Section 13 SEC Reporting by Advisers and Brokers and Section 16 SEC Reporting by “Insiders” of Public Companies

Under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), advisers and brokers who exercise investment discretion over accounts which hold exchange traded equity securities may be required to file acquisition and ownership reports with the Securities and Exchange Commission (the “SEC”) in certain circumstances. These reports, which are required by Section 13 of the Exchange Act, may be filed on Schedule 13D, Schedule 13G, Form 13F, and/or Form 13H, each of which is discussed in more detail below. A firm (and in some cases its “controlling persons”) will likely have a Section 13 reporting obligation if the firm:

  • manages discretionary accounts (including accounts managed for insiders) that, in the aggregate, hold more than 5% of the voting, equity securities of any SEC reporting company, closed-end fund or insurance company, as described further below (a “Section 13(d) or Section 13(g) reporting obligation”);
  • manages discretionary accounts holding, in the aggregate, equity securities with a market value of $100 million or more (a Section 13(f) reporting obligation); or
  • manages discretionary accounts that purchase or sell any equity securities in an aggregate amount equal to or greater than (i) 2 million shares or shares with a fair market value of over $20 million during a day, or (ii) 20 million shares or shares with a fair market value of over $200 million during a calendar month (a “Section 13(h) reporting obligation”).

The determination of whether a firm is required to report its holdings is generally made based on the firm’s holdings on December 31 of each year, however, a reporting obligation can arise earlier if the firm acquires more than 10% of an issuer’s outstanding “Section 13 Securities”.[1]

In addition, Section 16 of the Exchange Act imposes a reporting obligation on certain persons considered insiders of a company that has a class of equity securities registered under Section 12 of the Exchange Act. Such insiders may be liable for short-swing profits i.e., profits made from sales and purchases of the company’s securities within a six-month time period.

This memorandum summarizes the Section 13 reporting requirements applicable to investment advisers and brokers, focusing particularly on firms holding more than 5%, but less than 10%, of an issuer’s Section 13 Securities (and as such are generally required to file Schedule 13G as further described below),[2] and the Section 16 reporting requirements applicable to insiders of public companies, and includes a schedule of the filing deadlines for 2017.

[1]   A “Section 13 Security” means any voting, equity security that is (1) of a class that is registered pursuant to Section 12 of the Exchange Act (which includes all exchange-traded and NASDAQ-listed securities); (2) issued by an insurance company, which security would have been required to be registered under Section 12 of the Exchange Act but for the exemption contained in Section 12(g)(2)(G) of the Exchange Act; or (3) issued by a closed-end investment company registered under the Investment Company Act of 1940, as amended (“Investment Company Act”).

[2]   This Memorandum focuses on Schedule 13G filing requirements. If you are not eligible to report on Schedule 13G, please contact us if you would like guidance regarding Schedule 13D.

Click here for a PDF of the full text