis of EDGAR filings
and reflects the subset of filings (1,136 of the total 1,161 filings
reported in Table 1) for which required information could be
extracted.

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[GRAPHIC] [TIFF OMITTED] TR07NO23.001

    About 71 percent of all of the initial Schedule 13D filings in 2022
were filed within the existing 10-day filing window (represented by the
dark grey bars),\695\ with about 34 percent of the filings being made
on the filing deadline.\696\ Approximately 29 percent of the initial
Schedule 13D filings, representing about 41 percent of all of the
initial Schedule 13D filings that were filed by the current filing
deadline, were filed within the amended five-business day deadline.
---------------------------------------------------------------------------

    \695\ We note that approximately 42% of the Schedule 13D filings
in Figure 1 were made after the tenth day following the trigger
date. However, not all of these filings are considered late by the
Commission. By rule, the Commission accepts as timely any filing
that, if the calendar due date falls on a weekend or holiday, is
received by the next business day. 17 CFR 240.0-3(a) (``[I]f the
last day on which [a filing] can be accepted as timely filed falls
on a Saturday, Sunday or holiday, such [filing] may be [made] on the
first business day following.''). Therefore, after accounting for
weekends and holidays, we preliminarily estimate that about 29% of
the filings (represented by the light grey bars) were late.
    \696\ This statistic includes the 20.7% of initial Schedule 13D
filings made on the 10th day after the trigger date (i.e., the dark
gray bar for day 10 in Figure 1) as well as those filings made after
the 10th day but still considered timely due to holidays or weekends
(i.e., the dark gray portion of the bar for days 11-14 in Figure 1).
See supra note 695.
---------------------------------------------------------------------------

ii. Types of Filings
    An initial Schedule 13D filing obligation is triggered by the
acquisition of beneficial ownership of more than five percent of a
covered class, which can be achieved through various means, including
via the purchase of shares on the open market as well as the receipt of
shares through events involving off-market transactions. Initial
Schedule 13D filings are required in a number of different
circumstances, only some of which reflect shareholder activism, as
noted by commenters.\697\ As discussed further below, filings involving
the acquisition of shares as a result of certain corporate actions and
other off-market transactions (e.g., compensatory equity grants to
executives) are less likely to be characterized as announcements of
activist campaigns.
---------------------------------------------------------------------------

    \697\ See, e.g., letter from STB (stating that ``the Commission
should recognize that the investors who file on Schedule 13D are by
no means all activist investors engaging in the types of activities
the Williams Act seeks to regulate'').
---------------------------------------------------------------------------

    Based on staff review of over a decade of Schedule 13D
filings,\698\ we believe that the nature of transaction history
disclosures, which are required pursuant to Item 5(c) of Schedule
13D,\699\ provide a reasonable means of distinguishing, in a large
sample, those filings that are likely to reflect the acquisition of
beneficial ownership through corporate actions or other off-market
transactions as opposed to those that are more likely to represent
activist campaigns.\700\ In particular, for those filings for which we
could not extract a history of transactions in tabular form, we found
that most reported only one or two transactions, representing off-
market transfers of shares.\701\ We found

that these filings are typically associated with beneficial ownership
acquired in events such as the consummation of negotiated mergers and
acquisitions, IPOs, other restructurings, private placements, or
compensation awards.\702\ We therefore categorize these filings as
``corporate action filings.'' \703\ In contrast, we found that filings
that report a transaction history pursuant to Item 5(c) in tabular form
are typically associated with the accumulation of shares in open-market
trading through a series of multiple transactions and are more likely
to discuss potential plans and proposals that are commonly viewed as
characteristic of activist campaigns.\704\ We therefore categorize the
filings for which we are able to extract a transaction history in
tabular form as ``non-corporate-action filings,'' which we view as more
likely to involve activist campaigns, acknowledging that we may be
somewhat over-inclusive in our application of the term ``activist
campaign.'' \705\ We present a breakdown of the percentages of initial
Schedule 13D filings in calendar years 2011 through 2021 that we
characterize as ``non-corporate-action filings'' or ``corporate action
filings'' based on the nature of transaction histories extracted from
the filings in Table 2.\706\
---------------------------------------------------------------------------

    \698\ Staff analyzed initial Schedule 13D filings from EDGAR
from calendar years 2011 to 2021 through programmatic text analysis
and manual review. In particular, programmatic search terms were
designed to identify text or data associated with transactions or
with beneficial ownership obtained through various kinds of events
(such as initial public offerings (``IPOs'') and equity-based
compensation awards). Programmatic text analysis was also used to
extract transaction history data reported in tabular form. Manual
review of the extracted text and data and of the filings was used to
better understand the nature of different filings and to what extent
the extracted text and data were systematically related to the
different types of underlying filings.
    \699\ See 17 CFR 240.13d-101, Item 5(c) (requiring reporting
persons to ``[d]escribe any transactions in the class of securities
reported on that were effected during the past sixty days or since
the most recent filing of Schedule 13D'').
    \700\ We also note that the nature of transaction history
disclosures affects staff's ability, in practice, to include filings
in certain analyses. In particular, data on the share accumulation
patterns of the filer could only be systematically extracted from
filings when it was presented in tabular form, and such data is
required for the analyses presented in Tables 5 and 6 below (in
sections C.1.a.iii and C.1.b.i).
    \701\ This observation is based on staff review of initial
Schedule 13D filings from EDGAR from calendar years 2011 to 2021
through programmatic text analysis and manual review. In particular,
staff used programmatic text analysis to extract potential
transaction dates outside of any tabular disclosure by searching for
any text in the format of a date that seemed to be accompanied by a
price and/or a quantity of shares. Among the filings for which a
tabular history of transactions was not extracted, no more than two
potential transaction dates were extracted for about 70% of the
filings. Upon manual review of the remaining 30% of the filings for
which a tabular history of transactions was not extracted, staff
found that a large number of the additional potential transaction
dates that were programmatically extracted do not actually reflect
transactions. We therefore believe that a significant fraction of
these remaining filings also reflect no more than two transactions.
    \702\ This observation is based on staff review of initial
Schedule 13D filings from EDGAR from calendar years 2011 to 2021
through programmatic text analysis and manual review, including
significant manual review of the disclosures pursuant to Item 3 of
the Schedule 13D filings to confirm the source of the shares
acquired. See supra note 698 for more detail on the analysis and
review undertaken.
    \703\ While we label all of these filings as ``corporate action
filings'' for simplicity, we acknowledge that some of these filings
represent transfers that are not strictly related to corporate
actions, such as bequests of shares, and that our classification
methodology is subject to some possible error. For example, 3% of
these filings reflected in Table 2 below are made by Prominent
Activists, as described supra note 692, (representing 28% of all of
the filings by Prominent Activists in Table 1 above) and it is
possible that such filings may represent activist campaigns
incorrectly classified as corporate action filings.
    \704\ This observation is based on staff review of initial
Schedule 13D filings from EDGAR from calendar years 2011 to 2021
through programmatic text analysis and manual review, including
significant manual review of the disclosures pursuant to Item 4 of
the Schedule 13D filings regarding the purpose of the transaction.
See supra note 731 for more detail on the analysis and review
undertaken. Examples of plans and proposals that were considered
characteristic of activist campaigns include potential discussions
or recommendations with respect to board composition, other
governance matters, business strategy, capital structure and
dividend policies, and a potential sale process for the issuer or a
segment of the issuer.
    \705\ In a manual review of these filings, our staff did observe
many instances of beneficial ownership held for investment purposes,
with no stated plans or proposals, which are nonetheless included in
our category of non-corporate-action filings by virtue of their
filing on Schedule 13D (rather than Schedule 13G) and their
inclusion of a tabular transaction history. In general, our
classification methodology is subject to some possible error.
Further, a filer might not consider itself an ``activist investor''
or be viewed as such even if it is involved in what we label as a
non-corporate-action filing and characterize as a potential activist
campaign for purposes of this memorandum.
    \706\ These estimates are based on staff analysis of EDGAR
filings, including programmatic text analysis to extract tabular
trading histories. See supra note 692 regarding the filer type
classifications. The classification of filings as late (in the notes
accompanying the table) accounts for the effect of weekends and
holidays. See supra note 695.

                           Table 2--Types of Initial Schedule 13D Filings in 2011-2021
----------------------------------------------------------------------------------------------------------------
                                                                              Breakdown by filer type
                                                   Percentage of -----------------------------------------------
                                     Number of      all filings                        Other           Other
                                      filings           (%)          Prominent     institutions     individuals
                                                                   activists (%)        (%)             (%)
----------------------------------------------------------------------------------------------------------------
Non-Corporate-Action Filings *..           3,067              20              28              65               7
Corporate Action Filings **.....          12,657              80               3              67              30
----------------------------------------------------------------------------------------------------------------
* Filings for which tabular trading histories were extracted are categorized as ``Non-Corporate-Action Filings''
  due to the results of our staff's programmatic and manual review of such filings. See note 705 regarding some
  of the limitations of this approach. About 11% of these filings were filed late relative to the current
  deadline (see note 706).
** Filings for which tabular trading histories were not extracted are categorized as ``Corporate Action
  Filings'' due to the results of our staff's programmatic and manual review of such filings. See note 703
  regarding some of the limitations of this approach. About 34% of filings in this category were filed late
  relative to the current deadline (see note 706).

    The categorization of filings presented in Table 2 was also
included by staff in the DERA Memorandum. One comment letter addressing
the DERA Memorandum indicated that the analysis presented in that
memorandum (which is similar to analysis included in this economic
analysis) was not replicable because it is ``not based on publicly
available information,'' citing staff's references to programmatic text
analysis and manual review.\707\ To clarify, the analyses in the DERA
Memorandum and this economic analysis are based on publicly available
filings and datasets. The reliance of the staff's analysis on
programmatic text analysis is limited primarily to the extraction of
trigger dates, the reported level of beneficial ownership, and the
tabular trading histories (as discussed in this section) from public
initial Schedule 13D filings from EDGAR. This data or other data that
would allow us to understand the share accumulation patterns of filers
is not available from any third-party sources that we are aware of, and
our extraction of this data is not novel; other researchers have
extracted similar transaction history data from public Schedule 13D
filings for the purpose of academic studies.\708\ Further, the manual
review (as well as certain additional programmatic text analysis)
discussed in this section and elsewhere in this economic analysis is
used to validate our methodologies and not to generate the results of
the analyses.
---------------------------------------------------------------------------

    \707\ See letter from Profs. Bishop and Partnoy III.
    \708\ See, e.g., Pierre Collin-Dufresne & Vyacheslav Fos, Do
Prices Reveal the Presence of Informed Trading?, 70 J. Fin. 1555
(2015) (``Collin-Dufresne & Fos 2015 Study''); Yu Ting Forester
Wong, Wolves at the Door: A Closer Look at Hedge Fund Activism, 66
Mgmt. Sci. 2347 (2020) (``Wong 2020 Study'').
    \709\ See letter from EIM IV. That commenter also stated that
the categorization of filings presented in the DERA Memorandum
would, in some cases, result in ``potential double counting''
whereby ``Schedule 13D filings with respect to a single M&A
transaction would likely end up in both categories.'' Id. We do not
believe there is a risk of double-counting in this sample given that
it is limited to initial Schedule 13D filings and each filing
appears only in a single category. If a person that is a potential
acquiror in an M&A transaction files an initial Schedule 13D while
assembling an initial position, and then files a Schedule 13D
amendment upon consummation of the acquisition of the issuer, only
the initial Schedule 13D would appear (in a single category) in our
analysis.
---------------------------------------------------------------------------

    Another commenter addressing the DERA Memorandum raised concerns
about potential errors in the classification of filings as ``non-
corporate-action filings'' category, as acknowledged by staff in the
DERA Memorandum, and questioned why the magnitude of any overstatement
of this category is not quantified.\709\ In the

discussion above, we acknowledge that some filings classified as non-
corporate-action filings do not state plans and proposals typical of
activist campaigns. That said, these filings are still due
consideration. That is, to the extent the share accumulation patterns
reported in these filings would be affected by a shortened deadline,
and to the extent these filings are associated with abnormal stock
returns, they may still be important to consider in evaluating the
costs and benefits quantitatively analyzed in this economic analysis.
We also acknowledge above that some non-corporate-action filings may be
incorrectly categorized as corporate action filings.\710\ While we
acknowledge the potential noise in our data, we believe that any large
dataset or classification approach applied to a large dataset would be
subject to some degree of error. Another commenter suggested that we
consider using an alternative database, stating that it ``includes a
more comprehensive dataset on non-corporate action filings and activist
campaigns than that created by DERA.'' \711\ Our initial dataset
includes all Schedule 13D filings on EDGAR, so we expect it to be fully
comprehensive. As discussed above, the subset of these filings that are
categorized as non-corporate-action filings may not include every
filing that some may consider to represent an ``activist campaign.''
However, it is not practical to extend the key analyses conducted later
in this economic analysis to additional filings because staff was, by
definition, unable to systematically extract transaction history data
for the filings classified as corporate action filings, and data on the
share accumulation patterns of the filer are required for these
analyses.\712\ We do not believe that potential misclassifications have
a meaningful impact on the results or interpretation of the analyses in
this economic analysis.\713\
---------------------------------------------------------------------------

    \710\ One commenter suggested that staff ``could have
alternately analyzed a set of Schedule 13D filed by prominent
activists to avoid assignment errors.'' See Craig Lewis, Review of
the Supplemental Data and Analysis on Certain Economic Effects of
Proposed Amendments Regarding the Reporting of Beneficial Ownership,
exhibit to letter from EIM IV (``Lewis Study II (exhibit to letter
from EIM IV)''). We note that prominent activists are responsible
for a minority of non-corporate-action filings (per Table 2) and
that we do not believe it would be appropriate to limit our
assessment of costs and benefits to this subgroup of filers given
that filings by less prominent activist investors and filers that do
not consider themselves to be ``activist'' investors are also due
consideration and may be associated with similar types of costs and
benefits. Further, it is not necessarily the case that filings by
prominent activists are misclassified as corporate action filings,
as many of these filers engage in a variety of activities which
could include involvement in corporate actions of the types listed
above.
    \711\ See letter from CIRCA IV (recommending the use of the 13D
Monitor database).
    \712\ See Tables 5 and 6 below (in sections C.1.a.iii and
C.1.b.i).
    \713\ For example, staff found that many filings by prominent
activists that were categorized as ``corporate action filings'' did
not involve the accumulation of shares on the open market during the
filing window, which is why staff could not extract a tabular
transaction history. This finding also means that the risk that the
filer's acquisition of its beneficial ownership interest could be
affected by the shortened filing deadline is limited.
---------------------------------------------------------------------------

iii. Timing of Share Accumulation
    Because the final amendments will shorten the window between the
trigger date and filing deadline for an initial Schedule 13D filing, we
also consider current practices under the baseline with respect to the
timing of the filer's accumulation of shares during the filing window.
    As discussed above, for those initial Schedule 13D filings that we
classify as ``corporate action filings,'' which represent about 80
percent of initial Schedule 13D filings (per the second row of Table
2), we found that most reported only one or two transactions
representing off-market transfers of shares.\714\ These transfers
typically took place on or very close to the trigger date.\715\ We
found that very few of these transfers occur following the fifth day
after the filer \716\ crosses the five percent threshold.\717\
---------------------------------------------------------------------------

    \714\ See supra note 701.
    \715\ This observation is based on staff review of initial
Schedule 13D filings from EDGAR from calendar years 2011 to 2021
through programmatic text analysis (to extract potential transaction
dates, as discussed supra note 701, and to extract trigger dates)
and manual review.
    \716\ References to the term ``filer'' in this economic analysis
are inclusive of the beneficial owner before the person actually
made a Schedule 13D filing.
    \717\ References to a filer ``crossing the five percent
threshold'' in this economic analysis mean that the filer just
completed acquiring beneficial ownership totaling more than five
percent of a covered class or otherwise triggered a responsibility
to file an initial Schedule 13D. Based on staff analysis of EDGAR
filings through programmatic text analysis (to extract potential
transaction dates, as discussed supra note 701, and to extract
trigger dates), we estimate that about 2% of the potential
transaction dates extracted from the text of corporate action
filings between 2011 and 2021 occurred between the fifth day after
the filer crosses the 5% threshold and the subsequent filing date.
However, upon manual review, we found that many of these dates do
not actually reflect transactions (i.e., the dates were extracted
because they seemed to relate to a number of shares and/or a price,
but they reflect information other than specific transactions, as in
the case of a summary of holdings as of the filing date that appears
in the body of the filing).
---------------------------------------------------------------------------

    For initial Schedule 13D filings that we classify as ``non-
corporate-action filings,'' we use data extracted from the filings to
examine filers' current patterns of share accumulation. We extracted
such data from the 3,067 non-corporate-action filings from 2011 through
2021 reflected in the first row of Table 2. We further refined the
sample of filings to exclude late filers and filers with no beneficial
ownership reported as of the filing date and to adjust for multiple
filings on the same date.\718\ Our refinements resulted in a sample
size of 2,370 non-corporate-action filings, which we use for Figures 2,
3a, 3b, and Table 3 below. Figure 2 displays the percentage of non-
corporate-action filings for which filers completed acquiring the total
beneficial ownership reported in their initial Schedule 13D filing by
the specified day after the trigger date.\719\
---------------------------------------------------------------------------

    \718\ When multiple filings were made on the same date and
pertain to the same issuer, only the filing reporting the largest
stake is included in the analysis.
    \719\ These estimates are based on staff analysis of EDGAR
filings through programmatic text analysis (to extract trigger
dates, the reported levels of beneficial ownership, and transaction
histories, which were all used to determine share accumulation
patterns; and to categorize filings, as discussed in the previous
section). See supra section IV.B.3.a.ii.

---------------------------------------------------------------------------

[GRAPHIC] [TIFF OMITTED] TR07NO23.002

    The dark grey bars in Figure 2 represent filers that completed
acquiring their total reported stake by the amended deadline, i.e.,
five business days after their trigger date.\720\ Summing the dark grey
bars of the figure,\721\ we find that about 80 percent of the filers
completed acquiring their reported stake by the amended deadline. The
remaining approximately 20 percent of filers (represented in the light
grey bars) continued accumulating shares after the amended deadline.
---------------------------------------------------------------------------

    \720\ See supra note 695.
    \721\ Typically, five business days translates to seven calendar
days after weekends are accounted for. Occasionally, five business
days includes more than seven calendar days because of federal
holidays. For instance, if an investor crosses the 5% threshold on a
Friday and the following Monday is a federal holiday, then five
business days will equate to 10 calendar days.
---------------------------------------------------------------------------

    We next explore the significance of additional accumulations of
shares after the amended deadline. Figures 3a and 3b display, for the
same sample of filings as in Figure 2, the percentage of filers that
complete acquiring 90 percent and 75 percent, respectively, of their
stake on the indicated day after the trigger date.\722\
---------------------------------------------------------------------------

    \722\ These estimates are based on staff analysis of EDGAR
filings through programmatic text analysis (to extract trigger
dates, the reported levels of beneficial ownership, and transaction
histories, which were all used to determine share accumulation
patterns; and to categorize filings, as discussed in the previous
section). See section IV.B.3.a.ii. As discussed above, we use the
maximum ownership separately reported in a filing as our measure of
the total reported ownership, and, in some cases (approximately 7%
of all of the Schedule 13D filings in Table 2 above), this approach
may understate the aggregate ownership of a group of co-filers. See
supra note 692. Because this measure of total reported ownership is
used as the denominator to determine the percentage accumulation by
a given day in these figures, our estimate of the percentage of
reported ownership that is accumulated after the fifth business day
following the trigger date may be overestimated in some cases. For
example, we manually reviewed all filings categorized in the light
grey bars of Figure 3b (those with 25% or more of their reported
ownership accumulated after the amended deadline) and determined
that 1 out of 16 filings in the light grey bars, or 6% of these
filings, would not have been categorized in this group if our
algorithm to extract total reported ownership from the filing was as
precise as our manual review of the documents.

---------------------------------------------------------------------------

[GRAPHIC] [TIFF OMITTED] TR07NO23.003

[GRAPHIC] [TIFF OMITTED] TR07NO23.004

    The dark grey bars in Figures 3a and 3b represent filers that
completed acquiring 90 percent or 75 percent, respectively, of their
reported stake by the amended deadline. Summing the dark grey bars of
Figure 3a, we find that about 97 percent of the filers completed
acquiring 90 percent of their reported stake by the amended deadline,
while the remaining three percent of filers (represented in the light
grey bars) continued to accumulate shares constituting 10 percent or
more of their reported stake after the amended deadline. Similarly,
summing the dark grey bars of Figure 3b, we find that about 99 percent
of the filers completed acquiring 75 percent of their reported stake by
the amended deadline, while the remaining one percent of filers
continued to accumulate shares representing 25 percent or more of their
reported stake after that date.
    The number and percentage of non-corporate action filings with
different degrees of accumulation from Figures 2,

3a, and 3b are summarized in Table 3.\723\
---------------------------------------------------------------------------

    \723\ These estimates are based on staff analysis of EDGAR
filings through programmatic text analysis. See supra notes 719 and
722.

    Table 3--Degree of Accumulation by Amended Deadline Non-Corporate-Action Filings of Initial Schedule 13D
                                                   [2011-2021]
----------------------------------------------------------------------------------------------------------------
                                                         Percent of stake accumulated by amended deadline
                                                 ---------------------------------------------------------------
                                                  (1) 100% (full                     (3) <90%        (4) <75%
                                                      stake)         (2) <100%     subset of (2)   subset of (3)
----------------------------------------------------------------------------------------------------------------
Number of campaigns in sample...................           1,907             463              78              16
Percent of campaigns in sample..................             80%             20%              3%              1%
Average number of campaigns/year................             173              42               7               1
----------------------------------------------------------------------------------------------------------------

    Column 1 of Table 3 (representing the same filings as those in the
dark grey bars of Figure 2) presents information about campaigns in
which the filer completed accumulating their shares by the amended
deadline (five business days after crossing the five percent
threshold). Column 2 (representing the same filings as those in the
light grey bars of Figure 2) presents information about the remainder
of the campaigns, in which the filer continued accumulating shares
after the amended deadline. Columns 3 and 4 (representing the same
filings as those in the light grey bars of Figure 3a and 3b
respectively) present the subsets of the campaigns in Column 2 in which
the filer had accumulated less than 90 or 75 percent, respectively, of
their stake by the amended deadline (i.e., 10 percent or 25 percent,
respectively, or more of their stake was accumulated between the
amended deadline and their actual filing date).\724\
---------------------------------------------------------------------------

    \724\ The figures in Tables 3, 5, and 6 use the same methodology
as in Table 2 and as discussed in section IV.B.3.a.ii for
identifying non-corporate action filings. A different methodology,
such as those proposed in some comment letters (see supra notes 710-