What is SEC Schedule 13D

SEC Schedule 13D is a form that the U.S. Securities and Exchange Commission requires some shareholders to file within 10 days of purchasing a stock. Investors that qualify for Schedule 13D are beneficial owners of more than 5 percent of a company’s outstanding voting stock. Schedule 13D is sometimes known as the beneficial ownership report, and is mandated by a 1968 amendment to the Securities Exchange Act of 1934.

BREAKING DOWN SEC Schedule 13D

SEC Schedule 13D is a report mandated by the U.S. Securities and Exchange Commission (SEC) of any individual or entity that holds more than 5 percent of the voting stock of any publicly traded company. More specifically, the individual must be a beneficial owner of those shares. The SEC defines a beneficial shareholder as anyone with voting or investment power over their shares.

Originally, the shareholder filed Schedule 13D with the company whose stock they had purchased as well as any exchange on which the stock traded. The Dodd-Frank Act of 2010 removed this requirement, and beneficial owners now send their Schedules 13D directly to the SEC. The report is then uploaded to the commission’s online EDGAR database for public review. Any changes to the shareholder’s position of more than 1 percent of outstanding share must be reported in a subsequent amendment to the Schedule.

Exceptions to this rule allow for filing a condensed form of the report, Schedule 13G, by any member of one of three groups. The first is exempt investors, who acquired their shares prior to the company registering with the SEC. The second group consists of qualified institutional investors, who report their positions at the end of a calendar year on the report. The final group has been exempt from Schedule 13D requirements since 1998. The group includes passive investors who can certify that they have no intention to control or influence the company issuing the stock.

The Purpose of Schedule 13D

Section 13D was added to the Securities Exchange Act of 1934 as part of a 1968 amendment known as the Williams Act. This addition responded to the increasing use of tender offers as part of corporate takeovers. It was designed to give individual investors advance warning of impending changes to corporate control that could result from consolidation of voting power by corporate raiders. Section 13G was added in 1977 to allow investor groups who were either professional investors or unlikely to engage in shareholder activism a shorter version of Schedule 13D.