Among the many new rules and considerations affecting proxy season disclosures this year, one of the more subtle changes affects beneficial ownership disclosure pursuant to S-K Item 403(a). That rule requires companies to report the beneficial ownership of their greater than 5% shareholders “as of the most recent practicable date,” with beneficial ownership being determined in accordance with Exchange Act Rule 13d-3. In years past, all Schedule 13G filers were required to file amendments within 45 days after the end of the calendar year to report any change to their previously reported holdings. Companies traditionally have relied on those year-end filings for purposes of completing the Item 403(a) beneficial ownership table in their proxy statements. Under the amendments to the Schedule 13D/G reporting rules that went into effect in September 2024, greater than 5% beneficial owners reporting on Schedule 13G now are required to file a Schedule 13G/A within 45 days after the end of any calendar quarter if, as of the end of the calendar quarter, there are any material changes in the information reported in the previous filing. A material change would include an acquisition or disposition of beneficial ownership of securities in an amount equal to one percent or more of the outstanding class of securities. However, absent a triggering acquisition or disposition or other material change, Schedule 13G filers are no longer required to file an amendment reporting their beneficial ownership as of the end of the calendar year.
Under Instruction 3 to S-K Item 403(a), companies are entitled to rely on the most recently filed Schedule 13G when preparing the beneficial ownership table for their proxy statement, unless the company knows or has reason to believe that the most recently filed 13G is not complete or accurate or that a statement or amendment should have been filed and was not. However, the mere fact that an institutional shareholder is reporting different ownership on its quarterly Form 13-F does not mean that a company “knows or has reason to believe” that the information in the most recently filed Schedule 13G may no longer be relied upon. As the SEC Staff confirmed in S-K C&DI 229.02, the concept of “investment discretion” that is used for reporting on Form 13-F is not the same as “beneficial ownership” for purposes of Schedule 13D and 13G reporting.
Accordingly, absent some other basis for knowing or believing that a Schedule 13G is no longer accurate, companies should continue to rely on the most recently filed Schedule 13G when preparing the beneficial ownership table for their proxy statement, even when that most recent Schedule 13G is more than a year old. When preparing the proxy beneficial ownership table, we recommend that companies drop a footnote indicating the date as of which the shareholder’s beneficial ownership was reported in the Schedule 13G, and preferably also the filing date of the Schedule 13G that the company is relying on (the same applies with respect to shareholders reporting on Schedule 13D). Companies also should confirm that any lead-in language to the beneficial ownership table stating that ownership is reported as of a specific date is qualified by language along the lines of, “except to the extent indicated otherwise in the footnotes”.