SEC adopts shorter reporting deadlines for beneficial ownership

The rule, adopted Tuesday, shortens the deadline for those who own more than 5 percent of a company to inform the public of their position from 10 days to five days.

“In our fast-paced markets, it shouldn’t take 10 days for the public to learn about an attempt to change or influence control of a public company,” said SEC Chair Gary Gensler in a press release.

The rule also requires certain beneficial ownership information amendments be filed within two business days, in addition to other requirements accelerating and streamlining related reporting processes.

The SEC in April reopened comment on the rule proposal, which had first been released in February 2022. Gensler stressed the need to modernize reporting requirements and ensure investors receive material information in a timely manner.

“At its core, today’s adoption is about reducing overall information asymmetries in the market, promoting transparency, allowing better-informed decision-making by investors, and improving liquidity,” he said in a statement.

Gensler noted two elements of the proposed rule were not adopted regarding 1) the current legal standard governing when two or more persons may be considered a group for the purposes of beneficial ownership reporting and 2) the circumstances where holding certain cash-settled derivatives count toward the 5 percent threshold for reporting. The agency instead opted to provide guidance on these areas.

SEC Commissioner Hester Peirce said in a statement she could not support adoption of the rule, breaking from her Republican counterpart Mark Uyeda, who offered a statement in support.

“Although the original filing timelines are not necessarily the platonic ideal, a decision to shorten the timeframes should be well justified. Here, a justification is lacking,” said Peirce.

The final rule will become effective 90 days after publication in the Federal Register.