[Federal Register Volume 88, Number 214 (Tuesday, November 7, 2023)]
[Rules and Regulations]
[Pages 76896-76984]
[FR Doc No: 2023-22678]

Vol. 88

Tuesday,

No. 214

November 7, 2023

Part II

Securities and Exchange Commission

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17 CFR Parts 232 and 240

Modernization of Beneficial Ownership Reporting; Final Rule

Federal Register / Vol. 88 , No. 214 / Tuesday, November 7, 2023 /
Rules and Regulations

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SECURITIES AND EXCHANGE COMMISSION

17 CFR Parts 232 and 240

[Release Nos. 33-11253; 34-98704; File No. S7-06-22]
RIN 3235-AM93

Modernization of Beneficial Ownership Reporting

AGENCY: Securities and Exchange Commission.

ACTION: Final rule; guidance.

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SUMMARY: The Securities and Exchange Commission (``Commission'') is
adopting amendments to certain rules that govern beneficial ownership
reporting. The amendments generally shorten the filing deadlines for
initial and amended beneficial ownership reports filed on Schedules 13D
and 13G. The amendments also clarify the disclosure requirements of
Schedule 13D with respect to derivative securities. We also are
expanding the timeframe within a given business day by which Schedules
13D and 13G must be filed, and separately requiring that Schedule 13D
and 13G filings be made using a structured, machine-readable data
language. Further, we discuss how, under the current rules, an
investor's use of a cash-settled derivative security may result in the
person being treated as a beneficial owner of the class of the
reference equity security. We also are providing guidance on the
application of the current legal standard found in section 13(d)(3) and
13(g)(3) of the Securities Exchange Act of 1934 to certain common types
of shareholder engagement activities. Finally, we are making certain
technical revisions.

DATES:
    Effective dates: The amendments are effective on February 5, 2024.
    Compliance dates: See section II.G.

FOR FURTHER INFORMATION CONTACT: Nicholas Panos, Senior Special
Counsel, and Valian Afshar, Senior Special Counsel, Division of
Corporation Finance, at<PHONE_NUMBER>, U.S. Securities and Exchange
Commission, 100 F Street NE, Washington, DC 20549.

SUPPLEMENTARY INFORMATION: We are adopting amendments to 17 CFR
240.13d-1 (``Rule 13d-1''), 17 CFR 240.13d-2 (``Rule 13d-2''), 17 CFR
240.13d-3 (``Rule 13d-3''), 17 CFR 240.13d-5 (``Rule 13d-5''), 17 CFR
240.13d-6 (``Rule 13d-6''), 17 CFR 240.13d-101 (``Rule 13d-101''), and
17 CFR 240.13d-102 (``Rule 13d-102'') under the Securities Exchange Act
of 1934 [15 U.S.C. 78a et seq.] (``Exchange Act'').\1\ We also are
adopting amendments to 17 CFR 232.13 (``Rule 13 of Regulation S-T'')
and 17 CFR 232.201 (``Rule 201 of Regulation S-T'') under 17 CFR part
232 (``Regulation S-T'').\2\ In addition, we are rescinding 17 CFR
240.13d-7 (``Rule 13d-7'').
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    \1\ Unless otherwise noted, when we refer to the Exchange Act,
or any paragraph of the Exchange Act, we are referring to 15 U.S.C.
78a of the United States Code, at which the Exchange Act is
codified, and when we refer to rules under the Exchange Act, or any
paragraph of these rules, we are referring to title 17, part 240 of
the Code of Federal Regulations [17 CFR part 240], in which these
rules are published.
    \2\ Unless otherwise noted, when we refer to Regulation S-T, or
any paragraph of the rules thereunder, we are referring to title 17,
part 232 of the Code of Federal Regulations [17 CFR part 232], in
which these rules are published.
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Table of Contents

I. Introduction
II. Discussion of the Final Amendments
    A. Amendments to Rules 13D-1 and 13D-2 and Rules 13 and 201 of
Regulation S-T To Revise Filing Deadlines and Filing Date Assignment
    1. Rule 13d-1(a), (e), (f), and (g)
    2. Rule 13d-1(b), (c), and (d)
    3. Rule 13d-2(a) and (b)
    4. Rule 13d-2(c) and (d)
    5. Rules 13(a)(4) and 201(a) of Regulation S-T
    B. Proposed Amendment to Rule 13D-3 Regarding the Use of Cash-
Settled Derivative Securities
    1. Proposed Amendment
    2. Comments Received
    3. Commission Guidance
    C. Proposed Amendments to Rule 13D-5
    1. Proposed Rule 13d-5(b)(1)(i), (b)(2)(i), and (b)(1)(ii)
    2. Proposed Rule 13d-5(b)(1)(iii) and (b)(2)(ii)
    3. Proposed Rule 13d-5(b)(1)(iv) and (b)(2)(iii)
    D. Proposed Amendments to Rule 13D-6 To Create Certain
Exemptions
    1. Proposed Amendments
    2. Comments Received
    3. Final Amendments
    E. Amendment to Schedule 13D To Clarify Disclosure Requirements
Regarding Derivative Securities
    1. Proposed Amendment
    2. Comments Received
    3. Final Amendment
    F. Structured Data Requirement for Schedules 13D and 13G
    1. Proposed Amendment
    2. Comments Received
    3. Final Amendment
    G. Compliance Dates
III. Other Matters
IV. Economic Analysis
    A. Overview
    B. Baseline
    1. Current Schedule 13D and 13G Filing Requirements
    2. Market Trends
    3. Affected Parties and Current Market Practices
    C. Economic Effects of the Final Rules
    1. Shortened Initial Schedule 13D Filing Deadline
    2. Shortened Schedule 13G Filing Deadlines
    3. Other Amendments
    D. Reasonable Alternatives to the Final Rules
    1. Alternative Filing Deadlines
    2. Tiered Approaches
    3. Modify Structured Data Requirement
V. Paperwork Reduction Act
    A. Summary of the Collections of Information
    B. Summary of Comment Letters on PRA Estimates
    C. Burden and Cost Estimates for the Final Amendments
VI. Regulatory Flexibility Act Certification Statutory Authority

I. Introduction

    We are amending certain rules within 17 CFR 240.13d-1 through
240.13f-1 (``Regulation 13D-G'') \3\ and Regulation S-T to modernize
the beneficial ownership reporting requirements and improve their
operation and efficacy. Some \4\ of these amendments are based on the
amendments that the Commission proposed in 2022 (``Proposed
Amendments'').\5\ Specifically, we are adopting revisions to the
deadlines for Schedule 13D and Schedule 13G filings. We also are
adopting certain related technical changes to Regulation S-T that the
Commission proposed in connection with these amendments. Further, we
are requiring that Schedule 13D and 13G filings be submitted using a
structured, machine-readable data language.
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    \3\ Unless otherwise noted, when we refer to Regulation 13D-G,
we are referring to title 17, part 240 of the Code of Federal
Regulations [17 CFR part 240], in which 17 CFR 240.13d-1 through
240.13f-1 are published.
    \4\ See infra note 22 for a discussion of certain technical
amendments we are adopting that the Commission did not previously
propose.
    \5\ See Modernization of Beneficial Ownership Reporting, Release
Nos. 33-11030; 34-94211 (Feb. 10, 2022) [87 FR 13846 (Mar. 10,
2022)] (``Proposing Release''). On Apr. 28, 2023, the Commission
reopened the comment period for the Proposing Release in connection
with the addition to the comment file of a memorandum prepared by
staff of the Commission's Division of Economic and Risk Analysis.
See Reopening of Comment Period for Modernization of Beneficial
Ownership Reporting, Release Nos. 33-11180; 34-97405 (Apr. 28, 2023)
[88 FR 28440 (May 4, 2023)] (``Reopening Release''). That memorandum
provided supplemental data and analysis related to certain economic
effects of the Proposed Amendments. See Memorandum of the Staff of
the Division of Economic and Risk Analysis, Supplemental data and
analysis on certain economic effects of proposed amendments
regarding the reporting of beneficial ownership (Apr. 28, 2023),
available at https://www.sec.gov/comments/s7-06-22/s70622-20165251-334474.pdf (``DERA Memorandum'').
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    In response to the comments we received on the Proposed
Amendments,\6\ however, we are making

certain adjustments from the proposal. For example, we are not adopting
proposed 17 CFR 240.13d-3(e) (``Rule 13d-3(e)'') to deem certain
holders of cash-settled derivative securities \7\ as beneficial owners
of the reference covered class.\8\ Instead, we discuss how, under
current Rule 13d-3, persons using these types of derivative securities
may already be subject to regulation as beneficial owners. We also are
not adopting many of the proposed amendments to Rules 13d-5 \9\ and
13d-6. Instead, we are issuing guidance on the application of the
current legal standard found in sections 13(d)(3) and 13(g)(3) to
certain common types of shareholder engagement activities.
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    \6\ See generally letters submitted in connection with the
Proposed Amendments, available at https://www.sec.gov/comments/s7-06-22/s70622.htm. Unless otherwise specified, all references in this
release to comment letters are to comments submitted on the Proposed
Amendments. Further, on June 22, 2023, the Commission's Investor
Advisory Committee (``IAC'') adopted recommendations (``IAC
Recommendations'') with respect to the Proposed Amendments. See U.S.
Securities and Exchange Commission Investor Advisory Committee,
Recommendation of the Market Structure Subcommittee of the SEC
Investor Advisory Committee on SEC Proposed Amendments to Regulation
13D-G, Proposed Rule 10B-1, and Proposed Rule 9j-1 (June 22, 2023),
available at https://www.sec.gov/files/spotlight/iac/20230622-recommendation-regarding-sec-proposed-amendments-regulation-13d-g-proposed-rule-10b-1-and.pdf. The IAC was established in Apr. 2012
pursuant to section 911 of the Dodd-Frank Wall Street Reform and
Consumer Protection Act [Pub. L. 111-203, sec. 911, 124 Stat. 1376,
1822 (2010)] (``Dodd-Frank Act'') to advise and make recommendations
to the Commission on regulatory priorities, the regulation of
securities products, trading strategies, fee structures, the
effectiveness of disclosure, and initiatives to protect investor
interests and to promote investor confidence and the integrity of
the securities marketplace. We discuss the IAC Recommendations in
connection with the comments received on the Proposed Amendments
below. See infra sections II.A.1.b, II.A.2.b, II.B.2, and II.C.1.b.
In addition, on Sept. 21, 2022, the IAC held a meeting that included
a panel discussion on the Proposed Amendments. See the agenda for
that meeting, including the panelists that discussed the Proposed
Amendments, at https://www.sec.gov/spotlight/investor-advisory-committee/iac092122-agenda.htm.
    \7\ As used in this release (including for purposes of proposed
Rule 13d-3(e)), the term ``derivative security'' has the meaning set
forth in 17 CFR 240.16a-1(c) (``Rule 16a-1(c)''). See Rule 16a-1(c)
(defining ``derivative securities'' as including certain rights,
such as options, warrants, convertible securities, stock
appreciation rights, or similar rights ``with an exercise or
conversion privilege at a price related to an equity security, or
similar securities with a value derived from the value of an equity
security,'' excluding certain enumerated rights, obligations,
interests, and options). For purposes of proposed Rule 13d-3(e), the
term ``derivative security'' would not have included a security-
based swap, as defined in section 3(a)(68) of the Exchange Act and
the rules and regulations thereunder (``SBS''). As the context
requires, references to ``SBS'' in this release includes both the
singular (``security-based swap'') and plural (``security-based
swaps'') form. See Proposing Release at 13864 & nn.110-114.
    \8\ As used in this release, a ``covered class'' is a class of
equity securities described in section 13(d)(1) of the Exchange Act
and Rule 13d-1(i) and generally means, with limited exception, a
voting class of equity securities registered under section 12 of the
Exchange Act.
    \9\ See infra note 22 and sections II.C.2 and II.C.3 for a
discussion of the proposed amendments to Rule 13d-5 that we are
adopting.
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    With respect to the Schedule 13D and Schedule 13G filing deadlines,
we are amending the following rules:
     17 CFR 240.13d-1(a) (``Rule 13d-1(a)''): Shortening the
filing deadline for the initial Schedule 13D to within five business
days \10\ after the date on which a person acquires beneficial
ownership of more than five percent of a covered class; \11\
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    \10\ The term ``business day'' currently is not defined in
section 13(d) or 13(g) or any rule of Regulation 13D-G. Accordingly,
we are amending 17 CFR 240.13d-1(i) (``Rule 13d-1(i)'') by adopting
a new paragraph (i)(2) that defines ``business day'' for purposes of
Regulation 13D-G to mean any day, other than Saturday, Sunday, or a
Federal holiday, from 12 a.m. to 11:59 p.m. Eastern Time. See infra
notes 14 and 134 for further discussion of our new definition of
``business day.''
    \11\ Throughout this release, we refer to an initial Schedule
13D filing obligation as being incurred under Rule 13d-1(a) when a
person ``acquires beneficial ownership of more than 5% of a covered
class,'' among other similar formulations. These formulations refer
to the requirement in Rule 13d-1(a), which currently states that
``[a]ny person who, after acquiring directly or indirectly the
beneficial ownership of any equity security of a [covered class], is
directly or indirectly the beneficial owner of more than five
percent of the class shall, within 10 days after the acquisition,
file with the Commission, a . . . Schedule 13D.''
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     17 CFR 240.13d-1(e), (f), and (g) (``Rule 13d-1(e), (f),
and (g)''): Shortening the filing deadline for the initial Schedule 13D
required to be filed by certain persons who become ineligible to report
on Schedule 13G in lieu of Schedule 13D to five business days after the
event that causes the ineligibility;
     17 CFR 240.13d-1(b) and (d) (``Rule 13d-1(b) and (d)''):
Shortening the deadline for the initial Schedule 13G filing for
Qualified Institutional Investors (``QIIs'') \12\ and Exempt Investors
\13\ to within 45 days \14\ after the end of the calendar quarter in
which beneficial ownership first exceeds five percent of a covered
class; \15\
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    \12\ The institutional investors qualified to report on Schedule
13G, in lieu of Schedule 13D and in reliance upon Rule 13d-1(b),
include a broker or dealer registered under section 15 of the
Exchange Act, a bank as defined in section 3(a)(6) of the Exchange
Act, an insurance company as defined in section 3(a)(19) of the
Exchange Act, an investment company registered under section 8 of
the Investment Company Act of 1940, a person registered as an
investment adviser under section 203 of the Investment Advisers Act
of 1940, a parent holding company or control person (if certain
conditions are met), an employee benefit plan or pension fund that
is subject to the provisions of the Employee Retirement Income
Security Act of 1974, a savings association as defined in section
3(b) of the Federal Deposit Insurance Act, a church plan that is
excluded from the definition of an investment company under section
3(c)(14) of the Investment Company Act of 1940, non-U.S.
institutions that are the functional equivalent of any of the
institutions listed in Rule 13d-1(b)(1)(ii)(A) through (I), so long
as the non-U.S. institution is subject to a regulatory scheme that
is substantially comparable to the regulatory scheme applicable to
the equivalent U.S. institution, and related holding companies and
groups (collectively, ``Qualified Institutional Investors'' or
``QIIs''). 17 CFR 240.13d-1(b)(1)(ii). In addition, under Rule 13d-
1(b), in order to qualify to report on Schedule 13G in lieu of
Schedule 13D, a QII must have acquired securities in the covered
class in the ordinary course of business and not with the purpose
nor with the effect of changing or influencing the control of the
issuer, nor in connection with or as a participant in any
transaction having such purpose or effect. 17 CFR 240.13d-
1(b)(1)(i).
    \13\ The term ``Exempt Investor'' as used in this release refers
to persons holding beneficial ownership of more than 5% of a covered
class, but who have not made an acquisition of beneficial ownership
subject to section 13(d). For example, persons who acquire all of
their securities prior to the issuer registering the subject
securities under the Exchange Act are not subject to section 13(d).
In addition, persons who acquire no more than 2% of a covered class
within a 12-month period are exempted from section 13(d) by section
13(d)(6)(B). In both cases, however, those persons are subject to
section 13(g). Amendments to Beneficial Ownership Reporting
Requirements, Release No. 34-39538 (Jan. 12, 1998) [63 FR 2854, n.8
(Jan. 16, 1998)]; see also Proposing Release at 13856, n.55.
    \14\ Any reference to ``day'' in this release means ``calendar
day,'' and those terms may be used interchangeably. Any reference to
``business day'' means ``business day,'' as we are defining that
term. See supra note 10 and infra note 134 for discussions of our
new definition of ``business day.''
    \15\ In addition, we are retaining the requirement in Rule 13d-
1(b)(2) that a QII file its initial Schedule 13G on a more expedited
basis if its beneficial ownership exceeds 10% of a covered class. 17
CFR 240.13d-1(b)(2). We are amending that rule, however, to require
that such an initial Schedule 13G be filed within five business days
after the end of the first month in which the QII's beneficial
ownership exceeds 10% of a covered class, computed as of the last
day of the month, rather than the current requirement of 10 calendar
days after month-end.
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     17 CFR 240.13d-1(c) (``Rule 13d-1(c)''): Shortening the
deadline for Passive Investors \16\ to file an initial Schedule 13G in
lieu of Schedule 13D to within five business days after the date on
which they acquire beneficial ownership of more than five percent of a
covered class;
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    \16\ The term ``Passive Investors'' as used in this release
refers to beneficial owners of more than 5% but less than 20% of a
covered class who can certify under Item 10 of Schedule 13G that the
subject securities were not acquired and are not held for the
purpose or effect of changing or influencing the control of the
issuer of such securities and were not acquired in connection with
or as a participant in any transaction having such purpose or
effect. Amendments to Beneficial Ownership Reporting Requirements,
Release No. 34-39538 (Jan. 12, 1998) [63 FR 2854, n.9 (Jan. 16,
1998)]. These investors are ineligible to report beneficial
ownership pursuant to Rule 13d-1(b) or (d) but are eligible to
report beneficial ownership on Schedule 13G in reliance upon Rule
13d-1(c).
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     17 CFR 240.13d-2(a) (``Rule 13d-2(a)''): Revising the
deadline for filing amendments to Schedule 13D to two business days
after the date on which a material change occurs;

     17 CFR 240.13d-2(b) (``Rule 13d-2(b)''): Shortening the
deadline for Schedule 13G amendments filed pursuant to that provision
to 45 days after the end of the calendar quarter in which a reportable
change occurs;
     17 CFR 240.13d-2(c) (``Rule 13d-2(c)''): Shortening the
filing deadline for Schedule 13G amendments filed pursuant to that
provision to five business days after the end of the month in which
beneficial ownership first exceeds 10 percent of a covered class, and
thereafter upon any deviation by more than five percent of the covered
class, with these requirements applying if the thresholds were crossed
at any time during a month; and
     17 CFR 13d-2(d) (``Rule 13d-2(d)''): Revising the deadline
for Schedule 13G amendments filed pursuant to that provision to two
business days after the date on which beneficial ownership exceeds 10
percent of a covered class, and thereafter upon any deviation by more
than five percent of the covered class.
    In addition, we are amending Rule 13d-2(b) to require that an
amendment to a Schedule 13G be filed only if a ``material change''
occurs (replacing the current rule text that requires an amendment upon
the occurrence of ``any change'' in the facts previously reported).
Further, we are amending 17 CFR 232.13(a) (``Rule 13(a) of Regulation
S-T'') to permit Schedules 13D and 13G, and any amendments thereto,
that are submitted by direct transmission commencing on or before 10
p.m. Eastern Time \17\ on a given business day to be deemed to have
been filed on the same business day.\18\ This amendment should provide
additional time for beneficial owners to prepare and submit their
Schedule 13D or 13G filings.\19\ The following table summarizes the
changes we are adopting with respect to Schedule 13D and 13G filings,
as described more fully in section II.A:
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    \17\ When we refer to ``Eastern Time'' in this release, we mean
Eastern Standard Time or Eastern Daylight Saving Time, whichever is
currently in effect.
    \18\ This rule applies to filing deadlines expressed both in
calendar days and in business days. For example, for filing
deadlines expressed in calendar days, if the deadline falls on a
Federal holiday, a Saturday, or a Sunday, then the filing may be
made on the next business day thereafter. See infra note 268.
    \19\ See Rule 13(a)(2) of Regulation S-T. We also are amending
17 CFR 232.201(a) (``Rule 201(a) of Regulation S-T'') to make the
temporary hardship exemption set forth in that rule--which applies
to unanticipated technical difficulties preventing the timely
preparation and submission of an electronic filing--unavailable to
Schedules 13D and 13G, including any amendments thereto.

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                                   Current Schedule                        Current Schedule
              Issue                       13D          New Schedule 13D           13G          New Schedule 13G
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Initial Filing Deadline.........  Within 10 days      Within five         QIIs & Exempt       QIIs & Exempt
                                   after acquiring     business days       Investors: 45       Investors: 45
                                   beneficial          after acquiring     days after          days after
                                   ownership of more   beneficial          calendar year-end   calendar quarter-
                                   than 5% or losing   ownership of more   in which            end in which
                                   eligibility to      than 5% or losing   beneficial          beneficial
                                   file on Schedule    eligibility to      ownership exceeds   ownership exceeds
                                   13G. Rule 13d-      file on Schedule    5%. Rule 13d-1(b)   5%. Rule 13d-1(b)
                                   1(a), (e), (f),     13G. Rule 13d-      and (d).            and (d).
                                   and (g).            1(a), (e), (f),    QIIs: 10 days       QIIs: Five
                                                       and (g).            after month-end     business days
                                                                           in which            after month-end
                                                                           beneficial          in which
                                                                           ownership exceeds   beneficial
                                                                           10%. Rule 13d-      ownership exceeds
                                                                           1(b).               10%. Rule 13d-
                                                                                1(b).
                                                                          Passive Investors:  Passive Investors:
                                                                           Within 10 days      Within five
                                                                           after acquiring     business days
                                                                           beneficial          after acquiring
                                                                           ownership of more   beneficial
                                                                           than 5%. Rule 13d-  ownership of more
                                                                           1(c).               than 5%. Rule 13d-
                                                                                1(c).
Amendment Triggering Event......  Material change in  Same as current     All Schedule 13G    All Schedule 13G
                                   the facts set       Schedule 13D:       Filers: Any         Filers: Material
                                   forth in the        Material change     change in the       change in the
                                   previous Schedule   in the facts set    information         information
                                   13D. Rule 13d-      forth in the        previously          previously
                                   2(a).               previous Schedule   reported on         reported on
                                                       13D. Rule 13d-      Schedule 13G.       Schedule 13G.
                                                       2(a).               Rule 13d-2(b).      Rule 13d-2(b).
                                                                          QIIs & Passive      QIIs & Passive
                                                                           Investors: Upon     Investors: Same
                                                                           exceeding 10%       as current
                                                                           beneficial          Schedule 13G:
                                                                           ownership or a 5%   Upon exceeding
                                                                           increase or         10% beneficial
                                                                           decrease in         ownership or a 5%
                                                                           beneficial          increase or
                                                                           ownership. Rule     decrease in
                                                                           13d-2(c) and (d).   beneficial
                                                                                ownership. Rule
                                                                                13d-2(c) and (d).
Amendment Filing Deadline.......  Promptly after the  Within two          All Schedule 13G    All Schedule 13G
                                   triggering event.   business days       Filers: 45 days     Filers: 45 days
                                   Rule 13d-2(a).      after the           after calendar      after calendar
                                                       triggering event.   year-end in which   quarter-end in
                                                       Rule 13d-2(a).      any change          which a material
                                                                           occurred. Rule      change occurred.
                                                                           13d-2(b).           Rule 13d-2(b).
                                                                          QIIs: 10 days       QIIs: Five
                                                                           after month-end     business days
                                                                           in which            after month-end
                                                                           beneficial          in which
                                                                           ownership           beneficial
                                                                           exceeded 10% or     ownership exceeds
                                                                           there was, as of    10% or a 5%
                                                                           the month-end, a    increase or
                                                                           5% increase or      decrease in
                                                                           decrease in         beneficial
                                                                           beneficial          ownership. Rule
                                                                           ownership. Rule     13d-2(c).
                                                                           13d-2(c).
                                                                          Passive Investors:  Passive Investors:
                                                                           Promptly after      Two business days
                                                                           exceeding 10%       after exceeding
                                                                           beneficial          10% beneficial
                                                                           ownership or a 5%   ownership or a 5%
                                                                           increase or         increase or
                                                                           decrease in         decrease in
                                                                           beneficial          beneficial
                                                                           ownership. Rule     ownership. Rule
                                                                           13d-2(d).           13d-2(d).
Filing ``Cut-Off'' Time.........  5:30 p.m. Eastern   10 p.m. Eastern     All Schedule 13G    All Schedule 13G
                                   Time. Rule          Time. Rule          Filers: 5:30 p.m.   Filers: 10 p.m.
                                   13(a)(2) of         13(a)(4) of         Eastern Time.       Eastern Time.
                                   Regulation S-T.     Regulation S-T.     Rule 13(a)(2) of    Rule 13(a)(4) of
                                                                           Regulation S-T.     Regulation S-T.
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    As noted above, we are not adopting proposed Rule 13d-3(e).
Instead, we discuss the circumstances in which a holder of a cash-
settled derivative security, excluding SBS, may be deemed the
beneficial owner of the reference covered class under Rule 13d-3. We
also are not adopting the proposed exemption in 17 CFR 240.13d-6(d)

(``Rule 13d-6(d)''), which the Commission proposed to enable certain
persons to transact in derivative securities in the ordinary course of
business without concern that they had formed a group under section
13(d)(3) or 13(g)(3), in part because we are not adopting proposed Rule
13d-3(e).
    To further clarify the disclosure requirements with respect to
derivative securities, particularly cash-settled derivative securities,
held by a person required to report on Schedule 13D, the Commission is
adopting an amendment to Schedule 13D. Specifically, we are amending
Item 6 of Schedule 13D, codified at Rule 13d-101, to remove any
implication that a person is not required to disclose interests in all
derivative securities that use a covered class as a reference security.
This amendment is intended to eliminate any ambiguity regarding the
scope of the disclosure obligations of Item 6 of Schedule 13D as to
derivative securities, including with respect to any derivative not
originating with, or offered or sold by, the issuer, such as a cash-
settled option or SBS.
    As noted above, we are not adopting most of the proposed
substantive amendments to Rule 13d-5.\20\ We also are not adopting
proposed 17 CFR 240.13d-6(c) (``Rule 13d-6(c)''), which would have
specified certain circumstances under which two or more persons may
coordinate and consult with one another and engage with an issuer
without being subject to regulation as a group. Instead, we are issuing
guidance regarding the appropriate legal standard for determining
whether a group is formed. This guidance is intended to provide clarity
on the circumstances under which a person may be deemed to have formed
a group with another person or persons within the meaning of sections
13(d)(3) and 13(g)(3).
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    \20\ But see infra note 22 and sections II.C.2 and 3 for a
discussion of the proposed amendments to Rule 13d-5 that we are
adopting.
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    We are adopting the proposed requirement that Schedules 13D and 13G
be filed using a structured, machine-readable data language. We are,
therefore, now requiring that all disclosures, including quantitative
disclosures, textual narratives, and identification checkboxes, on
Schedules 13D and 13G be filed using an XML-based language.\21\ This
requirement is intended to make it easier for investors and other
market participants to access, compile, and analyze information that is
disclosed on Schedules 13D and 13G.
---------------------------------------------------------------------------

    \21\ Under this structured data requirement, only the exhibits
to Schedules 13D and 13G will remain unstructured.
---------------------------------------------------------------------------

    Finally, we also are adopting certain technical revisions, some of
which were not included among the Proposed Amendments.\22\
---------------------------------------------------------------------------

    \22\ Specifically, as proposed, we are: (1) changing the title
of Rule 13d-5 from ``Acquisition of securities'' to ``Acquisition of
beneficial ownership''; (2) revising 17 CFR 240.13d-5(a) (``Rule
13d-5(a)'') to conform the text to the new title; (3) redesignating
current Rule 13d-6 as new 17 CFR 240.13d-6(a) (``Rule 13d-6(a)'');
and (4) redesignating current 17 CFR 240.13d-5(b)(2) (``Rule 13d-
5(b)(2)'') as new 17 CFR 240.13d-6(b) (``Rule 13d-6(b)''). The
Commission did not receive any substantive comments on these
amendments, so we are adopting them as proposed for the reasons set
forth in the Proposing Release. We also are making other technical
changes not included in the Proposing Release, namely: (1)
rescinding in its entirety Rule 13d-7 because Congress already
repealed the statutory requirements under sections 13(d)(1), (d)(2),
(g)(1), and (g)(2) for beneficial owners to deliver a copy of a
Schedule 13D or 13G, and any amendments thereto, to the issuer of
the covered class and any national securities exchanges where such
equity securities are listed, see Public Law 111-203, 124 Stat. 1900
929R(a)(1)(B) through (4)(B) (2010); (2) making conforming
amendments to Schedules 13D and 13G to remove the notes in those
Schedules that refer to Rule 13d-7 and its requirements; (3)
correcting incorrect cross references in Item 8 of Schedule 13G; and
(4) replacing the gender-based pronouns used in Rules 13d-1, 13d-3,
13d-6, 13d-101, and 13d-102 with gender-neutral phrases and making
additional conforming edits to the surrounding text as necessary.
Although the Commission did not propose these amendments, we find
good cause, in accordance with the Administrative Procedure Act
(``APA''), Public Law 79-404, 60 Stat. 237 (June 11, 1946), that, in
light of their technical nature, notice and public comment in
respect of these amendments is impracticable, unnecessary, or
contrary to the public interest. 5 U.S.C. 553(b)(3)(B).
---------------------------------------------------------------------------

II. Discussion of the Final Amendments

A. Amendments to Rules 13d-1 and 13d-2 and Rules 13 and 201 of
Regulation S-T To Revise Filing Deadlines and Filing Date Assignment

    We are adopting a series of amendments to the deadlines for filing
initial and amended beneficial ownership reports on Schedules 13D and
13G and expanding the timeframe within a given business day in which
such filings may be timely made. These amendments are listed in section
I above and discussed in more detail below.
1. Rule 13d-1(a), (e), (f), and (g)
    Section 13(d)(1) of the Exchange Act requires a disclosure
statement to be filed ``within ten days after [acquiring beneficial
ownership of more than five percent of a covered class] or within such
shorter time as the Commission may establish by rule.'' \23\ Consistent
with this provision, Rule 13d-1(a) sets forth the 10-day filing
deadline for the initial Schedule 13D.\24\ Although the Dodd-Frank Act
amended section 13(d)(1) to grant the Commission the authority to
shorten the deadline for filing the initial Schedule 13D, the 10-day
deadline has not been updated since it was enacted more than 50 years
ago.\25\
---------------------------------------------------------------------------

    \23\ 15 U.S.C. 78m(d)(1).
    \24\ 17 CFR 240.13d-1(a) (requiring that a Schedule 13D be filed
``within 10 days after the acquisition'' of beneficial ownership of
more than 5% of a covered class).
    \25\ Section 13(d)(1) of the Exchange Act was enacted by the
Ninetieth Congress in 1968 through the approval of Senate Bill 510.
---------------------------------------------------------------------------

    Rule 13d-1(e), (f), and (g) set forth the initial Schedule 13D
filing obligations for investors who are no longer eligible to rely
upon Rule 13d-1(b) \26\ or (c) \27\ (which permit investors to file the
more abbreviated Schedule 13G in lieu of the longer-form Schedule 13D).
Rule 13d-1(e), (f), and (g) ensure that initial Schedule 13D filings
uniformly are subject to a 10-day deadline, regardless of whether the
beneficial owners were previously eligible to file a Schedule 13G in
lieu of the Schedule 13D.
---------------------------------------------------------------------------

    \26\ 17 CFR 240.13d-1(b).
    \27\ 17 CFR 240.13d-1(c).
---------------------------------------------------------------------------

    Rule 13d-1(e) applies to persons who have been filing a Schedule
13G in lieu of Schedule 13D in reliance upon either Rule 13d-1(b) or
(c). Rule 13d-1(b) and (c) both provide that a person may not rely on
those provisions if he or she beneficially owns the relevant equity
securities with the purpose or effect of changing or influencing the
control of the issuer.\28\ Institutional and non-institutional
beneficial owners who are unable to certify that they do not hold
beneficial ownership for the purpose of or with the effect of changing
or influencing the control of the issuer or in connection with any
transaction that would have such purpose or effect, as described more
fully under Item 10 of Schedule 13G, or certain institutional investors
that also acquire or hold beneficial ownership outside of the ordinary
course of business, are considered to have, for purposes of this
release, a ``disqualifying purpose or effect.'' \29\ Rule 13d-1(e)(1)
requires

such persons to file their initial Schedule 13D within 10 days of
losing their Schedule 13G eligibility because they beneficially own a
covered class with a disqualifying purpose or effect.
---------------------------------------------------------------------------

    \28\ The provision at 17 CFR 240.12b-2 (``Rule 12b-2 of
Regulation 12B'') defines the term ``control'' to mean ``the
possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a person, whether
through the ownership of voting securities, by contract, or
otherwise.'' The provision at 17 CFR 240.12b-1 sets forth the scope
of Regulation 12B and provides that all rules contained in
Regulation 12B ``shall govern . . . all reports filed pursuant to
section[ ] 13.''
    \29\ Whether investors are engaged in activity with the purpose
or effect of changing or influencing control of an issuer, and thus
holding beneficial ownership with a disqualifying purpose or effect,
ordinarily is a determination that would be based upon the specific
facts and circumstances. For that reason, the Commission has not
provided extensive guidance on this issue. The Commission has
previously expressed the view that most solicitations in support of
a proposal specifically calling for a change of control of the
company (e.g., a proposal to seek a buyer for the company or a
contested election of directors or a sale of a significant amount of
assets or a restructuring of a corporation) would clearly have that
purpose and effect. For a more expansive discussion of the
Commission's reasoning and factors to consider when making this
determination, see Amendments to Beneficial Ownership Reporting
Requirements, Release No. 34-39538 (Jan. 12, 1998) [63 FR 2854 (Jan.
16, 1998)].
---------------------------------------------------------------------------

    Similarly, Rule 13d-1(f) applies to persons who have been filing a
Schedule 13G in lieu of Schedule 13D in reliance on Rule 13d-1(c). Rule
13d-1(c) provides that persons may not rely on that provision if they
beneficially own 20 percent or more of a covered class. Rule 13d-
1(f)(1) currently requires that such persons file their initial
Schedule 13D within 10 days of losing their Schedule 13G eligibility
because they beneficially own 20 percent or more of a covered class.
    Finally, Rule 13d-1(g) applies to persons who have been filing a
Schedule 13G in lieu of Schedule 13D in reliance upon Rule 13d-1(b).
Only QIIs may rely on Rule 13d-1(b). Further, in order to rely on Rule
13d-1(b), a QII must beneficially own the relevant equity securities in
the ordinary course of its business. Rule 13d-1(g) currently requires
that such persons either file their initial Schedule 13D or amend their
Schedule 13G to indicate that they are now relying on Rule 13d-1(c)
(assuming they are eligible to rely on that rule) within 10 days of
losing their Schedule 13G eligibility under Rule 13d-1(b) because they
either no longer are a QII or no longer beneficially own the relevant
equity securities in the ordinary course of their business.
    Rule 13d-1(e), (f), and (g) operate as regulatory safeguards that
reestablish the application of Rule 13d-1(a) to beneficial owners who
previously relied on Rule 13d-1(b) or (c). Under Rule 13d-1(e), (f),
and (g), beneficial owners ``shall immediately become subject to''
Rules 13d-1(a) and 13d-2(a), which provisions are reinstated anew with
respect to those persons the moment they become ineligible to rely upon
Rule 13d-1(b) and (c).
a. Proposed Amendments
    In the Proposing Release, the Commission proposed to amend Rule
13d-1(a) to require a Schedule 13D to be filed within five days after
the date on which a person acquires beneficial ownership of more than
five percent of a covered class. The Commission stated that the
deadline for filing an initial Schedule 13D should be revised in light
of advances in technology and developments in the financial markets and
noted that shortening that deadline would be consistent with previous
efforts to accelerate public disclosures of material information to the
market.\30\ The Commission also asserted that the proposed five-day
deadline would maintain an appropriate balance between the requirement
that material information be timely disseminated to investors and the
competing interest that undue burdens not be imposed in the change of
control context.\31\ In addition, the Commission stated that it was
mindful of the need to balance the market's demand for timely
information and the administrative burden placed upon a filer to
adequately and accurately prepare that information.\32\ Finally, the
Commission noted that the current 10-day filing deadline ``contributes
to information asymmetries that could harm investors'' and stated that
shortening that deadline could increase transparency and provide
assurance ``that transactions are not being made based on mispriced
securities caused by a prolonged lag in the dissemination of market-
moving information,'' thereby improving investor confidence, market
efficiency, and liquidity.\33\
---------------------------------------------------------------------------

    \30\ Proposing Release at 13851.
    \31\ Id.
    \32\ Id. at 13852.
    \33\ Proposing Release at 13850, 13852.
---------------------------------------------------------------------------

    In the Proposing Release, the Commission also proposed to amend the
initial Schedule 13D filing deadline under Rule 13d-1(e)(1), (f)(1),
and (g) for largely the same reasons that it proposed to amend Rule
13d-1(a). Specifically, the Commission proposed to make conforming
revisions to Rule 13d-1(e), (f), and (g) so that persons who initially
elected to report beneficial ownership on Schedule 13G, in lieu of a
Schedule 13D, but subsequently lost their eligibility would be treated
no differently from persons who make a Schedule 13D their initial
filing.\34\ Accordingly, the Commission proposed to amend Rule 13d-
1(e), (f), and (g) to make the required Schedule 13D--or, in the case
of Rule 13d-1(g), the amendment to Schedule 13G indicating that the
filer is now relying on Rule 13d-1(c), if applicable--due no later than
five days after the date on which the person became ineligible to
report on Schedule 13G.\35\
---------------------------------------------------------------------------

    \34\ Id. at 13854.
    \35\ Id.
---------------------------------------------------------------------------

b. Comments Received
    Commenters \36\ expressed a range of views on the proposed
amendments to Rule 13d-1(a), (e), (f), and (g). A number of commenters
supported shortening the deadline for filing an initial Schedule 13D
from 10 days to five days.\37\ Several

commenters asserted that the proposed amendments would increase the
timeliness and quality of information for market participants.\38\ A
number of commenters asserted that the proposed amendments would
increase transparency and fairness in the financial markets.\39\
---------------------------------------------------------------------------

    \36\ Throughout the release, in describing some of the comments
we received on the Proposed Amendments, we focus on those commenters
that responded to a specific request for comment or question raised
in the Proposing Release or Reopening Release, or that addressed a
specific Proposed Amendment. We note that several commenters
expressed general support or opposition for the Proposed Amendments
or raised concerns or made recommendations that are unrelated to or
beyond the scope of the Proposed Amendments; we do not, however,
summarize all of their comments in this release. For the sake of
brevity, we also do not cite letters that substantially duplicate
comments made in other letters that we cite in this release. For
example, in response to the Reopening Release, a number of
commenters submitted substantially identical letters generally
supporting some of the Proposed Amendments and expressing concerns
or making recommendations with respect to other parts of the
Proposed Amendments. See, e.g., Letter Type B, available at https://www.sec.gov/comments/s7-06-22/s70622-typeb.htm; Letter Type C,
available at https://www.sec.gov/comments/s7-06-22/s70622-typec.pdf.
We also note that several commenters submitted letters with
substantially similar views as those expressed in Letter Type B, but
with the letters worded sufficiently differently that they could not
be consolidated with Letter Type B. See, e.g., letter from Gerardo
Cruz (June 27, 2023). We note the same with respect to Letter Type
C. See, e.g., letters from Chad Thompson (June 29, 2023); Bert
Abanes (June 28, 2023). See infra note 37 for a discussion of Letter
Type A. See infra note 458 for a discussion of Letter Type D and
Letter Type E.
    \37\ See, e.g., letters from Committee on Federal Regulation of
Securities of the Section of Business Law of the American Bar
Association (Apr. 28, 2022) (``ABA'') (expressly supporting only the
proposed amendment to Rule 13d-1(a), but noting that ``[t]he
Committee is not unanimous in this view'' and that ``[t]here is
support among some members of the Committee to further shorten the
initial filing deadline to one or two calendar days'' and that
``there are other members of the Committee that suggest a five
business day deadline is more appropriate''); Brandon Rees, Deputy
Director of Corporations and Capital Markets, AFL-CIO (Apr. 11,
2022) (``AFL-CIO'') (expressly supporting only the proposed
amendment to Rule 13d-1(a)); Americans for Financial Reform
Education Fund (Apr. 11, 2022) (``AFREF'') (same); Americans for
Financial Reform Education Fund, American Federation of Labor and
Congress of Industrial Organizations (AFL-CIO), Communications
Workers of America (CWA), Interfaith Center on Corporate
Responsibility (ICCR), Public Citizen (June 27, 2023) (``AFREF, et
al.'') (same); Anonymous (Feb. 19, 2022) (``Anonymous 1'');
Anonymous (Feb. 19, 2022) (``Anonymous 3''); Anonymous (Feb. 20,
2022) (``Anonymous 5''); Anonymous (Mar. 14, 2022) (``Anonymous
11''); Anonymous (Mar. 14, 2022) (``Anonymous 12''); Anthony R.,
Individual Investors (Feb. 18, 2022) (``Anthony R.''); Better
Markets (Apr. 11, 2022) (``Better Markets I'') (same); Better
Markets (June 27, 2023) (``Better Markets II'') (same); Maria
Ghazal, Senior Vice President and Counsel, Business Roundtable (Apr.
11, 2022) (``BRT'') (same); Curtis Robinson (Feb. 18, 2022) (``C.
Robinson''); Richard F. McMahon, Jr., Senior Vice President, Energy
Supply & Finance Edison Electric Institute (Mar. 22, 2022)
(``EEI''); An Investor, Engineer (Apr. 4, 2022) (``Engineer''); Mark
R. Allen, Executive Vice President, FedEx Corporation (Apr. 12,
2022) (``FedEx''); Freeport-McMoRan Inc./Douglas N. Currault II,
Senior Vice President and General Counsel (Apr. 11, 2022)
(``Freeport-McMoRan''); Tyler Gellasch, Executive Director, Healthy
Markets Association (Mar. 22, 2022) (``HMA I''); Healthy Markets
Association (Apr. 29, 2022) (``HMA II'') (same); Jack Pieper (Feb.
21, 2022) (``J. Pieper''); Joshua Soucie, Managing Director,
Singularity Acquisitions LLC (Feb. 21, 2022) (``J. Soucie''); Jonah
(Feb. 18, 2022) (``Jonah''); Juan, Relationship Banker II (Feb. 19,
2022) (``Juan''); Brandon Rees, Deputy Director of Corporations and
Capital Markets, AFL-CIO (June 6, 2022) (``Labor Unions'') (same);
Mark C. (Feb. 19, 2022) (``Mark C.''); Mike (Feb. 23, 2022)
(``Mike''); Jeffrey S. Davis, Senior Vice President and Senior
Deputy General Counsel, Nasdaq, Inc. (Apr. 12, 2022) (``Nasdaq'');
National Investor Relations Institute (Apr. 15, 2022) (``NIRI'')
(same); Phillip Worts (July 29, 2023) (``P. Worts''); Marc
Steinberg, Radford Chair in Law and Professor of Law, Southern
Methodist University (Feb. 22, 2022) (``Prof. Steinberg'') (same);
Society for Corporate Governance (Apr. 13, 2022) (``SCG'') (same);
Christina Maguire, President and Chief Executive Officer, Society
for Corporate Governance and Matthew D. Brusch, President and CEO,
National Investor Relations Institute (July 7, 2023) (``SCG &
NIRI'') (same); Tammy Baldwin, Sherrod Brown, Bernard Sanders,
Elizabeth Warren, Tammy Duckworth, and Jeffrey A. Merkley, United
States Senators (July 18, 2022) (``Sen. Baldwin, et al.'') (same);
SIFMA Asset Management Group, William Thurn, Managing Director,
SIFMA AMG (Apr. 11, 2022) (``SIFMA AMG'') (same); Theodore N.
Mirvis, Adam O. Emmerich, David A. Katz, Sabastian V. Niles, Jenna
E. Levine, and Carmen X. W. Lu (Feb. 10, 2022) (``T. Mirvis, et
al.''); Taj Reilly (Feb. 19, 2022) (``T. Reilly''); TIAA (Apr. 11,
2022) (``TIAA'') (same); Todd (Feb. 19, 2022) (``Todd''); Wachtell,
Lipton, Rosen & Katz (Apr. 11, 2022) (``WLRK I'') (same); Wachtell,
Lipton, Rosen & Katz (Oct. 4, 2022) (``WLRK II''); see also Letter
Type B; Letter Type C. We note that commenters submitted a
substantively identical version of the letter from Sen. Baldwin, et
al. an additional 16 times. See Letter Type A, available at https://www.sec.gov/comments/s7-32-10/s73210-typeb.pdf. As such, every
citation to the letter from Sen. Baldwin, et al. in this release
should also be read as a citation to those additional 16 submissions
of the substantively identical letter.
    \38\ See, e.g., letters from ABA; Anthony R.; FedEx; Freeport-
McMoRan; Jonah; P. Worts; T. Mirvis, et al.
    \39\ See, e.g., letters from ABA; AFREF, et al.; Anonymous 5;
Anonymous 12; Better Markets I; FedEx; Freeport-McMoRan; Labor
Unions; Nasdaq; P. Worts; Sen. Baldwin, et al.
---------------------------------------------------------------------------

    Several commenters identified potential specific benefits of the
proposed amendments. For example, some commenters asserted that the
proposed amendments would be particularly beneficial for retail
investors by providing them with additional information and
transparency.\40\ Another commenter stated that the proposed amendments
would enable investors and the market to ``better track when beneficial
owners take significant positions in covered securities for purposes of
controlling or exerting influence over issuers, resulting in more
informed decision-making by investors and more accurate valuation of
securities by the market.'' \41\
---------------------------------------------------------------------------

    \40\ See, e.g., letters from C. Robinson (``I welcome all rules
that require more disclosure and faster times to report[ ].''); J.
Soucie; P. Worts.
    \41\ See letter from TIAA; see also letter from P. Worts.
---------------------------------------------------------------------------

    Other commenters highlighted potential downsides of the current 10-
day deadline. For example, one commenter described the 10-day deadline
as costly to public companies and investors generally and based its
support for the proposed amendments ``on the fundamental concept that a
public company must have timely information about its owners in order
to engage with them effectively and respond promptly to their
concerns.'' \42\ Another commenter stated that ``[i]nvestors' and
market participants' abilities to prudently manage their positions and
exposures is materially undermined by the arbitrary, unnecessary,
discriminatory delay in reporting.'' \43\
---------------------------------------------------------------------------

    \42\ See letter from SCG; see also letter from NIRI (stating
that the proposal ``would also ensure that public companies are not
ambushed and are better prepared to respond to an activist investor
who has accumulated a significant position over a relatively short
period of time'').
    \43\ See letter from HMA I.
---------------------------------------------------------------------------

    Several commenters suggested that the proposed amendments would
reduce information asymmetry among market participants.\44\ Other
commenters raised similar information asymmetry-based concerns
regarding the 10-day filing deadline. For example, one commenter
expressed concern that under the current deadline, pension funds are
deprived of any short-term gains from hedge fund activism if they sell
shares during the 10-day delay in disclosure of a beneficial ownership
stake.\45\ Another commenter asserted that the current 10-day deadline
``disadvantages selling shareholders after the 5% threshold is reached
and permits activist investors to ambush public companies, often by
disclosing an ownership interest that far exceeds 5% of shares
outstanding.'' \46\ Further, one commenter suggested that the proposed
amendments could help address information asymmetries that facilitate
``stealth'' accumulations at artificially low market prices, which
purportedly transfer value from public investors to those activists
engaged in seeking ownership, control, or influence over the target
company.\47\
---------------------------------------------------------------------------

    \44\ See, e.g., letters from ABA; AFREF; AFREF, et al.; Better
Markets II; Freeport-McMoRan; Nasdaq; NIRI; SCG; SCG & NIRI; see
also Letter Type C. One of these commenters stated that ``if the
filing window is shortened, institutional investors will be better
able to manage liquidity shocks in a way that serves their ultimate
beneficiaries, instead of costing them money by unknowingly selling
undervalued shares.'' See letter from AFREF, et al.
    \45\ See letter from Labor Unions.
    \46\ See letter from NIRI.
    \47\ See letter from Better Markets I; see also letter from
Better Markets II.
---------------------------------------------------------------------------

    Other commenters supported the proposed amendments based on changes
in technology and developments in the financial markets.\48\ For
example, one commenter supported the proposal based on the ``increasing
effectiveness of activist campaigns and their decreased cost due to
advances in information technology and the rise of concentrated
economic ownership in the United States,'' citing ``cost-effective
activism'' due to both the fact that ``little more than 10 to 15
institutions are the target audience'' and ``the Commission's new
universal proxy rule.'' \49\ Similarly, other commenters described the
current Schedule 13D filing deadline as ``outdated.'' \50\ One
commenter agreed with the expressed concern in the Proposing Release
that material information about potential change of control
transactions is not being disseminated to the public in a manner that
would be considered timely in today's financial markets.\51\ One
commenter cited an April 2020 survey it conducted of its members
(composed of corporate officers and investor relations consultants)
indicating that 82 percent supported modernization of the Schedule 13D
filing deadlines.\52\
---------------------------------------------------------------------------

    \48\ See, e.g., letters from ABA; AFL-CIO; Better Markets I;
BRT; C. Robinson; FedEx; Freeport-McMoRan; HMA I; HMA II; NIRI; SCG;
Sen. Baldwin, et al.; T. Mirvis, et al.; T. Reilly; WLRK I; WLRK II;
see also Letter Type B.
    \49\ See letter from WLRK II. The commenter also noted that
``successful activism campaigns have been run by stockholders with
relatively small stakes, often below or well below 5%.'' Id.
    \50\ See, e.g., letters from Sen. Baldwin, et al.; T. Mirvis, et
al.
    \51\ See letter from BRT.
    \52\ See letter from NIRI.
---------------------------------------------------------------------------

    Several commenters noted that many foreign jurisdictions require
beneficial ownership reporting on a shorter deadline than currently
required under Regulation 13D-G.\53\ One commenter disagreed with the
notion expressed in the Proposing Release that the comparison of the
beneficial ownership reporting deadline in the United States to foreign
jurisdictions is imperfect because U.S. corporate law permits anti-
takeover provisions that are not present in those jurisdictions.\54\ To
the contrary, that commenter asserted that some of those foreign
jurisdictions are even less

``stockholder'' and ``activism'' friendly than the United States,
making corporate takeovers and activism more difficult, and described
the corporate laws and corporate governance practices of those foreign
jurisdictions as compared to the United States (focusing, in
particular, on Delaware corporate law).\55\ Other commenters noted that
the proposed amendments would be consistent with similar Commission
efforts to accelerate filing deadlines.\56\
---------------------------------------------------------------------------

    \53\ See, e.g., letters from AFREF; Better Markets I; SCG; Sen.
Baldwin, et al.; WLRK II.
    \54\ See letter from WLRK II.
    \55\ See id. The commenter also presented statistics indicating
that, notwithstanding the stricter beneficial ownership reporting
obligations and purportedly increased inhibitions on shareholder
activism, those foreign jurisdictions have experienced increased
shareholder activism in recent years. Id. Some commenters, however,
disagreed with and questioned the utility of this analysis of
foreign jurisdictions. See letters from Jose Ceballos, Council for
Investor Rights and Corporate Accountability (Dec. 20, 2022)
(``CIRCA III''); Richard B. Zabel, General Counsel Chief Legal
Officer, Elliott Investment Management L.P. (Nov. 21, 2022) (``EIM
III''); see also letter from Richard B. Zabel, General Counsel Chief
Legal Officer, Elliott Investment Management L.P. (June 27, 2023)
(``EIM IV'') (reiterating the points made in the commenter's letter
dated Nov. 21, 2022). One of those commenters asserted that
``regulatory structures, as well as cultural norms . . . mean that
activism in non-U.S. markets is less prevalent than in the United
States'' which is ``to the detriment of investors in those non-U.S.
markets where, in many cases, there remains a lack of independent
voices in the market able to hold boards and management
accountable.'' See letter from EIM III. The commenter also stated
that, because activism is less prevalent in those foreign
jurisdictions than in the U.S., ``[s]ome level of increased activist
engagement in a handful of non-U.S. markets . . . does not mean that
the Commission should seek to emulate regulatory structures in those
other jurisdictions.'' Id. The other commenter noted that the
analysis ignores that some of the cited foreign jurisdictions offer
benefits to shareholders that the United States does not. See letter
from CIRCA III.
    \56\ See, e.g., letters from SCG; WLRK I.
---------------------------------------------------------------------------

    A number of commenters asserted that the proposed amendments would
not impose significant costs or burdens on beneficial owners of more
than five percent of a covered class.\57\ For example, one of those
commenters stated that the compliance costs of the proposed amendments
``are unlikely to be unduly burdensome, in a manner that outweighs the
benefits'' of the proposal given the nature of investors that generally
file a Schedule 13D and the technology available to them.\58\ Another
commenter agreed that the proposed amendments would be consistent in
balancing investors' need for adequate disclosures with the burdens
placed on filers to accurately prepare required disclosures.\59\
---------------------------------------------------------------------------

    \57\ See, e.g., letters from ABA; Anonymous 11; BRT; Freeport-
McMoRan; J. Soucie; WLRK I.
    \58\ See letter from WLRK I.
    \59\ See letter from FedEx.
---------------------------------------------------------------------------

    Several commenters stated that the proposed amendments would not
significantly reduce shareholder activism.\60\ For example, one
commenter asserted that the proposed five-day deadline would not
significantly impair the ability of activists to pursue their
agendas.\61\ Another commenter questioned whether there is an empirical
basis for asserting that the proposed amendments would prevent
shareholder activism and engagement.\62\ Some commenters asserted that
the proposed amendments would not interfere with shareholder activism
on environmental, social, or governance (``ESG'') issues because many
such activists are not Schedule 13D filers.\63\ One commenter was ``not
persuaded that a 10-day delay in beneficial ownership disclosure after
acquiring a 5 percent stake is needed to incentivize . . . [a] large
investor to be an activist investor.'' \64\ And, one commenter asserted
that the proposed amendments are ``more likely to adversely affect
short-term behaviors than long-term oriented activism.'' \65\
---------------------------------------------------------------------------

    \60\ See, e.g., letters from ABA; AFREF; Better Markets I;
Better Markets II; HMA II; Labor Unions; Sen. Baldwin, et al.; WLRK
I.
    \61\ See letter from Better Markets I. The commenter stated that
that many Schedule 13D filers currently do not avail themselves of
the full 10-day filing period, many activists are effective in their
campaigns without reaching the 5% beneficial ownership reporting
threshold, and the proposed five-day deadline would give activists
enough time to accumulate profits before public disclosure of their
goals, enabling them to offset the costs of their activism. Id.; see
also letter from Better Markets II (reiterating the point made in
its first letter and citing the data and analysis in the DERA
Memorandum for support).
    \62\ See letter from HMA II.
    \63\ See letters from Labor Unions; Sen. Baldwin, et al. One of
those commenters noted that some of the most impactful ESG campaigns
to date have occurred in Australia, where the beneficial ownership
reporting deadline for a 5% stake is two business days, which
``provides further evidence that a 10 day window is not needed to
use shareholder activism to meaningfully change corporate
behavior.'' See letter from Sen. Baldwin, et al. The Commission is
not expressing any view as to whether the measures described by the
commenters referenced herein would constitute activities undertaken
for the purpose of changing or influencing control of an issuer.
Nothing stated in this release changes or supersedes the
Commission's prior guidance regarding whether certain soliciting
activity has a control purpose or effect. See supra note 29.
    \64\ See letter from AFL-CIO.
    \65\ See letter from WLRK I.
---------------------------------------------------------------------------

    In addition, a number of commenters stated that shareholder
activism is not uniformly beneficial for issuers and their
shareholders.\66\ For example, one commenter asserted that hedge fund
activism could be contributing to an emphasis on short-term gains over
sustainable, long-term growth that benefits longer-term investors.\67\
One commenter noted that while a Schedule 13D filing by an activist may
often lead to an immediate bump in the issuer's stock price, there is
no compelling evidence that activist interventions deliver long-term
value to shareholders.\68\ One commenter asserted that the current 10-
day deadline may discourage companies from going public, inhibiting
capital formation, based on the threat of activism and ``the burden of
being subject to attacks by activist investors, a number of whom have
short-term agendas.'' \69\ One commenter stated that activist investors
often pressure companies and their management to agree to their short-
term demands that may or may not be in the long-term interests of
shareholders, employees, and other stakeholders.\70\ Further, one
commenter cited a study indicating that activist hedge fund campaigns
targeting public companies are associated with a reduction in jobs,
research and development spending, and capital expenditures, which
arguably harms employees.\71\
---------------------------------------------------------------------------

    \66\ See, e.g., letters from AFREF; Better Markets I; HMA II;
Labor Unions; NIRI; SCG; Sen. Baldwin, et al.; WLRK I.
    \67\ See letter from AFREF. The commenter also noted that while
hedge fund activism is associated with short-term increases in
shareholder value, the evidence is much more mixed on the question
of whether hedge fund activism results in long-term gains. Id.; see
also letter from Better Markets I (stating that the benefits of
shareholders seeking to acquire or influence corporate control and
policy are mixed because some act out of short-term profit motives,
not a desire to promote long-term value).
    \68\ See letter from WLRK I.
    \69\ See letter from SCG. The commenter also stated that
although activists would have less time to buy additional shares
after crossing 5% under the proposal, there is no shareholder
protection rationale that would justify forcing other investors to
subsidize activists' efforts to build larger positions in issuers.
Id.
    \70\ See letter from NIRI.
    \71\ See letter from Labor Unions. The commenter also asserted
that the proposed amendments would benefit pension funds based on a
study it cited that found that while company value tends to increase
in the first three years after being targeted by an activist hedge
fund, these gains tend to be reversed in the fourth and fifth years.
Id.; see also letter from Sen. Baldwin, et al. (citing the same
study for the proposition that ``research . . . shows the stock
price increase [associated with an activist's Schedule 13D filing]
is temporary and in fact the company is often in a weaker economic
position post-activist intervention''). But see letter from
International Institute of Law and Finance (Nov. 1, 2022) (``Profs.
Bishop and Partnoy II'') (critiquing the cited study, noting, among
other things, that ``a simple analysis of the data, not undertaken
in that study, shows that employment levels at firms targeted by
activists decrease substantially in the years prior to an activist
intervention, violating the parallel trends assumption that is
required to make any sort of causal inference from the empirical
design'').
---------------------------------------------------------------------------

    Finally, commenters raised a variety of other points in support of
the proposed amendments. For example, one commenter stated that the
balance that Congress sought to strike in the Williams Act \72\ was
between activist investors seeking to change companies

and those companies' management--not between an activist investor and a
company's other investors.\73\ One commenter stated that the proposed
amendments could moderate the sudden, abrupt changes in corporate
governance that often occur in issuers targeted by activist
investors.\74\ And, one commenter noted that the proposed amendments
fall ``squarely'' within the Commission's legal authority under section
929R of the Dodd-Frank Act and align with the Williams Act's intent
because Congress chose a 10-day deadline to accommodate the practical
challenges associated with preparing and filing a Schedule 13D.\75\
---------------------------------------------------------------------------

    \72\ Public Law 90-439, 82 Stat. 454 (July 29, 1968).
    \73\ See letter from HMA II. The commenter also stated that
there is no evidence or legitimate policy rationale to support a
connection between the purported benefits of activist strategies
generally on the one hand, and the purported need to preserve the
ability of the small subset of investors engaged in them to be able
to trade while in possession of material, non-public information to
the detriment of other investors--for precisely 10 days. Id.
    \74\ See letter from AFREF. The commenter stated that the
proposed amendments could decrease the likelihood of issuers that
are not targeted by activist investors taking preemptive steps
(e.g., overspending on short-term shareholder payouts and forgoing
investments necessary for long-term financial health and growth) to
avoid becoming targets of activism. Id. The commenter also asserted
that the proposed amendments would benefit shareholders and other
market participants by facilitating sound corporate governance. Id.
For example, the commenter stated that a shortened filing deadline
would help investors ensure their asset managers are fulfilling
their fiduciary duties and help inform the education and advocacy
efforts of those with a stake in proxy contests, shareholder
resolutions, and other important votes. Id.
    \75\ See letter from Better Markets I.
---------------------------------------------------------------------------

    A number of commenters opposed shortening the initial Schedule 13D
filing deadline to five days.\76\ Several commenters expressed concern
that the proposed amendments would disincentivize shareholder activism
by reducing the amount of time that such shareholders have to
accumulate positions in an issuer before filing a Schedule 13D, thereby
depriving issuers and their shareholders of the positive benefits of
such activism.\77\ For example, one commenter stated that ``if active
shareholders are unable to establish an economically efficient pre-
disclosure ownership stake, public company shareholders (and the
economy more broadly) will be less likely to benefit from the improved
stock price performance that often attends the monitoring and
engagement activities pursued by engaged shareholders, given that such
shareholders would have difficulty justifying certain engagements with
issuers.'' \78\ Similarly, another commenter asserted that the proposal
would ``mak[e] it more costly for blockholders to build a sufficient
position to effect change'' and ``reduce the profitability of, and
therefore the incentive to pursue, activist strategies,'' which would
``reduce management's accountability to shareholders and corporate
governance generally.'' \79\ And another commenter stated that
``although the SEC requires an activist buyer to disclose information
that the buyer has acquired, the SEC fails to ask whether the buyer
would acquire the information initially'' and suggested that, under the
proposed deadline, ``the buyer would often be unlikely to make the
original investment in information.'' \80\
---------------------------------------------------------------------------

    \76\ See, e.g., letters from Adrian Day, RIA (Feb. 12, 2022)
(``A. Day''); Daniel Austin, Director, U.S. Policy and Regulation,
Alternative Investment Management Association (Apr. 11, 2022)
(``AIMA''); Ben Mason (June 26, 2023) (``B. Mason''); Bernard
Sharfman (Mar. 22, 2022) (``B. Sharfman'') (expressly opposing only
the proposed amendment to Rule 13d-1(a)); CIRCA (Apr. 11, 2022)
(``CIRCA I'') (same); CIRCA III (same); Milan Dalal, CIRCA (June 27,
2023) (``CIRCA IV'') (same); Charles F. Pohl, Chairman, Dodge & Cox
(Apr. 12, 2022) (``Dodge & Cox''); Edwin Fraser (Apr. 11, 2022)
(``E. Fraser'') (same); Susan Olson, General Counsel and Sarah
Bessin, Associate General Counsel, Investment Company Institute
(Apr. 7, 2022) (``ICI I''); Irenic Capital Management LP (Apr. 11,
2022) (``ICM'') (same); Marcus Frampton (Mar. 16, 2022) (``M.
Frampton'') (same); Managed Funds Association (Apr. 11, 2022)
(``MFA'') (same); National Venture Capital Association (Apr. 11,
2022) (``NVCA'') (same); Perkins Coie LLP (Apr. 12, 2022) (``Perkins
Coie''); Jeffrey N. Gordon, Professor of Law, Columbia Law School
(June 20, 2022) (``Prof. Gordon'') (same); Robert Eccles and
Shivaram Rajgopal (Mar. 31, 2022) (``Profs. Eccles and Rajgopal'')
(same); Alan Schwartz, Sterling Professor, Yale Law School and the
Yale School of Management and Steven Shavell, Samuel R. Rosenthal
Professor of Law and Economics, Harvard Law School Director, John M.
Olin Center for Law, Economics & Business, Harvard University (Apr.
12, 2022) (``Profs. Schwartz and Shavell I'') (same); Alan Schwartz,
Sterling Professor, Yale Law School and the Yale School of
Management and Steven Shavell, Samuel R. Rosenthal Professor of Law
and Economics, Harvard Law School Director, John M. Olin Center for
Law, Economics & Business, Harvard University (May 15, 2022)
(``Profs. Schwartz and Shavell II'') (same); Edward P. Swanson,
Texas A&M University, Glen M. Young, Texas State University, and
Christopher G. Yust, Texas A&M University (Feb. 19, 2022) (``Profs.
Swanson, Young, and Yust'') (same); Rolf Parta (Apr. 7, 2022) (``R.
Parta'') (same); Allison K. Thacker, President and Chief Investment
Officer, Rice Management Company, Treasurer, William Marsh Rice
University (Mar. 21, 2022) (``Rice Management'') (same); Jennifer
Nadborny, Simpson Thacher Bartlett LLP (Apr. 11, 2022) (``STB'')
(same); Donna Anderson, Marc Wyatt, and Bob Grohowski, T. Rowe Price
(Apr. 11, 2022) (``TRP'') (same).
    \77\ See, e.g., letters from AIMA; CIRCA I; CIRCA III; CIRCA IV;
Dodge & Cox; ICM; MFA; Prof. Gordon; Profs. Eccles and Rajgopal;
Profs. Schwartz and Shavell I: Profs. Schwartz and Shavell II;
Profs. Swanson, Young, and Yust; Rice Management; TRP.
    \78\ See letter from ICM.
    \79\ See letter from AIMA.
    \80\ See letter from Profs. Schwartz and Shavell II (emphasis in
original); see also letter from Profs. Schwartz and Shavell I.
---------------------------------------------------------------------------

    In addition, one commenter expressed concern that the proposed
amendments would disproportionately disincentivize shareholder activism
that is targeted towards reforms other than a sale of the issuer.\81\
Another commenter asserted that the proposed amendments would inhibit
an activist investor's ability to make overtures to an issuer's
management prior to public disclosure and to consult with other
shareholders to ensure that shareholders' opinions and proposals are
considered when approaching management.\82\ And, one commenter stated
that the proposed amendments would particularly disincentivize activism
at medium- and small-cap companies because a larger economic position
is needed to offset the activists' costs.\83\
---------------------------------------------------------------------------

    \81\ See letter from Profs. Swanson, Young, and Yust. The
comment letter also stated that if the proposed accelerated initial
Schedule 13D filing deadline reduces activists' ability to profit
from price discovery, the proposed amendments could reduce market
efficiency. Id.
    \82\ See letter from CIRCA I. In a separate letter, this
commenter also disagreed with those supporting commenters that
expressed concern about the negative effects that activists may have
on targeted companies and cited data indicating that activist
interventions benefit all shareholders in both the short- and long-
term. See letter from CIRCA III.
    \83\ See letter from Prof. Gordon; see also letter from ICM
(predicting a reduction in shareholder activism and related benefits
for other shareholders and stating that the predicted ``harms . . .
will be most pronounced at micro-, small-, and mid-capitalization
issuers . . . where the majority of active shareholder engagement
occurs'').
---------------------------------------------------------------------------

    Several commenters took issue with the information asymmetry
concerns that the Commission expressed as a justification for the
proposed amendments.\84\ For example, one commenter cited data
indicating that shareholders who sell during the period after an
activist accumulates more than five percent beneficial ownership but
before the activist files its Schedule 13D

still generally benefit from that activist's accumulation because the
stock price generally increases prior to the Schedule 13D filing.\85\
Some commenters stated that the information asymmetry described in the
Proposing Release is no different from the general asymmetry that
exists in the market when any investor--activist or otherwise--
determines to invest the time and resources to develop and then
implement an investment thesis.\86\ Similarly, some commenters asserted
that information asymmetry is a quintessential element of the U.S.
capital markets where investors are, and should be, entitled to profit
from their analysis, hard work, and risk taking.\87\ Other commenters
stated that selling shareholders are not forced to sell their shares
and do so voluntarily, either seeking liquidity or because they have
doubts about the issuer's prospects, and noted that such shareholders
have the same access as the Schedule 13D filer to disclosures from both
the issuer and insiders.\88\ Some commenters asserted that the
Commission ignored the fact that although some investors may miss out
on selling at an appreciated price once the Schedule 13D is filed, a
larger number of investors generally will benefit from the efforts of
an activist.\89\ Finally, one commenter asserted that the Williams Act
was not intended to address information asymmetry-based concerns or the
interests of shareholders who elect to sell prior to the disclosure of
an initial Schedule 13D and cited to the legislative history and a U.S.
Supreme Court decision to support such assertion.\90\
---------------------------------------------------------------------------

    \84\ See, e.g., letters from AIMA; CIRCA I; CIRCA III; CIRCA IV;
Dodge & Cox; ICM; Prof. Gordon; Profs. Swanson, Young, and Yust;
TRP. In addition, one commenter did not oppose the proposal but
expressed concern about the information asymmetry-based
justification. See letter from Elliott Investment Management L.P.
(Apr. 11, 2022) (``EIM I''). That commenter stated, among other
things, that ``the suggestion that an activist's awareness of her
confidential intention to build a position in a public company
should prohibit her from trading is both illogical and inconsistent
with established law'' and contrasted the proposal with the
``recently proposed short sale reporting rulemaking'' in which ``the
Commission . . . expressly provided an alternative that protects the
confidentiality of short sellers and their strategies, in
recognition that disclosure would vitiate the value of their
research.'' Id. (citing Short Position and Short Activity Reporting
by Institutional Investment Managers, Release No. 34-94313 (Feb. 25,
2022) [87 FR 14950 (Mar. 16, 2022)] (``Short Position Reporting
Proposal'')); see also letter from Richard B. Zabel, General Counsel
& Chief Legal Officer, Elliott Investment Management L.P. (Sept. 18,
2023).
    \85\ See letter from Profs. Swanson, Young, and Yust.
    \86\ See, e.g., letters from CIRCA I; ICM; Prof. Gordon. These
commenters also asserted that the Commission has long recognized the
legitimacy of this asymmetry, including by allowing confidential
treatment in Form 13F filings and in other contexts. Id.
    \87\ See, e.g., letters from CIRCA I; ICM; Prof. Gordon.
    \88\ See, e.g., letters from AIMA; ICM. Similarly, one commenter
noted the absence of data indicating that shareholders are harmed by
the timing of when they sell a security under the current Schedule
13D reporting regime and posited that shareholders selling during
the 10-day period are generally sophisticated, non-retail investors
seeking liquidity based on an investment strategy which is unrelated
(and indifferent) to disclosure indicating whether an activist has a
stake in the company. See letter from CIRCA III.
    \89\ See letters from AIMA; TRP.
    \90\ See letter from ICM (citing Rondeau v. Mosinee Paper Corp.,
422 U.S. 49 (1975)); see also letters from B. Sharfman (``[T]he U.S.
Supreme Court has repeatedly and unambiguously stated that the `sole
purpose' of the Williams Act was for the protection of investors who
are confronted with a cash tender offer.'' (citing Piper et al. v.
Chris-Craft Industries, Inc., 430 U.S. 1 (1977)); EIM IV (citing
Rondeau, 422 U.S. 49, for the same proposition, but not expressly
opposing the proposal).
---------------------------------------------------------------------------

    A number of commenters also disagreed with the Commission's
technological advancement- and financial market development-based
justifications for the proposed acceleration of the beneficial
ownership reporting deadlines.\91\ For example, some commenters
asserted that neither Congress nor the Commission previously suggested
that technological ability to file is or should be the primary basis to
determine the appropriate filing deadlines for Schedules 13D and
13G.\92\ One commenter asserted that the Commission has not made
significant technological advances over the years to its own systems
that market participants rely on to prepare Schedules 13D and 13G,
making it challenging and costly for investors to gather the
information about beneficial ownership they need to file Schedules 13D
and 13G.\93\ One commenter asserted that technological advances do not
support shortening the filing deadline as proposed because despite
advances in technology, the filing process still has numerous
operational components that take time to complete.\94\ Another
commenter stated that recent trends indicate that activist investors
are having a moderate and declining impact in the United States and,
therefore, the Commission should ``encourage new forms of activism, not
suppress them.'' \95\
---------------------------------------------------------------------------

    \91\ See, e.g., letters from AIMA; CIRCA IV; Dodge & Cox; ICI I;
ICM; Robert E. Bishop, Fellow, UC Berkeley School of Law Center for
Law and Business, Frank Partnoy, Adrian A. Kragen Professor of Law,
UC Berkeley School of Law (Apr. 11, 2022) (``Profs. Bishop and
Partnoy I''); STB; see also letter from Investment Adviser
Association (Apr. 11, 2022) (``IAA'') (neither clearly supporting
nor opposing the proposed amendments, but expressing certain
concerns and making certain recommendations regarding the proposed
amendments).
    \92\ See, e.g., letters from AIMA; ICI I; ICM; STB.
    \93\ See letter from ICI I.
    \94\ See letter from IAA. The commenter cited legal developments
since 1968, including various anti-takeover mechanisms and the
adoption of section 13(f) and Form 13F, as well as certain
technological developments that provide public companies with the
benefit of nearly-contemporaneous insight into their shareholder
base and that have facilitated management entrenchment as offsetting
factors to any technological advancements during that time period
that would increase the ease of making a Schedule 13D filing. Id.
    \95\ See letter from Profs. Bishop and Partnoy I. The commenter
further said that ``given the development of poison pills, public
company boards are no longer monitored by hostile takeovers, so
activism is the remaining recourse.'' Id.
---------------------------------------------------------------------------

    Several commenters expressed concerns that the proposed amendments
do not align with the purpose or objectives of the Williams Act. For
example, one commenter asserted that the proposed amendments ``would
necessarily be considered to be beyond [the Commission's] statutory
authority and an `abuse of discretion,' if not `arbitrary and
capricious' under the APA'' because the proposed rule does not connect
the proposed reduction in filing time with what the commenter described
as the ``sole purpose'' of the Williams Act under Supreme Court
precedent, namely the protection of shareholders confronted with a cash
tender offer.\96\ Another commenter stated that not all of the
investors who file on Schedule 13D are activist investors engaging in
the types of activities the Williams Act seeks to regulate.\97\ Other
commenters expressed concern that the proposed amendments would disrupt
the balance that the Williams Act sought to strike.\98\
---------------------------------------------------------------------------

    \96\ See letter from B. Sharfman.
    \97\ See letter from STB. The commenter noted that many Schedule
13D filers are former Exempt Investors who became disqualified to
file on Schedule 13G because they acquired more than 2% beneficial
ownership in a 12-month period. Id. The commenter also noted that
many Schedule 13D filers are investors who seek a minority position
and potentially a board seat (given their desire to more actively
monitor their sizeable investment), but seek to work cooperatively
with the issuer, with the goal of building shareholder value for all
investors, and possess no intent to replace a majority of the board
of directors, launch a tender offer, or make an offer to take the
company private. Id.
    \98\ See letters from CIRCA IV; ICM.
---------------------------------------------------------------------------

    Some opposing commenters detailed the potential compliance burdens
that the proposed amendments could impose. For example, some commenters
expressed concern that the proposed five-day deadline would be unduly
burdensome for smaller and non-institutional beneficial owners.\99\
Other commenters asserted that the proposed amendments would present
compliance challenges \100\ and create significant reporting and
monitoring burdens.\101\ One commenter expressed concern that the
proposed amendments could negatively impact the ability of investors
and their advisors to draft meaningful disclosures and engage in
thoughtful analysis.\102\
---------------------------------------------------------------------------

    \99\ See letters from A. Day; E. Fraser.
    \100\ See letter from NVCA.
    \101\ See letter from Perkins Coie; see also letter from
Jennifer W. Han, Executive Vice President, Chief Counsel & Head of
Global Regulatory Affairs, Managed Funds Association and National
Association of Private Fund Managers (July 24, 2023) (``MFA &
NAPFM'') (describing potential costs associated with the Proposed
Amendments, but not expressly opposing the Proposed Amendments).
    \102\ See letter from STB. For example, the commenter suggested
that in order to avoid making a ``late'' filing with the Commission,
beneficial owners may shift to boilerplate disclosures in their
Schedule 13D filings, which can be prepared more quickly but are
less useful to investors and regulators. Id.
---------------------------------------------------------------------------

    Other commenters raised various other concerns regarding the
proposed

amendments. For example, a number of commenters expressed concerns that
the proposed amendments would increase management entrenchment and
reduce shareholder engagement and corporate accountability.\103\ One
commenter stated that although ``some purchasers may file within fewer
than the required 10 days for Schedule 13D,'' that ``does not justify
accelerating the reporting timeline.'' \104\ One commenter also noted
that the proposed accelerated initial Schedule 13D filing deadline
could result in activist investors relying more heavily on derivatives,
such as total return swaps and call options.\105\ One commenter
asserted that the Commission has not provided a compelling
justification for the proposed amendments or provided evidence to
support its concerns regarding information asymmetries and reporting
gaps that would warrant the proposed acceleration of the beneficial
ownership reporting deadlines.\106\ One commenter expressed concern
that the proposed amendments would induce a front-running effect that
would distort market pricing and increase market volatility.\107\ Other
commenters asserted that investors already have access to all of the
volume and price data for publicly traded companies that they need to
take appropriate action and, therefore, do not need additional
information regarding holdings by significant beneficial owners.\108\
---------------------------------------------------------------------------

    \103\ See, e.g., letters from AIMA; CIRCA I; CIRCA III; Dodge &
Cox; ICM; M. Frampton; MFA; Rice Management; TRP.
    \104\ See letter from AIMA. According to the commenter, ``[m]ost
investors will have a total aggregate investment in mind,'' and
``[w]hen the investor reaches this level and exceeds the 5%
threshold, she files her Schedule 13D,'' but ``[t]his standard
market practice in no way suggests that all other holders who are
continuing to accumulate shares should be required to file
earlier.'' Id.
    \105\ See letter from Profs. Swanson, Young, and Yust.
    \106\ See letter from ICI I.
    \107\ See letter from Rice Management.
    \108\ See letters from ICM; R. Parta.
---------------------------------------------------------------------------

    In addition, one commenter expressed concern that the Commission
has not cited a market event or failure related to the existing
beneficial ownership regime to support the proposed amendments.\109\
That commenter distinguished the proposed amendments from other
congressional efforts to accelerate public disclosures based on the
fact that the proposed amendments apply to unrelated, third-party
investors rather than issuers or insiders.\110\ Finally, one commenter
asserted that the proposed amendments conflict with contract law in the
United States, which generally refrains from imposing disclosure
obligations on buyers of property.\111\
---------------------------------------------------------------------------

    \109\ See letter from AIMA.
    \110\ Id. The commenter also stated that although some
beneficial owners file a Schedule 13D before the end of the 10-day
deadline, this does not support shortening the deadline because the
decision as to when to file is based on each investor's target
accumulation level. Id.
    \111\ See letter from Profs. Schwartz and Shavell I.
---------------------------------------------------------------------------

    Some of the commenters that generally supported the proposed
amendments also made various recommendations to the Commission. For
example, one commenter recommended that the Commission require that an
initial Schedule 13D be filed by the end of the day on which a person
acquires beneficial ownership of more than five percent of a covered
class.\112\ Another recommended that the Commission require that an
initial Schedule 13D be filed within one calendar day of a person
acquiring three percent, rather than more than five percent, of a
covered class and that a person be prohibited from acquiring more than
three percent until one business day after filing a Schedule 13D.\113\
Similarly, one commenter recommended that the Commission require that
an initial Schedule 13D be filed within one business day after crossing
the five percent threshold and institute a moratorium on the
acquisition of beneficial ownership of additional equity securities of
an issuer by any acquirer required to file a Schedule 13D that would be
in effect from the acquisition of a five percent beneficial ownership
stake until two business days after filing the Schedule 13D.\114\
---------------------------------------------------------------------------

    \112\ See letter from Corey (Feb. 19, 2022) (``Corey'').
    \113\ See letter from Prof. Steinberg.
    \114\ See letter from WLRK I. The commenter asserted that the
proposed five-day deadline will still substantially fail to serve
the purpose of the Williams Act to require the timely release of
information to the investing public with respect to the accumulation
of substantial ownership of an issuer's voting securities. Id.
According to the comment, this will ``provide hedge funds and
activist shareholders ample time to accrue significant stakes in an
issuer and ``improperly exploit, and profit from, information
asymmetries at the expense of other public investors.'' Id. The
commenter also stated that the moratorium is necessary to address
information asymmetries and ensure the markets have time to assess
impact of Schedule 13D filing and likened it to the 10-business day
cooling off period applicable to Passive Investors switching from
Schedule 13G filers to Schedule 13D filers. Id.
---------------------------------------------------------------------------

    Other supporting commenters recommended that the Commission require
that an initial Schedule 13D be filed within two business days,
consistent with the filing deadline for a Form 4.\115\ One supporting
commenter recommended that the Commission require that an initial
Schedule 13D be filed within three days rather than five days.\116\
Other supporting commenters recommended that the Commission consider
further shortening the beneficial ownership reporting deadlines without
specifying an alternative filing deadline.\117\
---------------------------------------------------------------------------

    \115\ See, e.g., letters from NIRI; SCG; SCG & NIRI; see also
Letter Type C; letter from PL Salvati (Aug. 9, 2023) (``PL
Salvati'') (neither clearly supporting nor opposing the proposal,
but recommending a two-business day deadline).
    \116\ See letter from T. Reilly.
    \117\ See, e.g., letters from AFREF; Freeport-McMoRan; HMA I.
---------------------------------------------------------------------------

    In addition, some of the commenters that generally opposed the
proposed amendments made various recommendations to the Commission. For
example, one recommended that rather than shortening the Schedule 13D
filing deadline, the Commission should impose a prohibition on tipping
by an activist as soon as it reaches the five percent threshold until
it files a Schedule 13D.\118\ Another recommended that the Commission
include an assets under management-based threshold for the proposed
accelerated Schedule 13D filing deadlines.\119\
---------------------------------------------------------------------------

    \118\ See letter from Prof. Gordon.
    \119\ See letter from A. Day.
---------------------------------------------------------------------------

    Other opposing commenters recommended that the Commission consider
a ``tiered approach'' to Rule 13d-1(a).\120\ For example, one commenter
suggested a tiered approach designed to vary the reporting deadline for
an initial Schedule 13D based on the issuer's market capitalization
without any limitation on acquisitions during the period between the
time that the investor acquires more than five percent of a covered
class and the time that the initial Schedule 13D is filed.\121\ Another
opposing commenter recommended that the Commission require those who
cross certain thresholds (e.g., 10 percent) or accumulate certain
amounts after crossing five percent (e.g., an additional three percent)
to file on the more accelerated timeline, but allowing investors who
trigger Schedule 13D filings for more technical reasons and who are not
accumulating stock in connection with a potential activist engagement
(e.g., proxy contests or intended take-private activity) to continue
filing under the current regime.\122\
---------------------------------------------------------------------------

    \120\ See letters from ICM; STB.
    \121\ See letter from ICM.
    \122\ See letter from STB.
---------------------------------------------------------------------------

    Some opposing commenters recommended that if the Commission revises
the initial Schedule 13D filing deadline, it should adopt a different
deadline than proposed. For example, one commenter recommended that the

Commission consider extending the filing deadline (e.g., to 15 or 30
days) rather than accelerating it.\123\ One commenter recommended that
the Commission require an initial Schedule 13D be filed within eight
days rather than the proposed five days.\124\ Other commenters
recommended that the Commission require an initial Schedule 13D be
filed in five business days rather than five calendar days.\125\ Some
of those commenters suggested that a five-business day deadline would
be more appropriate in light of the steps required to prepare and file
an accurate Schedule 13D,\126\ and one commenter noted that most
analogous securities laws governing reporting of material changes
(e.g., Form 8-K and Exchange Act section 16 filings) require filings
within time periods designated in business days rather than calendar
days.\127\
---------------------------------------------------------------------------

    \123\ See letter from E. Fraser. The commenter also recommended
that the Commission consider a provision for when a shareholder's
position goes over the 5% threshold because of ordinary corporate
actions that result in the number of outstanding shares to drop such
that the shareholder unwittingly holds over the 5% of outstanding
shares and recommended that the Commission consider increasing the
threshold from greater than 5% beneficial ownership to 10%. Id.
    \124\ See letter from MFA.
    \125\ See, e.g., letters from Dodge & Cox; ICI I; SIFMA AMG;
STB; see also IAC Recommendations (recommending that the Commission
adopt a five-business day deadline, rather than a five-calendar day
deadline, for an initial Schedule 13D filing).
    \126\ See letters from Dodge & Cox; ICI I.
    \127\ See letter from STB; see also IAC Recommendations.
---------------------------------------------------------------------------

    Finally, some commenters that neither clearly supported nor opposed
the proposed amendments made recommendations to the Commission. Several
commenters recommended an alternative filing deadline than proposed,
with some suggesting that the Commission require an initial Schedule
13D be filed within one day,\128\ within two days,\129\ five business
days,\130\ or on the same day as the event triggering the filing
obligation.\131\ Some commenters expressed a general preference for a
deadline expressed in ``business days'' rather than ``calendar days.''
\132\ And, one commenter recommended that to the extent the Commission
is concerned about Schedule 13D filers acquiring additional shares
after crossing the five percent threshold without public disclosure, it
should prohibit trading after crossing the five percent threshold
rather than accelerating the filing deadlines.\133\
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    \128\ See, e.g., letters from Jason Dunlop, Software Developer
for the FAA (Feb. 19, 2022) (``J. Dunlop''); John Kennedy, Tax
Paying American Citizen (Feb. 22, 2022) (``J. Kennedy''); Phillip,
Retail Investor (Feb. 19, 2022) (``Phillip''). These commenters
suggested that all beneficial ownership reports should be filed
within one day. See also letter from Juan B. (Aug. 14, 2023) (``Juan
B.'') (recommending that the initial Schedule 13D and 13G filing
deadlines under Rule 13d-1(a), (b), and (d) be shortened to one
day).
    \129\ See letter from Charles Jacobs, USCG (Feb. 20, 2022) (``C.
Jacobs'').
    \130\ See letters from IAA; Profs. Bishop and Partnoy II; Robert
Bishop, Associate Professor, Duke Law School, and Frank Partnoy,
Adrian A. Kragen Professor of Law, UC Berkeley School of Law,
Berkeley Haas (Affiliated Faculty) (June 27, 2023) (``Profs. Bishop
and Partnoy III''). One of these commenters asserted that five
calendar days would be extremely challenging for filers to obtain
and verify all the information needed to ensure the accuracy and
completeness of an initial Schedule 13D filing. See letter from IAA.
    \131\ See, e.g., letters from Chris McEntee, Retail Investor
(Mar. 14, 2022) (``C. McEntee''); David Choate (Aug. 2, 2023) (``D.
Choate''). These commenters suggested that all beneficial ownership
reports should have a same-day filing deadline.
    \132\ See, e.g., letters from IAA; Profs. Bishop and Partnoy
III. One of these commenters recommended that the Commission use
business days to give filers sufficient time to analyze and prepare
Schedules 13D and 13G and make it more likely that the Commission,
issuers, and the marketplace will receive beneficial ownership
information that is accurate and complete and asserted that the use
of business days instead of calendar days when establishing the
filing deadlines will not have a detrimental impact on the proposed
benefits of shorter deadlines. See letter from IAA. Another of these
commenters expressed the belief that ``there is now a broad
consensus that the final rule should be framed in terms of business
(or trading) days.'' See letter from Profs. Bishop and Partnoy III.
    \133\ See letter from Committee on Securities Law of the
Business Law Section of the Maryland State Bar Association (Apr. 11,
2022) (``MSBA'').
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c. Final Amendments
    We are amending Rule 13d-1(a), (e), (f), and (g) to shorten the
initial Schedule 13D filing deadline. We are adopting a five-business
day \134\ deadline, however, rather than the proposed five-calendar day
deadline based on the input we received from commenters.
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    \134\ The term ``business day'' is not defined in section 13(d)
or 13(g) or any rule of Regulation 13D-G. Accordingly, in the
Proposing Release, the Commission proposed to define ``business
day'' for purposes of Regulation 13D-G to mean any day, other than
Saturday, Sunday, or a Federal holiday, from 6 a.m. to 10 p.m.
Eastern Time. Proposing Release at 13847, n.5. One commenter
addressed this proposal, expressing concern that the proposed
definition of ``business day'' could raise confusion as to on which
business day a material change occurred if the event took place
outside of the hours set forth in that definition (i.e., 6 a.m. to
10 p.m. Eastern Time). See letter from EIM I. Accordingly, the
commenter recommended that the ``business day'' definition comprise
the full 24-hour period of any given day based on the customary
definition of the term. Id. To avoid the concern expressed by this
commenter, we are adopting the commenter's recommendation. As such,
the term ``business day'' for purposes of Regulation 13D-G will be
defined to mean any day, other than Saturday, Sunday, or a Federal
holiday, from 12:00 a.m. to 11:59 p.m. Eastern Time. We believe this
will avoid any confusion as to the date on which a beneficial
ownership report is due if, for example, a person incurs a filing
obligation before 6 a.m. or after 10 p.m. on a day that is not a
Saturday, Sunday, or Federal holiday. It is important to note,
however, as stated at the outset of Regulation 13D-G, that
Regulation S-T governs the preparation and submissions of filings in
electronic format and should be read in conjunction with the rules
contained within Regulation 13D-G, including Rules 13d-1 and 13d-2.
Thus, even though the definition of ``business day'' encompasses an
entire day, a Schedule 13D or 13G must be submitted by direct
transmission to the Commission in accordance with the times set
forth in Rule 13(a) of Regulation S-T in order to be deemed to have
been filed on that day. See infra section II.A.5 for a more detailed
discussion of Rule 13(a) of Regulation S-T, including the amendments
we are adopting to extend the filing ``cut-off'' time for Schedules
13D and 13G.
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    As noted above, Rule 13d-1(a) currently requires an initial
Schedule 13D to be filed within 10 days after the date on which a
person acquires beneficial ownership of more than five percent of a
covered class.\135\ We are amending Rule 13d-1(a) to require a Schedule
13D to be filed within five business days after the date \136\ of such
acquisition. Similarly, as discussed above, Rule 13d-1(e), (f), and (g)
currently require an initial Schedule 13D to be filed within 10 days
after the date on which a person loses its Schedule 13G eligibility. We
are

amending those rules to require such Schedule 13D to be filed within
five business days after such date.
---------------------------------------------------------------------------

    \135\ Under section 21 of the Exchange Act, the Commission has
the authority to investigate and enforce violations of section
13(d)(1) and Rule 13d-1(a) and may seek to impose various remedies
for late filings, such as injunctive relief, cease-and-desist orders
or civil monetary penalties. Importantly, no state of mind
requirement exists for violations of section 13(d)(1) and
corresponding Rule 13d-1(a). See SEC v. Levy, 706 F. Supp. 61, 63-69
(D.D.C. 1989) (holding a defendant liable notwithstanding the
defendant's assertion that his attorney ``misinformed defendant
about his obligation to disclose'' information on Schedule 13D
because scienter is not an element of such violations); see also SEC
v. Savoy Indus., Inc., 587 F.2d 1149, 1167 (D.C. Cir. 1978)
(``Indeed, the plain language of section 13(d)(1) gives no hint that
intentional conduct need be found, but rather, appears to place a
simple and affirmative duty of reporting on certain persons. The
legislative history confirms that Congress was concerned with
providing disclosure to investors, and not merely with protecting
them from fraudulent conduct.''); Oppenheimer & Co., Inc., 47 SEC
286, 1980 WL 26901, at *1-2 (May 19, 1980) (``We have previously
held that the failure to make a required report, even though
inadvertent, constitutes a willful violation.''). To the extent a
person willfully fails to comply with section 13(d), a beneficial
owner also has exposure to criminal liability under section 32(a) of
the Exchange Act.
    \136\ We also are revising Rule 13d-1(a) to state that the
initial Schedule 13D must be filed within five business days ``after
the date of such acquisition'' rather than the current formulation
of ``after such acquisition.'' This modification, which the
Commission proposed, is intended to clarify that, for purposes of
determining the filing deadline, the first day in the five-business
day count towards reaching the deadline is the day after the date on
which beneficial ownership of more than 5% is acquired (rather than
the date of such acquisition). We also are adopting similar changes
to Rule 13d-1(c) and (f)(1), as those rules currently contain
language similar to the ``after such acquisition'' formulation
currently in Rule 13d-1(a). We do not believe that a similar change
is required for Rule 13d-1(e) and (g), as those rules use different
formulations. See 17 CFR 240.13d-1(e)(1) and (g) (currently
requiring an initial Schedule 13D be filed ``within 10 days'' of the
filing trigger date).
---------------------------------------------------------------------------

    For purposes of determining the filing deadline under these
amendments, the Commission must receive the filing by the fifth
business day after the date on which the initial Schedule 13D filing
obligation arises--i.e., the date on which a person acquires beneficial
ownership of more than five percent of a covered class under Rule 13d-
1(a) or the date on which a person loses eligibility to file on
Schedule 13G under Rule 13d-1(e), (f), and (g)--in order for the filing
to be considered timely. Pursuant to our amendment to Rule 13(a)(4) of
Regulation S-T, discussed in section II.A.5 below, the filing will have
to be submitted by direct transmission commencing on or before 10 p.m.
Eastern Time on the due date.\137\
---------------------------------------------------------------------------

    \137\ See infra section II.A.5 for a discussion of our amendment
to Rule 13(a)(4) of Regulation S-T, which extends the filing ``cut-
off'' time for Schedules 13D and 13G from 5:30 p.m. Eastern Time to
10 p.m. Eastern Time.
---------------------------------------------------------------------------

    We believe the current 10-day filing deadline for an initial
Schedule 13D filing should be revised to ensure investors receive
material information in a manner that is considered timely in light of
advancements in technology and developments in the financial markets
that have occurred since that deadline was enacted in 1968. Those
technological advancements include, for example, market professionals'
use of information technologies to compile the necessary data and
prepare a filing,\138\ as well as their ability to submit filings
electronically through the Commission's Electronic Data Gathering,
Analysis, and Retrieval (``EDGAR'') system.\139\ In addition, the use
of modern information technology and other developments in the
financial markets may facilitate an investor's accumulation of a large
equity stake more quickly than at the time Congress enacted the
Williams Act.\140\ Before 1993, ``the prevailing practice'' was to
``settl[e] securities transactions within five business days of trade
date.'' \141\ Since then, the Commission has shortened the settlement
cycle three times, most recently adopting rule amendments this year
that require settlement of most transactions in securities within one
business day after the trade date (with which compliance will be
required by May 28, 2024).\142\ Because a shortened settlement cycle
enables investors to access the proceeds of their transactions more
quickly, investors also may be able to acquire a significant equity
stake more quickly than when settling their transactions within five
business days of trade date.\143\ Congress, in the Dodd-Frank Act,
expressly empowered the Commission to shorten the deadline for filing
the initial Schedule 13D.\144\ Because of those advances in technology
and developments in the financial markets, we are now exercising that
authority to shorten the initial Schedule 13D filing deadline.
---------------------------------------------------------------------------

    \138\ See, e.g., letters from Better Markets I (noting
``technological advancements over the last 54 years [that] have
reduced the need for a 10-day reporting period,'' including ``vastly
more efficient data compilation methods''); SCG (noting that
``[e]very fund manager with the resources to amass a 5% stake in a
company should have sufficient record-keeping technology to
determine'' the amount of their beneficial ownership in a rapid
manner); Leo E. Strine, Jr., Who Bleeds When the Wolves Bite? A
Flesh-and-Blood Perspective on Hedge Fund Activism and Our Strange
Corporate Governance System, 126 Yale L.J. 1870, 1895, 1960-61
(2017) (describing the ``disclosure regime under Section 13 of the
Securities Exchange Act'' as ``antiquated'' and stating that ``[i]t
seems entirely clear to me that the idea of Section 13 was that an
investor should come public as soon as reasonably possible after
hitting the 5% threshold and that the reporting deadline was due to
what it took to type up, proof, and deliver to Washington the
required filing in 1968, when word processors and electronic filing
with a button push did not exist'').
    \139\ In mandating that all Schedules 13D and 13G be filed
electronically, the Commission reasoned that such a transition was
necessary to facilitate ``more rapid dissemination of, and easier
access to, financial and other material information . . . than under
our current paper filing system'' and cited to ``increased
efficiencies in the filing process, which will significantly reduce
the filing time required under traditional methods of paper
delivery.'' See Rulemaking for EDGAR System, Release No. 34-35113
(Dec. 19, 1994) [59 FR 67752 (Dec. 30, 1994)]; Mandated EDGAR Filing
for Foreign Issuers, Release No. 34-45922 (May 14, 2002) [67 FR
36678 (May 24, 2002)]; see also Adam O. Emmerich et al., Fair
Markets and Fair Disclosure: Some Thoughts on the Law and Economics
of Blockholder Disclosure, and the Use and Abuse of Shareholder
Power, 3 Harv. Bus. L. Rev. 135, 143 (2013) (noting that the 10-day
Schedule 13D filing deadline reflected ``commercial and
technological realities that existed in 1968, [which] would have
included the time required to mail the Schedule 13D to the SEC's
office''); letter from Wachtell, Lipton, Rosen & Katz to Elizabeth
M. Murphy, Sec'y, U.S. Sec. & Exch. Comm'n (Mar. 7, 2011)
(``Wachtell Petition'') at 1-7, available at https://www.sec.gov/rules/petitions/2011/petn4-624.pdf (petitioning the Commission to
propose amendments to the beneficial ownership reporting rules to,
among other things, shorten the Schedule 13D filing deadline from 10
days to one business day based, in part, on ``[c]hanges in
technology, acquisition mechanics and trading practices [that] have
given investors the ability to make these types of reports with very
little advance preparation time'' and the fact that ``the markets
rely on the expectation that material information wil1 be
disseminated promptly and widely, in no small part due to the impact
of the internet and online information exchange'').
    \140\ See, e.g., letter from SCG. This commenter noted, for
example, that ``investment managers [in 1968] didn't have access to
email, instant messaging, fax machines, market data terminals,
computer-assisted trading technology, or alternative `dark pool'
trading venues that help facilitate the accumulation of significant
positions.'' Id. The commenter also noted that ``[d]aily trading
volumes on U.S. exchanges, which averaged 22 million shares in 1968,
have grown by more than 1,000 times.'' Id.
    \141\ Shortening the Securities Transaction Settlement Cycle,
Release No. 34-96930 (Feb. 15, 2023) [88 FR 13872, 13873 (Mar. 6,
2023)].
    \142\ Id. at 13873, 13916.
    \143\ See letter from SCG (``Fifty-four years ago, there was no
standard period for settling securities trades; today the settlement
cycle is two business days and the Commission recently proposed
shortening that period further to `T+1' (one business day) by 2024
to reduce risks to investors.''). See also infra text accompanying
note 677 for further discussion of some ways in which investors may
be able to acquire a significant equity stake more quickly in
today's financial markets.
    \144\ Public Law 111-203, 124 Stat. 1900 929R(a)(1)(A) (2010).
---------------------------------------------------------------------------

    We note that our shortening of the initial filing deadline for
Schedule 13D is consistent with previous congressional and Commission
efforts to accelerate public disclosures of material information to the
market.\145\ For example, in 2002, when the Commission accelerated the
deadlines for issuers to submit their periodic reports, it reasoned
that ``[s]ignificant technological advances over the last three decades
have both increased the market's demand for more timely corporate
disclosure and the ability of companies to capture, process and
disseminate this information.'' \146\

Similarly, the Commission has long recognized the benefits of more
expedient reporting, stating, for example, that ``a lengthy delay
before . . . information becomes available makes the information less
valuable to investors.'' \147\
---------------------------------------------------------------------------

    \145\ For example, the Sarbanes-Oxley Act of 2002 (``Sarbanes-
Oxley Act'') amended section 16(a) of the Exchange Act to require
that change of beneficial ownership reports under section 16(a) of
the Exchange Act be filed by officers, directors and beneficial
owners of more than 10% of a covered class ``before the end of the
second business day following the day on which the subject
transaction has been executed.'' On Aug. 27, 2002, the Commission
adopted amendments to implement the accelerated deadline for Form 4
filings, shortening the deadline from 10 days after the close of
each calendar month to two business days after a filing obligation
is triggered. See Ownership Reports and Trading by Officers,
Directors and Principal Security Holders, Release No. 34-46421 (Aug.
27, 2002) [67 FR 56461 (Sept. 3, 2002)]. On Mar. 16, 2004, the
Commission amended Form 8-K to generally require that such filings
be made within four business days of a triggering event. In adopting
the accelerated timeline, the Commission explained the amended
requirement ``should enhance investor confidence in the financial
markets.'' Additional Form 8-K Disclosure Requirements and
Acceleration of Filing Date, Release No. 34-49424 (Mar. 16, 2004)
[69 FR 15593 at 15611 (Mar. 25, 2004)]. The Commission further
explained that ``[t]he requirement of enhanced, timely disclosure
should raise investors' expectations regarding the amount and timing
of information that reporting companies must make available to the
public'' and that ``[c]onfidence in the expectation of such enhanced
disclosure should provide more certainty to those investors that
they are making investment decisions in a more transparent market,
which should reduce market volatility as a result of uncertainty of
the availability of accurate timely information about public
companies.'' Id.
    \146\ Acceleration of Periodic Report Filing Dates and
Disclosure Concerning website Access to Reports, Release No. 34-
46464 (Sept. 5, 2002) [67 FR 58479 (Sept. 16, 2002)]. We recognize
that these accelerated deadlines applied to periodic filings made by
issuers, whereas sections 13(d) and (g) relate to filings made by
investors. See supra note 110 and accompanying text. We also
recognize that the acceleration of these deadlines was prompted, in
part, by section 409 of the Sarbanes-Oxley Act, which ``added
Section 13(l) of the Exchange Act . . . [to] require[ ] disclosure
on a rapid and current basis of such additional information
concerning material changes in the financial condition or operations
of the issuer,'' id. at n.15 and accompanying text (emphasis added),
whereas no such ``rapid and current'' language exists in sections
13(d) and 13(g). Nonetheless, the technological advances that have
increased both the market's demand for more timely disclosure and
the ability of issuers to file more rapidly are equally applicable
to the information disclosed on Schedule 13D and available to
investors making Schedule 13D filings. For example, Congress
recognized the market's demand for more timely disclosure of non-
issuer filings by accelerating the deadline for section 16 filings
in the Sarbanes-Oxley Act. See supra note 145. As such, we believe
that these technological advances and market practices also support
accelerating the initial Schedule 13D filing deadline.
    \147\ Acceleration of Periodic Report Filing Dates and
Disclosure Concerning Website Access to Reports, Release No. 34-
46464 (Sept. 5, 2002) [67 FR 58479, 58483 (Sept. 16, 2002)]; see
also H.R. Rep. 90-550 (1967) (``The persons seeking control,
however, have information about themselves and about their plans
which, if known to investors, might substantially change the
assumptions on which the market price is based. The bill is designed
to make relevant facts known so that shareholders have a fair
opportunity to make their decision.'').
---------------------------------------------------------------------------

    Despite those efforts to accelerate various other reporting
deadlines, the initial Schedule 13D filing deadline has remained
unchanged since its enactment in 1968. As a number of commenters
pointed out, there have been significant changes in technology and
developments in the financial markets in the intervening years that
have rendered the 10-day deadline ``outdated.'' \148\ Commenters also
highlighted some costs that the current 10-day deadline may be imposing
on market participants (i.e., by delaying the disclosure of potentially
material information) \149\ and identified some potential benefits of
shortening that deadline, including increased timeliness of information
and improved transparency and fairness in the financial markets.\150\
We agree with those commenters that shortening the initial Schedule 13D
filing deadline will increase the timeliness of the disclosure of
material information, thereby improving market transparency,
facilitating better-informed decision-making by investors, and
enhancing the efficiency of resource allocation (i.e., the direction of
capital and other resources to their most productive uses) across the
economy.\151\
---------------------------------------------------------------------------

    \148\ See supra notes 48-52 and accompanying text.
    \149\ See supra notes 42-43 and accompanying text.
    \150\ See supra notes 38-41 and accompanying text.
    \151\ See infra section IV.C.1.a.ii.
---------------------------------------------------------------------------

    We recognize that several commenters opposed the proposed
amendments to Rule 13d-1(a), (e), (f), and (g). Some commenters
asserted that neither Congress nor the Commission previously suggested
that technological ability to file should be the primary basis to
determine the appropriate initial Schedule 13D filing deadline.\152\
There is some indication, however, that when enacting the 10-day
deadline, Congress considered the amount of time a beneficial owner
would need to prepare and submit a filing.\153\ As noted above, there
have been significant technological advancements since 1968 that have
made it easier to prepare and file a Schedule 13D more quickly.\154\
There also is some indication that Congress enacted section 13(d), in
part, to provide shareholders with material information regarding
potential changes in control in a timely manner to facilitate their
investment decisions.\155\ Because changes in technology and
developments in the financial markets since 1968 have facilitated
investors' abilities to rapidly accumulate beneficial ownership,\156\
we believe it is appropriate to shorten the initial Schedule 13D
deadline so that the rate at which shareholders become aware of such
accumulations keeps pace.\157\
---------------------------------------------------------------------------

    \152\ See supra note 92 and accompanying text.
    \153\ See, e.g., Full Disclosure of Corporate Equity Ownership
and in Corporate Takeover Bids: Hearing on S. 510 Before the
Subcomm. on Securities of the S. Comm. on Banking and Currency, 90th
Cong. 136 (1967) (statement of Stanley Kaplan, Professor, University
of Chicago) (stating that ``[r]equiring the filing . . . within