Schedule 13G Definition


What Is Schedule 13G?

The Securities and Exchange Commission (SEC) Schedule 13G form is an alternative filing for the Schedule 13D form and is used to report a party’s ownership of stock which exceeds 5% of a company’s total stock issue. Schedule 13G is a shorter version of Schedule 13D with fewer reporting requirements. Schedule 13G can be filed in lieu of the SEC Schedule 13D form as long as the filer meets one of several exemptions.

Both Schedule 13D and Schedule 13G forms are referred to as “beneficial ownership reports.” According to the SEC, a beneficial owner is anyone directly or indirectly shares voting power or investment power. These forms are intended to provide information about individuals who have significant holdings in publicly-traded companies and thus, allow for other investors and other interested parties to make informed decisions about their own investments. The ownership of over 5% of a publicly-traded stock is considered significant ownership and reporting this to the public is a requirement.

Investors and any other interested parties can view the Schedule 13G forms of any publicly-traded company through the SEC’s EDGAR system.

Understanding Schedule 13G

There are several exemptions that permit a filer to file form Schedule 13G instead of Schedule 13D. Institutional investors can file a Schedule 13G if they acquired securities while doing normal business and they have no intention of influencing control of the issuer. Individuals who are not institutional investors can file a Schedule 13G if they have not acquired the security with the intent of influencing control over the issuer and are not directly or indirectly the beneficial owner of 20% or more of the security. Under Section 13(d)(6)(A) or (B) of the Securities Exchange Act of 1934, there are additional exemptions for investors. An investor may also be exempt if their beneficial ownership was acquired before December 22, 1970.

There are several filing deadlines for Schedule 13G. For institutional investors, they are required to file within 45 days of the end of the year in which they finish above 5%, or within 10 days of first finishing a month above 10% if the initial filing has not yet been completed. Passive investors are required to file within 10 days of acquiring 5% or more of a security. Finally, exempt investors (as defined by Section 13(d)(6)(A) or (B) of the Securities Exchange Act of 1934) must file within 45 days of the end of the year in which they become obligated to file.

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Any changes to the information contained in a Schedule 13G form must be amended through additional reporting. Institutional investors are required to file an amendment to report any changes within 45 days of the end of the year or within 10 days of first finishing a month above 10% and then within 10 days of any month-end where the holder’s ownership increases or decreases by 5% or more. Passive investors have similar requirements for reporting amendments.

The SEC can impose fines on individuals and/or companies for improperly filing Schedule 13G forms or failing to file them. Individuals can be cited if they fail to promptly report information about their holdings and transactions, and companies can be fined if they do not report that their employees have not properly filed any required forms. Even if it is inadvertent, the failure to timely file a required beneficial ownership report is a violation of the requirements set out under Sections 13(d), 13(g) and 16(a) of the Securities Exchange Act of 1934.

It is very important that fund managers and other investors are aware of their internal control policies and procedures. In order to settle improper filing claims with the SEC, individual investors have been forced to pay upwards of $150,000 in financial penalties. The SEC makes an effort to police these sorts of violations because these forms are intended to protect the public, keeping them aware of the trading activity of insiders and ultimately, preventing insider trading and other acts of stock manipulation.

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