January 16, 2014

The SEC Issues New Guidance on Reporting of Group Members' Beneficial Ownership of Other Group Members' Securities

Summary: On January 3, 2014, the SEC provided new guidance on when an individual must report beneficial ownership of equity securities of other members of a “group” for purposes of filings under Section 13. The SEC clarified that mere formation of a group is not enough to establish that a group member individually beneficially owns securities held by other group members. The SEC advised that it views a right of a group member to designate the nomination of one or more director nominees for whom the other group members have agreed to vote as conveying beneficial ownership to the rightholder. The new guidance alters how issuers will calculate certain investors’ beneficial ownership disclosure in proxy statements and registration statements and consideration of 1933 Act Rule 506(d) disqualifications; it may also be relevant to an analysis of conversion caps or similar provisions in convertible instruments.

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