[Federal Register Volume 63, Number 11 (Friday, January 16, 1998)]
[Rules and Regulations]
[Pages 2854-2868]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-1084]
[[Page 2853]]
_______________________________________________________________________
Part V
Securities and Exchange Commission
_______________________________________________________________________
17 CFR Part 240
Amendments to Beneficial Ownership Reporting Requirements; Final Rule
Federal Register / Vol. 63, No. 11 / Friday, January 16, 1998 / Rules
and Regulations
[[Page 2854]]
SECURITIES AND EXCHANGE COMMISSION
17 CFR Part 240
[Release No. 34-39538; File No. S7-16-96; International Series--1111]
RIN 3235-AG81
Amendments to Beneficial Ownership Reporting Requirements
AGENCY: Securities and Exchange Commission.
ACTION: Final rule.
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SUMMARY: The Securities and Exchange Commission is today adopting
amendments to its rules relating to the reporting of beneficial
ownership in publicly held companies. These amendments make the short-
form Schedule 13G available, in lieu of Schedule 13D, to all investors
beneficially owning less than 20 percent of the outstanding class that
have not acquired and do not hold the securities for the purpose of or
with the effect of changing or influencing the control of the issuer of
the securities. The purposes of the amendments are to improve the
effectiveness of the beneficial ownership reporting scheme and to
reduce the reporting obligations of passive investors.
EFFECTIVE DATE: The amendments are effective February 17, 1998.
FOR FURTHER INFORMATION CONTACT: Dennis O. Garris, Chief, Office of
Mergers and Acquisitions, Division of Corporation Finance, Securities
and Exchange Commission at (202) 942-2920, 450 Fifth Street N.W.,
Washington, D.C. 20549.
SUPPLEMENTARY INFORMATION: The Securities and Exchange Commission
(``Commission'') is adopting amendments to Regulation 13D-G \1\ and
Schedules 13D and 13G.\2\ In addition, the Commission is adopting
conforming amendments to Rule 16a-1 \3\ under the Securities Exchange
Act of 1934 (``Exchange Act'').
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\1\ Rules 13d-1, 13d-2, 13d-3, and 13d-7 [17 CFR 240.13d-1,
240.13d-2, 240.13d-3, and 240.13d-7].
\2\ K 17 CFR 240.13d-101 and 240.240.13d-102.
\3\ 17 CFR 240.16a-1.
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I. Executive Summary
Today, for the first time, the Commission is permitting certain
large shareholders to use the short-form Schedule 13G, rather than the
long-form Schedule 13D, to report accumulations and changes in stock
holdings. This expanded eligibility to file on Schedule 13G applies
only to persons not seeking to acquire or influence ``control'' of the
issuer and who own less than 20 percent of the class of securities
(``Passive Investor'').\4\ The existing reporting scheme imposed
unnecessary disclosure obligations on persons whose acquisitions do not
affect the control of issuers. The amendments adopted today will reduce
the reporting obligations of these Passive Investors. The amendments
also will improve the effectiveness of the beneficial ownership
reporting scheme. The reduced number of Schedule 13D filings will allow
the marketplace, as well as the staff of the Commission, to focus more
quickly on acquisitions involving the potential to change or influence
control.
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\4\ See fn. 9, infra.
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Since a control purpose reflects the state of mind of a filing
person and there are incentives to disclose less information, the
Commission is imposing some safeguards on this new class of short-form
filers:
Initial Schedule 13G must be filed within 10 days (instead
of year end);
Prompt amendments are required every time the Passive
Investor acquires more than an additional five percent;
Loss of Schedule 13G-eligibility occurs when Passive
Investor acquires 20 percent or more of the class; and,
If the person no longer passively holds their shares or
the person acquires 20 percent or more of the class, a Schedule 13D is
due within ten days and the person is not permitted to vote the shares
or acquire more shares during the period of time beginning from the
change in investment purpose or the acquisition of 20 percent or more
until ten days after the Schedule 13D is filed.
The Commission also is adopting related and clarifying amendments
including the simplification of the Schedule 13G dissemination
requirements to reflect the ready availability of those reports on the
Commission's EDGAR system. Schedules 13G will no longer be required to
be sent to the exchanges, since all Schedules 13D and 13G must now be
filed electronically with the Commission.\5\
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\5\ Schedules 13D and 13G are not required to be filed
electronically with respect to securities of foreign private
issuers. See Note to paragraph (c)(4) to 17 CFR 232.901.
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II. Amendments to Regulation 13D-G
A. Expansion of the Class of Investors Eligible To Report on Schedule
13G
The Commission proposed the amendments adopted today on July 3,
1996.\6\ The amendments are being adopted substantially as proposed
with some important modifications. In addition to the two existing
categories of Schedule 13G filers (``Qualified Institutional
Investors'' \7\ and ``Exempt Investors'' \8\), today's amendments
create a third category (``Passive Investors''),\9\ significantly
expanding the classes of persons eligible to file on the short form.
Under the amendments, all Passive Investors are permitted to use the
short-form Schedule 13G.\10\ Passive Investors choosing to report on
Schedule 13G will file that schedule within 10 calendar days after
acquiring beneficial ownership of more than five percent of a class of
subject securities. Persons unable or unwilling to certify that they do
not have a disqualifying purpose or effect because, for example, the
possibility exists that they may seek to exercise or influence control,
would be ineligible to file a Schedule 13G and would be required to
file a Schedule
[[Page 2855]]
13D.\11\ Qualified Institutional Investors remain eligible to file the
short-form report on Schedule 13G within 45 calendar days after the
calendar year end. Exempt Investors also will continue to file their
initial Schedule 13G within 45 calendar days after the calendar year in
which they became subject to Section 13(g) and new Rule 13d-1(d).
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\6\ Exchange Act Release No. 37403 (July 7, 1996) (``Reproposing
Release''). The comment letters, as well as a summary of the
comments, are available from the Commission's Public Reference Room
(File No. S7-16-96).
\7\ The institutional investors include a broker or dealer
registered under Section 15(b) of the Exchange Act [15 U.S.C.
78o(b)], a bank as defined in Section 3(a)(6) of the Exchange Act
[15 U.S.C. 78c(a)(6)], an insurance company as defined in Section
3(a)(19) of the Exchange Act [15 U.S.C. 78c(a)(19)], an investment
company registered under Section 8 of the Investment Company Act of
1940 [15 U.S.C. 80a-8], an investment adviser registered under
Section 203 of the Investment Advisers Act of 1940 [15 U.S.C. 80b-1
et seq.], an employee benefit plan or pension fund that is subject
to the provisions of the Employee Retirement Income Security Act of
1974 [codified principally in 29 U.S.C. 1001-1461], and related
holding companies and groups (collectively, ``institutional
investors''). Rule 13d-1(b)(1)(ii) [17 CFR 240.13d-1(b)(1)(ii)].
\8\ The term ``Exempt Investors'' refers to persons holding more
than five percent of a class of subject securities at the end of the
calendar year, but who have not made an acquisition subject to
Section 13(d). For example, persons who acquire all their securities
prior to the issuer registering the subject securities under the
Exchange Act are not subject to Section 13(d) and persons who
acquire not more than two percent of a class of subject securities
within a 12-month period are exempted from Section 13(d) by Section
13(d)(6)(B), but in both cases are subject to Section 13(g). Section
13(d)(6)(A) exempts acquisitions of subject securities acquired in a
stock-for-stock exchange which is registered under the Securities
Act of 1933.
\9\ The term ``Passive Investors'' is used in this release to
refer to shareholders beneficially owning more than five percent of
the class of subject securities and who can certify that the subject
securities were not acquired or held for the purpose of and do not
have the effect of changing or influencing the control of the issuer
of such securities and were not acquired in connection with or as a
participant in any transaction having such purpose or effect. See
Rule 13d-1(c) and revised Item 10 of Schedule 13G. Shareholders that
are unable to certify to this effect are considered to have, for
purposes of this release, a ``disqualifying purpose or effect''.
\10\ Rule 13d-1(c).
\11\ The Commission has revised, as proposed, the certification
on the Schedule 13G for Qualified Institutional Investors to provide
that such investors certify that the securities were acquired and
are held in the ordinary course of business and were not acquired
and are not held for the purpose of and do not have the effect of
changing or influencing the control of the issuer of such securities
and were not acquired and are not held in connection with or as a
participant in any transaction having such purpose or effect
(emphasis added). This amendment to the certification is to conform
the language of the certification to amended Rule 13d-1(e).
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Even though a Passive Investor may report on Schedule 13G, it will
be permitted to file a Schedule 13D instead. The fact that an investor
can represent that it does not have a disqualifying purpose or effect
but nevertheless chooses to file on a Schedule 13D may provide
important information concerning the filing person's investment
purpose.
B. Filing Periods for Passive Investors Filing on Schedule 13G
As adopted, Passive Investors choosing to file a Schedule 13G will
file the initial schedule within 10 calendar days of crossing the five
percent threshold. Requiring the filing within 10 days, rather than the
45 days following year end as is currently applicable to Qualified
Institutional Investors and Exempt Investors, will provide more timely
notice to the market and to investors of the existence of voting blocks
that have the potential of affecting or influencing control of the
issuer.
Although the Commission is adopting the initial reporting
obligations for Passive Investors as proposed that are more stringent
than those for Qualified Institutional Investors, the Commission is
adopting a more liberal approach for amending Schedule 13G. The rule
permits Passive Investors to amend in a manner similar, but more
promptly than, Qualified Institutional Investors reporting on Schedule
13G.\12\
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\12\ Amended Rule 13d-2(b) requires Qualified Institutional
Investors to amend Schedule 13G 45 days after the end of each
calendar year if, as of the end of such calendar year, there are any
changes in the information reported in the previous filing on that
Schedule. Further, under amended Rule 13d-2(c) if their beneficial
ownership exceeds 10 percent of the class at the end of any month,
an amendment would be required to be filed within 10 days after the
end of that month, as well as within 10 days after the end of any
month in which their ownership increases or decreases by more than
five percent of such class.
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As proposed, Passive Investors would have been subject to the more
stringent amendment requirements that currently apply to Schedule 13D
filers. Seven commenters specifically addressed the proposed amendment
requirements and five commenters believed that the proposals were too
complex and overly cautious. Those commenters believed that the
application of the more stringent amendment requirements to Passive
Investors would significantly diminish the benefits of the proposals
overall to Passive Investors and would be inconsistent with the
Commission's intent to reduce the reporting obligations of Passive
Investors. One commenter noted that if the Passive Investors have no
intent to influence or change control of the issuer, then there is no
substantially greater need to track the percentage changes in holdings
of Passive Investors, and therefore they should be treated no
differently than Qualified Institutional Investors. In contrast, other
commenters argued that the proposed accelerated filing of these
Schedule 13G amendments for Passive Investors is necessary to provide
notice to investors, issuers, and to the market of voting blocks of
securities that have the potential of affecting or influencing control
of the issuer.
While the Commission appreciates that the beneficial ownership
rules are already complex, separate amendment requirements for Passive
Investors appear to be necessary to address these competing concerns
raised by the commenters. The views of the commenters on the amendment
issue suggest that neither the current 13D nor 13G approach would be
appropriate. By requiring prompt reporting of more than five percent
changes in position, the Commission believes that sufficient
information will be provided to investors, issuers, and to the market
regarding the changes in percentage ownership of Passive Investors. To
further prevent any possible abuse in the use of Schedule 13G by
investors that have a disqualifying purpose or effect, the Commission
is adopting, as proposed, the ``cooling-off'' period upon a change in
investment purpose and the same ``cooling-off'' period will apply upon
acquiring 20 percent or more of the class.\13\
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\13\ See Sections II.C. and II.D. infra.
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Accordingly, as adopted, Passive Investors must amend the Schedule
13G within 45 calendar days after the end of the calendar year to
report any change in the information previously reported. Passive
Investors also will amend the Schedule 13G during the year if they
acquire greater than 10 percent of the subject securities. This
amendment will be required to be filed ``promptly'' \14\ upon acquiring
greater than 10 percent. Between 10 percent and less than 20 percent,
Passive Investors will be required to file additional amendments
``promptly'' during the year if they increase or decrease their
beneficial ownership by more than five percent of the class.
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\14\ The determination of what constitutes ``promptly'' under
Regulation 13D-G is based upon the facts and circumstances
surrounding the materiality of the change in information triggering
the filing obligation and the filing person's previous disclosures.
Any delay beyond the date the filing reasonably can be filed may not
be prompt. See In the Matter of Cooper Laboratories, Inc., Release
No. 34-22171 (June 26, 1985).
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These new amendment requirements for Passive Investors that acquire
greater than 10 percent of the class are different than the amendment
requirements for Qualified Institutional Investors that acquire greater
than 10 percent. Qualified Institutional Investors have until 10 days
after the month in which they acquired greater than ten percent to
amend their Schedule 13G. Qualified Institutional Investors holding
more than 10 percent have until 10 days after the month in which they
increased or decreased their beneficial ownership by more than five
percent. In each case, the Qualified Institutional Investor's
beneficial ownership is computed as of the last day of the month. The
Qualified Institutional Investors are permitted greater flexibility in
filing amendments in recognition of the fact that Qualified
Institutional Investors routinely buy and sell securities in the
ordinary course of business and are less likely to abuse the process.
C. 13D Filing Requirement and Cooling-Off Period for Changes in
Investment Purpose or Effect
When Qualified Institutional Investors and Passive Investors
determine they hold the subject securities with a disqualifying purpose
or effect, they must file a Schedule 13D no later than 10 calendar days
after the change in investment purpose.\15\ The Commission is adopting,
as proposed, a ``cooling-off'' period that will begin with the change
in investment purpose and last until the expiration of the tenth
calendar day from the date of the filing of a Schedule 13D. During the
cooling-off period, the reporting person is prohibited from voting or
directing the voting of the subject securities or acquiring additional
beneficial ownership of any equity securities of
[[Page 2856]]
the issuer or any person controlling the issuer.
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\15\ Rule 13d-1(e).
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Seven commenters specifically addressed the proposals regarding the
Schedule 13D filing requirement upon a change in investment purpose or
effect and the related cooling-off period. Three of those commenters
supported the Schedule 13D filing requirement and cooling-off period as
proposed. The other four commenters supported the concept of a cooling-
off period but thought the period should be shortened. However, in
light of the changes being adopted today to liberalize the amendment
requirements for Passive Investors reporting on Schedule 13G, the
Commission believes the 10 day cooling-off period, as adopted, is
necessary and appropriate. The earlier commencement of the cooling-off
period will encourage the prompt filing of a Schedule 13D.\16\ The
cooling-off period will prevent further acquisitions or the voting of
the subject securities until the market and investors have been given
time to react to the information in the Schedule 13D filing.
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\16\ The sooner the Schedule 13D filing is made, the sooner the
cooling-off period will end, since the cooling-off period ends 10
calendar days from the date the Schedule 13D is filed.
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D. Twenty-Percent Limit on Ownership Interest Reportable on Schedule
13G and Related Cooling-Off Period
Under today's amendments, Passive Investor status is limited to
holders of less than 20 percent of the class of subject securities.
Upon acquiring 20 percent or more, the investor must report the
acquisition on Schedule 13D within 10 calendar days.\17\ Additionally,
the investor will be subject to a ``cooling-off'' period commencing
from the time the investor reaches the 20 percent threshold until ten
calendar days after the filing of the Schedule 13D.\18\ During this
period, the investor will be prohibited from voting or directing the
voting of the subject securities and from acquiring additional
beneficial ownership in any equity securities of the issuer. This
cooling-off period is the same period that applies to Passive Investors
and Qualified Institutional Investors when they change their investment
purpose. The Commission proposed a standstill \19\ period upon the
acquisition of 20 percent or more of the class. The Commission is
adopting the cooling-off period in lieu of the standstill period at the
20 percent threshold in order to further prevent abuse of the liberal
amendment requirements adopted today for Passive Investors and to
simplify Regulation 13D-G.
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\17\ Upon reaching the 20 percent limit, the investor is not
required to amend its Schedule 13G in addition to filing the
Schedule 13D.
\18\ Rule 13d-1(f).
\19\ The ``standstill'' period would have commenced upon
acquiring 20 percent or more of the class and terminated upon the
filing of the Schedule 13D. During the standstill period, the
investor would have been prohibited from voting its securities or
acquiring additional equity securities in the issuer.
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Six commenters specifically addressed the proposal regarding the 20
percent limitation and related standstill period. A majority of those
commenters supported the 20 percent limitation. One commenter believed
the ownership limit should be lowered to 10%. Three commenters
supported the standstill period as proposed. Two commenters believed
that it would be unfair to Passive Investors to impose a limit on
beneficial ownership reportable on Schedule 13G and to apply any
standstill period. Those commenters believed that if an investor can
make the passive certification, then it should be treated the same as
Qualified Institutional Investors. The Commission believes that the 20
percent limitation and the cooling-off period adopted today are
necessary and appropriate for prompt disclosure of sizeable blocks of
securities because of the inherent control implications corresponding
to such ownership positions held by persons that do not purchase
securities in the ordinary course of business.\20\
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\20\ As stated in the Reproposing Release, the Commission does
not intend these new rules to create a presumption that beneficial
ownership of 20 percent or more indicates control or a control
purpose. Further, no presumption is intended that beneficial
ownership below 20 percent cannot indicate control or a control
purpose. Indeed, the Commission believes that it would be unusual
for an investor to be able to make the necessary certification of a
passive investment purpose when beneficial ownership approaches 20
percent.
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The 20 percent limit applies only with respect to Passive Investors
reporting on Schedule 13G pursuant to new Rule 13d-1(c). Qualified
Institutional Investors and Exempt Investors are not subject to the 20
percent limitation because the Commission recognizes that institutions
that purchase securities in the ordinary course of business may be
burdened by a limitation on the amount of securities that can be
reported on the short-form Schedule 13G. Further, the Commission
believes that Schedule 13G strikes an appropriate balance between
furnishing disclosure to the market and the burdens placed on such
institutions.
E. Re-establishing Schedule 13G Eligibility
The amended rules allow persons who have lost their eligibility to
file on Schedule 13G to re-establish their Schedule 13G-eligibility and
again report on Schedule 13G.\21\ Specifically, a Qualified
Institutional Investor that has lost its Schedule 13G eligibility,
because it is no longer a qualified entity under Rule 13d-1(b)(1)(ii)
or cannot make the required certification, is allowed to switch back to
Schedule 13G pursuant to the Qualified Institutional Investor provision
\22\ once it re-establishes its status under Rule 13d-1(b)(1)(ii) or
can again make the necessary certification. Similarly, a Passive
Investor that has lost its Schedule 13G-eligibility under Rule 13d-
1(c), because it can no longer certify that it does not have a
disqualifying purpose or effect or because it reached the 20 percent
threshold, is able to switch back to Schedule 13G when it can once
again make the certification or when its beneficial ownership falls
below 20 percent. The Commission believes that investors and the market
will be better informed if reporting persons are able to switch back to
Schedule 13G after re-establishing their eligibility, since the filing
of a Schedule 13D will be a clearer indicator of investors that
currently have a disqualifying purpose or effect or investors that hold
20 percent or more of the class.
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\21\ Rule 13d-1(h).
\22\ Rule 13d-1(b).
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Once a Schedule 13D reporting person decides to switch to a
Schedule 13G, the Schedule 13G would be filed to reflect that
decision.\23\ The filing of the Schedule 13G will be deemed to amend
the Schedule 13D. Therefore, no formal amendment to the Schedule 13D
will be required.
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\23\ The Schedule 13G would be filed as an initial Schedule 13G
as opposed to an amendment even if the reporting person had reported
on Schedule 13G before losing its Schedule 13G-eligibility.
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F. Expansion of the Class of Qualified Institutional Investors
1. Foreign Institutional Investors
Under the amended rules, the use of the short-form Schedule 13G
pursuant to the Qualified Institutional Investor provisions of Rule
13d-1(b) will continue to be limited essentially to institutions such
as brokers, dealers, investment companies, and investment advisers
registered with the Commission, or regulated banks or insurance
companies. The use of Schedule 13G by similar non-domestic institutions
has been limited in the past to those institutions that have obtained
an exemptive order from the Commission \24\ or, under the current
[[Page 2857]]
practice, a no-action position from the Division of Corporation
Finance. The no-action relief was based on the requester's undertaking
to grant the Commission access to information that would otherwise be
disclosed in a Schedule 13D and the comparability of the foreign
regulatory scheme applicable to the particular category of
institutional investor.
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\24\ See Exchange Act Release No. 14692 (April 21, 1978) [43 FR
18484].
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The Commission is not expanding the list of qualified institutional
investors to include foreign institutions. The Passive Investor
provisions adopted today make Schedule 13G available to all investors
that do not have a disqualifying purpose or effect, including foreign
investors. These new provisions have more lenient filing requirements
for amendments to Schedule 13G than as originally proposed.\25\
Therefore, foreign institutional investors wanting to report on
Schedule 13G should be able to rely on the passive investor provisions
without significant difficulty. Any foreign institutional investor that
would rather report on Schedule 13G as a Qualified Institutional
Investor and does not want to rely on the Passive Investor provisions
may continue to seek no-action relief from the staff under current
practices.
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\25\ See Section II.B. above.
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2. State and Local Governmental Employee Benefit Plans
The Commission is expanding the list of Qualified Institutional
Investors under Rule 13d-1(b)(1)(ii) to allow employee benefit plans
maintained primarily for the benefit of state or local government
employees to report on Schedule 13G. The Commission believes that these
plans are now generally subject to fiduciary obligations and standards
for investment that are substantially similar to those imposed by
Employee Retirement Income Security Act of 1974 (``ERISA''). The
Commission has revised the language in Rule 13d-1(b)(1)(ii)(F) to
eliminate the phrase ``pension fund'' because such entities are
included in the definition of employee benefit plan in Section 3(3) of
ERISA.
The Commission is making a conforming change to the beneficial
owner definition under Section 16 by amending Rule 16a-1(a)(1)(vi) to
include state and local government employee benefit plans in the list
of persons that are not deemed to be the beneficial owners of
securities held for the benefit of third parties.
3. Savings Associations
Based upon the suggestions of commenters, the Commission is
expanding the list of Qualified Institutional Investors under Rule 13d-
1(b)(1)(ii) by adding new paragraph (H) to allow savings associations
to report on Schedule 13G. Adding savings associations to the list of
Qualified Institutional Investors codifies the staff no-action relief
granted to Columbia Savings and Loan (June 15, 1987).
The Commission is making a conforming change to the Section 16
rules by adding new Rule 16a-1(a)(1)(viii) to include savings
associations in the list of persons that are not deemed to be the
beneficial owners of securities held for the benefit of third parties.
4. Church Plans
Also upon the suggestion of commenters, the Commission is expanding
the list of Qualified Institutional Investors under Rule 13d-
1(b)(1)(ii) by adding new paragraph (I) to allow church employee
benefit plans to report on Schedule 13G. Adding church plans to the
list of Qualified Institutional Investors is consistent with the
treatment of church plans under the National Securities Markets
Improvement Act of 1996 \26\ which exempts such plans from most federal
securities regulation.
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\26\ Title V, Section 508.
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The Commission is making a conforming change to the Section 16
rules by adding new Rule 16a-1(a)(1)(ix) to include church plans in the
list of persons that are not deemed to be the beneficial owners of
securities held for the benefit of third parties.
5. Control Persons of Qualified Institutional Investors
The Commission is expanding the list of Qualified Institutional
Investors under Rule 13d-1(b)(1)(ii) to allow control persons of
Qualified Institutional Investors to report indirect beneficial
ownership through the controlled entity on Schedule 13G. In order to
use Schedule 13G, the control person must not own directly, or
indirectly through an ineligible entity or affiliate, more than one
percent of the subject company's stock and is not seeking to change or
influence control of the subject company.\27\
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\27\ Rule 13d-1(b)(1)(ii)(G). This amendment codifies the no-
action position set forth in Warren E. Buffet & Berkshire Hathaway,
Inc., (available December 5, 1986). Two commenters addressed this
proposal and both commenters supported the proposal.
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The Commission is making a conforming change to the Section 16
rules by amending Rule 16a-1(a)(1)(vii) to include control persons of
qualified institutions in the list of persons that are not deemed to be
beneficial owners of securities held for the benefit of third
parties.\28\
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\28\ This amendment under Section 16 codifies the interpretive
position set forth in Edward C. Johnson 3d., (available August 20,
1991).
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Four commenters have requested some form of relief or guidance on
when beneficial ownership under Rule 13d-3 should be attributed among
entities under common control. This issue arises in the case of a
consolidated group of corporations under common control or in the case
of a single entity that has separately managed businesses within the
same legal entity. The Commission recognizes that certain
organizational groups are comprised of many different business units
that operate independently of each other. They may nevertheless have to
aggregate beneficial ownership for Regulation 13D-G reporting
purposes.\29\ The need to aggregate may have the effect of requiring
diverse business units to share sensitive information, when it is
otherwise not necessary for business purposes.
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\29\ Since state takeover statutes and shareholder rights
provisions are triggered by certain ``beneficial ownership'' or
``voting power'' thresholds--and may even use the beneficial
ownership definition under Rule 13d-3--there is a concern that
reporting ownership on an aggregate basis may trigger some of those
provisions.
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Because the Rule 13d-3(a) definition of beneficial ownership
includes persons who have both direct and indirect, as well as shared,
voting and investment power, beneficial ownership by the business
units, divisions or subsidiaries that hold the securities normally
should be attributed to the parent entities that are in a control
relationship to the shareholder entity. In those instances where the
organizational structure of the parent and related entities are such
that the voting and investment powers over the subject securities are
exercised independently, attribution may not be required for the
purposes of determining whether a filing threshold has been exceeded
and the aggregate amount owned by the controlling persons.\30\
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\30\ Likewise, under these circumstances, attribution may not be
required under Rule 16a-1(a)(1).
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The determination as to whether the voting and investment powers
are exercised independently from the parent and other related entities
is based on the facts and circumstances. One circumstance in which
beneficial ownership may not be required to be attributed to the parent
entities is when these entities have in place certain informational
barriers that ensure that the voting and investment powers are
exercised independently from parent
[[Page 2858]]
and affiliated entities.\31\ This approach assumes that there will not
be arbitrary or artificial separation of business units. One factor
militating against separation would be participation in a common
compensation pool that may align voting and investment decisions.
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\31\ The Commission adopted a similar approach in modifying the
definition of ``affiliated purchaser'' under Regulation M. See
Exchange Act Release No. 38067 (December 20, 1996) [62 FR 520].
Although informational barriers may serve to prevent the attribution
of beneficial ownership to the parent entities, a group under Rule
13d-5(b) can still be formed among commonly controlled entities or
with the parent entity that otherwise own securities in the issuer
if these persons agree to act together for the purpose of acquiring,
holding, voting or disposing of the subject securities. See e.g., In
the Matter of the Gabelli Group, Inc., et al, Exchange Act Rel. No.
26005 (August 17, 1988).
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When informational barriers are relied upon to avoid attributing
beneficial ownership to the parent entities, the various companies or
groups should maintain and enforce written policies and procedures
reasonably designed to prevent the flow of information to and from the
other business units, divisions and entities that relate to the voting
and investment powers over the securities. Those companies or groups
also should obtain an annual, independent assessment of the operation
of the policies and procedures established to prevent the flow of
information among the related entities. The frequency in which an
informational barrier is crossed with respect to a particular security
(and therefore beneficial ownership would be attributed for that
security) would raise questions regarding the efficacy of the
informational barrier overall. However, an isolated instance in which
this occurs would not necessarily impact the ownership treatment of
securities of other issuers held by the reporting person.\32\
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\32\ To the extent the informational barrier is crossed,
beneficial ownership of that class of security should be reported on
an aggregate basis by the entities sharing the information.
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Finally, the parent entities should have no officers or directors
(or persons performing similar functions) or employees (other than
clerical, ministerial, or support personnel) who are involved in the
exercise of the voting and investment powers in common with the
shareholder.\33\ For example, the existence of an independent
investment committee would be evidence of an effective separation
between the parent and the affiliated entities.
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\33\ The entities may have common officers, directors, and
employees but those persons must not be involved in the exercise of
the voting and investment powers or otherwise made aware of specific
securities positions which are not publicly available. This factor
would ensure that persons involved in the exercise of the voting and
investment powers are not the same persons that would exercise such
powers for the parent entity and therefore no information concerning
the exercise of such powers would pass through the informational
barrier.
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6. Investment Advisers Prohibited From Registering Under the Investment
Advisers Act of 1940 Pursuant to Section 203A of That Act
Since the issuance of the Reproposing Release, Congress passed the
National Securities Markets Improvement Act of 1996.\34\ Among other
things, the Act amended the Investment Advisers Act of 1940 (the
``Advisers Act'') by adding Section 203A, which prohibits certain
investment advisers from registering with the Commission. For the most
part, only advisers that have ``assets under management'' of $25
million or more, that advise registered investment companies, or that
meet one of several exemptions from the prohibition on registration
will be registered with the Commission. Other advisers will be
regulated by state securities authorities. Currently, Rule 13d-
1(b)(1)(ii)(E) restricts the use of Schedule 13G to investment advisers
registered under Section 203 of the Advisers Act. Today the Commission
is amending this rule to allow those investment advisers that are
prohibited from registering under the Advisers Act pursuant to Section
203A of that Act to report on Schedule 13G as a Qualified Institutional
Investor. Although these persons will not be subject to the federal
regulatory regime for investment advisers, they will continue to buy
and sell securities in the ordinary course of business and their
businesses will be regulated by state law.
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\34\ Pub. L. No. 104-290, 110 Stat. 3416 (1996) (codified in
scattered sections of the United States Code).
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The Commission is making a conforming change to the Section 16
rules by amending Rule 16a-1(a)(1)(v) to include these investment
advisers in the list of persons that are not deemed to be the
beneficial owners of securities held for the benefit of third parties.
G. Shareholder Communications and Beneficial Ownership Reporting
The Commission requested comment as to whether the Section 13(d)
reporting obligations restrict a shareholder's ability to engage in
proxy related activities including the ability to use the proxy rule
exemptions that were adopted in 1992 to facilitate communications among
shareholders. The Commission asked whether relief, in addition to that
adopted today, from Schedule 13D filing obligations with respect to
soliciting activities is necessary and appropriate.
Only seven commenters responded to this request for comment. Two
commenters believed that the Section 13(d) reporting obligations do not
restrict the use of the proxy rule exemptions. The other five
commenters believed that the reporting obligations do restrict the use
of the proxy rule exemptions and all those commenters requested the
Commission to provide various forms of relief or guidance on the
matter. The two primary concerns raised by the five commenters are that
activities exempt from the rules:
(i) May constitute the formation of a ``group'' under Rule 13d-
5(b); or
(ii) May be construed as having the purpose or effect of changing
or influencing the control of the issuer, and therefore would
disqualify a person from eligibility to use Schedule 13G.
Although the Commission agrees that it can provide some further
guidance in this area as discussed below, the Commission does not
believe that the current beneficial ownership and group concepts unduly
interfere with the type of shareholder communications contemplated by
the proxy rule exemptions. The Commission believes that no further
relief from the Section 13(d) filing obligations is required.
Specifically, the Commission believes that a shareholder who is a
passive recipient of soliciting activities, without more, would not be
deemed a member of a group under Rule 13d-5(b)(1) with persons
conducting the solicitation. This would be true even where the
soliciting activities result in the shareholder granting a revocable
proxy. Similarly, when a shareholder solicits and receives revocable
proxy authority (subject to the discretionary limits of Rule 14a-4),
without more, that shareholder does not obtain beneficial ownership
under Section 13(d) in the shares underlying the proxy.
The eligibility to use Schedule 13G by a shareholder who submits,
supports, or engages in exempt soliciting activity in favor of a
shareholder proposal submitted pursuant to Rule 14a-8, will depend on
whether that activity was engaged in with the purpose or effect of
changing or influencing control of the company. That determination
normally would be based upon the specific facts and circumstances
accompanying the solicitation and the vote. For that reason, the
Commission is not able to provide extensive guidance on this issue.
In some cases the subject matter of the proposal or solicitation
may be dispositive. For example, most solicitations regarding social or
public
[[Page 2859]]
interest issues (e.g., environmental policies, apartheid, etc.) would
not have the purpose or effect of changing or influencing control of
the company. Corporate governance proposals, however, may or may not be
control related. Proposals and soliciting activity relating to matters
such as executive compensation, director pensions, and confidential
voting normally would not prevent the use of a Schedule 13G. Even
corporate governance issues that are presumably control related (e.g.,
removal of a poison pill, opting out of state takeover statutes, or
removal of staggered boards) might not have a disqualifying purpose or
effect, depending on the circumstances. In contrast, most solicitations
in support of a proposal specifically calling for a change of control
of the company (e.g., a proposal to seek a buyer for the company or a
contested election of directors or a sale of a significant amount of
assets or a restructuring of a corporation) would clearly have that
purpose and effect. Some relevant factors to consider in assessing the
purpose and effect of the type of proposal and related soliciting
activity include:
(1) Does the filing person purchase securities in the ordinary
course of business and by its nature does not seek to acquire control
of companies?
(2) Was the proposal submitted or solicitation undertaken based
upon the filing person's investment policies regarding good corporate
governance for all the filer's portfolio companies, rather than to
foster a control transaction for the particular company?
(3) Was the proposal submitted, or solicitation commenced, under
circumstances where, given the subject matter of the particular
proposal, it is likely to have the effect of facilitating a change of
control of that particular company by another person or group (for
example, the submission of a proposal to eliminate a staggered board
that may facilitate a non-management solicitation, even by an unrelated
third party)?
(4) Did the filing person commence an independent solicitation,
exempt or otherwise, in favor of a proposal (the mere submission of a
proposal under Rule 14a-8, without any independent soliciting activity,
would be less likely to have a disqualifying purpose or effect)?
(5) Was the activity undertaken in opposition to a proposal put
forth by management for shareholder approval, rather than in support of
a proposal submitted by the filing person or some other shareholder?
Some proxy-related activities, by their nature, will have only
limited effect on control of the company, and therefore should normally
not cause a shareholder to lose its 13G eligibility. For example,
voting in favor of an insurgent or making a voting announcement under
Rule 14a-1(l)(2)(iv) in favor of a corporate governance proposal,
without more, would not cause the loss of Schedule 13G eligibility,
regardless of the subject matter. This is true even if the voting
announcement supports a non-management shareholder proposal.
Although in many instances these determinations will be difficult
and fact intensive, the Commission believes that the amendment adopted
today that allows a person to re-establish its Schedule 13G eligibility
35 should serve to lessen the concern that a Schedule 13G
filing person may lose its eligibility to report on Schedule 13G by
engaging in or being a part of soliciting activities. Under new Rule
13d-1(h), if a reporting person loses its Schedule 13G eligibility due
to its soliciting activities and is required to then report on Schedule
13D, the reporting person can switch back to Schedule 13G when the
reporting person is no longer involved in the soliciting activities and
can make the necessary certifications.36
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\35\ Rule 13d-1(h).
\36\ On September 18, 1997, the Commission proposed amending
Rule 14a-8 to provide an override mechanism from the exclusion of
the shareholder proposal under Rule 14a-8 (c)(5) and (c)(7). See
Release No. 34-39093. The 13G-eligibility of a shareholder who would
use the proposed override mechanism to submit a shareholder proposal
would be determined in the same manner as discussed in this section.
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H. Related and Clarifying Amendments
The Commission also has eliminated the redundancies that existed in
Regulation 13D-G regarding the filing and dissemination requirements by
setting forth such requirements in one rule, Rule 13d-7(b). The
Commission believes that Schedule 13G will become the primary reporting
document for beneficial ownership, since a majority of investors will
now file Schedule 13G in lieu of Schedule 13D. For this reason, the
Commission proposed that the original and amendments to Schedules 13G
be provided to each exchange where the security is traded as is
currently required for Schedules 13D. However, since these filings will
be made by persons without a disqualifying purpose or effect and are
now required to be filed electronically on the Commission's Electronic
Data Gathering and Retrieval System and therefore available in the
electronic media, including on the Commission's World Wide Web site
(http://www.sec.gov), the Commission is not adopting this proposal.
Likewise, due to the electronic availability of Schedules 13D, the
Commission is not adopting the proposal that a copy of the Schedule 13D
and amendments thereto be provided to the National Association of
Securities Dealers for securities quoted on the National Association of
Securities Dealers Automated Quotation System
(``NASDAQ'').37
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\37\ Schedules 13D will, however, continue to be sent to each
exchange on which the security is traded, which is a statutory
requirement.
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Additionally, because of the electronic availability of filings and
the fact that Schedules 13G do not represent control transactions, the
Commission is further simplifying the dissemination requirements for
all Schedule 13G filers by eliminating the requirement that Schedules
13G be sent to the exchanges. Accordingly, copies of all initial
Schedules 13G and amendments filed with the Commission by Passive
Investors, Qualified Institutional Investors, and Exempt Investors will
only be required to be sent to the issuer and will not be required to
be sent to any exchange or automated quotation system on which the
securities are traded.
The amendments clarify the number of copies required to be filed to
the extent paper filings may be made. The Commission notes that paper
filings would be relatively rare, since all Schedules 13D and 13G must
be filed in electronic format, unless they relate to the securities of
a foreign private issuer or the filer has received a hardship
exemption. Additionally, the rules have been revised to eliminate
language regarding filing fees for Schedules 13D and 13G since such
fees have been previously eliminated.38 Finally, technical
amendments to Schedules 13D and 13G have been made to conform the
schedules to the proposed rules and to amend the filing deadlines and
the number of copies in the instruction.
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\38\ See Exchange Act Release No. 7331 (September 24, 1996).
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BILLING CODE 8010-01-P
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[GRAPHIC] [TIFF OMITTED] TR16JA98.000
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[GRAPHIC] [TIFF OMITTED] TR16JA98.001
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[GRAPHIC] [TIFF OMITTED] TR16JA98.002
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[GRAPHIC] [TIFF OMITTED] TR16JA98.003
BILLING CODE 8010-01-C
[[Page 2864]]
IV. Final Regulatory Flexibility Analysis
A Final Regulatory Flexibility Analysis (``FRFA'') has been
prepared in accordance with 5 U.S.C. 604 concerning the amendments to
the beneficial ownership rules of Regulation 13D-G and related
Schedules 13D and 13G and the amendments to Rule 16a-1(a)(1). The
analysis notes that the principal effect of the revisions to Regulation
13D-G will be to reduce the disclosure obligations and associated costs
to a majority of persons, including small entities, required to report
beneficial ownership under Sections 13(d) and 13(g) of the Exchange Act
and would eliminate the reporting obligations under Section 16 of the
Exchange Act of certain governmental employee benefit plans, church
plans, savings associations, investment advisers registered with the
state and certain control persons of Qualified Institutional Investors.
The analysis also indicates that there are no current federal rules
that duplicate, overlap or conflict with the rules and forms to be
amended.
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\38\ See Exchange Act Release No. 7331 (September 24, 1996).
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As stated in the analysis, alternatives to the proposed amendments
were considered, including, among other things, changing or simplifying
the compliance or reporting requirements for small entities or
exempting small entities from all requirements to file the schedules
under Regulation 13D-G. As discussed in the analysis, there is no less
restrictive alternative to the amendments that would serve the purposes
of the beneficial ownership provisions of the Exchange Act. As
originally proposed, Passive Investors would have been subject to more
stringent amendment requirements that would have required amendments to
be filed upon every one percent change in their beneficial ownership.
However, in order to further reduce the reporting burdens of Passive
Investors, the Commission is not adopting the proposed amendment
requirements. Under the adopted rules, Passive Investors will only file
amendments to their Schedules 13G upon greater than five percent
changes in their beneficial ownership, as well as the annual amendment.
Further, the Commission originally proposed that a copy of the Schedule
13G be sent to each exchange on which the security is traded and to
NASDAQ if the security trades there. However, in order to simplify the
dissemination requirements, copies of the Schedule 13G will not be
required to be sent to any exchange or NASDAQ and will only continue to
be sent to the issuer, as well as being filed with the Commission.
The Commission received no comments on the Initial Regulatory
Flexibility Analysis (``IRFA'') prepared in connection with the
proposing release. Five commenters indicated that the amendments would
improve the effectiveness of the beneficial ownership reporting system
and would reduce the reporting burdens of Passive Investors.
A copy of the FRFA may be obtained by contacting Dennis O. Garris
in the Office of Mergers and Acquisitions, Division of Corporation
Finance, Securities and Exchange Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549.
V. Paperwork Reduction Act
The beneficial ownership reporting requirements are intended to
provide investors and the subject issuer with information about
accumulations of securities that may have the ability to change or
influence control of the issuer. Before the amendments adopted today,
Regulation 13D-G required that most persons file a detailed disclosure
statement on the long-form Schedule 13D upon acquiring more than five
percent of the subject securities. Certain qualified institutions
(Qualified Institutional Investors) and persons who have not made an
acquisition subject to Section 13(d) (Exempt Investors) may file the
short-form disclosure statement Schedule 13G which requires less
detailed disclosure than Schedule 13D.
The amendments make Schedule 13G available, in lieu of Schedule
13D, to all Passive Investors beneficially owning less than 20 percent.
The Commission anticipates that the amendments will reduce the existing
information collection requirements associated with Regulation 13D-G
and Schedules 13D and 13G. The amendments will allow more individuals
and non-institutional investors to file the short-form Schedule 13G. An
important change from the proposed rules is that Passive Investors
filing on Schedule 13G will be subject to the more liberal filing
requirements with respect to amending the Schedule 13G. This change
further reduces the reporting obligations of Passive Investors. Under
the amended rules, Passive Investors must amend the Schedule 13G within
45 calendar days after the end of the calendar year to report any
change in the information previously reported. Passive Investors also
will promptly amend the Schedule 13G during the year if they acquire
greater than 10 percent of the subject securities and thereafter upon
an increase or decrease of greater than five percent. Further, in order
to reduce the dissemination requirements for all persons filing
Schedules 13G, the Commission is not adopting the proposed requirement
that Schedules 13G be sent to each exchange on which the security is
traded and to NASDAQ if the security trades on its system. As adopted,
Schedules 13G will only be required to be sent to the issuer as well as
being filed with the Commission.
In a recent study performed by the Office of Economic
Analysis,39 63 percent of the Schedules 13D surveyed
disclosed a passive investment purpose. Of the total surveyed, 53
percent disclosed a passive investment purpose and held less than 20
percent of the class of equity securities and therefore would be
eligible to file on Schedule 13G under the new rules as Passive
Investors.40 It is estimated that 1646 Schedules 13D will be
filed each year under the new rules.41 Each Schedule 13D
would impose an estimated burden of 14.75 hours for a total annual
burden of 24,278.50 hours.42 It is estimated that 9,044
Schedules 13G will be filed each year under the new rules.43
Each Schedule 13G would impose an estimated burden of 10 hours for a
total annual burden of 90,440 hours.
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\39\ The sample included 100 Schedules 13D filed from May 21,
1997 to June 2, 1997.
\40\ In an earlier survey discussed in the Reproposing Release,
110 Schedules 13D filed in November and December 1994 were surveyed
and 76 percent disclosed a passive investment purpose. Of the total
surveyed, 63 percent disclosed a passive investment purpose and held
less than 20 percent of the class of securities and would therefore
be eligible to use Schedule 13G as Passive Investors.
\41\ This estimated number of respondents is based upon the
number of Schedules 13D filed in fiscal year 1996 and assumes no
increase each year. This represents an estimated 53 percent
reduction from the 3,503 Schedules 13D filed in fiscal year 1996.
The estimated 53 percent reduction in Schedule 13D filings is based
upon the sample data provided by the Office of Economic Analysis.
\42\ Total annual burden hours are determined by multiplying the
estimated average burden hours for completing the particular
schedule by the estimated number of respondents that file that
schedule.
\43\ This number of respondents is based upon the number of
Schedules 13G filed in fiscal year 1996 (7,187) plus the additional
1,857 respondents that are expected to file on Schedule 13G under
the proposed rules and assumes no increase each year.
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The Commission did not receive any Paper Work Reduction Act
comments. Providing the information required by Schedules 13D and 13G
is mandatory under Sections 13(d) and 13(g) and Regulation 13D-G of the
Exchange Act. The information will not be kept confidential. Unless a
currently valid OMB control number is displayed on the Schedules 13D
and 13G, the Commission may not sponsor or
[[Page 2865]]
conduct or require response to an information collection. The OMB
control number is 3235-0145. The collection is in accordance with the
clearance requirements of 44 U.S.C. Sec. 3507.
VI. Cost-Benefit Analysis
No specific data was provided in response to the Commission's
request regarding the costs and benefits associated with amending the
filing requirements under Regulation 13D-G.44 Making
Schedule 13G available to all Passive Investors holding less than 20
percent of subject securities should significantly reduce the reporting
costs incurred by those investors. Regulation 13D-G applies to any
person that acquires more than five percent of a class of equity
securities. The amendments will decrease the disclosure obligations of
a significant number of persons currently required to file the long-
form Schedule 13D. Based upon data provided by the Commission's Office
of Economic Analysis, 53 percent of Schedules 13D studied by that
office disclosed a passive investment purpose and held less than 20
percent of the class of securities and, therefore, would be eligible to
file on Schedule 13G as Passive Investors under the amendments adopted
today.45
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\44\ However, eight commenters expressed general views as to the
costs and benefits associated with the amendments, without
attempting to quantify either the costs or benefits. Five commenters
stated that the proposed amendments would reduce passive filers'
reporting burdens and associated costs. Seven commenters expressed
concern that the proposed 20 percent limitation upon the
availability of Schedule 13G to institutional investors that are
passive would impose increased compliance burdens and costs without
providing any useful information to the public. Finally, three
commenters believed that requiring Schedule 13G filers to provide
each exchange upon which the security is traded a copy of the
Schedule would be overly burdensome because such information is not
readily available. The proposal to provide copies of Schedule 13G to
each exchange is not being adopted.
\45\ The sample included 100 Schedules 13D filed from May 21,
1997 to June 2, 1997.
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An important change from the proposed rules is that Passive
Investors filing on Schedule 13G will be subject to the more liberal
filing requirements with respect to amending the Schedule 13G. This
change further reduces the reporting obligations of Passive Investors.
Commenters believed that the amendment requirements, as proposed, were
too burdensome and that the potential benefit of the proposals to
Passive Investors would have been substantially outweighed by the costs
of monitoring their holdings and reporting the changes. Under the
amended rules, Passive Investors must amend the Schedule 13G within 45
calendar days after the end of the calendar year to report any change
in the information previously reported. Passive Investors also will
promptly amend the Schedule 13G during the year if they acquire greater
than 10 percent of the subject securities and thereafter upon an
increase or decrease of greater than five percent. Further, in order to
reduce the dissemination requirements for all persons filing Schedules
13G, the Commission is not adopting the proposed requirement that
Schedules 13G be sent to each exchange on which the security is traded
and to NASDAQ if the security trades on its system. As adopted,
Schedules 13G will only be required to be sent to the issuer as well as
being filed with the Commission.
The Commission does not believe that the amendments adopted today
will have any burden on competition or capital formation since the
purpose of the Regulation 13D-G filing requirements is only to report
beneficial ownership in public companies. The amendments adopted today
will increase market efficiency because with the reduced number of
Schedule 13D filings the market will be able to focus more quickly on
acquisitions involving the potential to change or influence control.
VII. Statutory Basis and Text of Amendments
The amendments to Rules 13d-1, 13d-2, 13d-3 and 13d-7 and Schedules
13D and 13G and Rule 16a-1 are being adopted pursuant to the authority
set forth in Sections 3(b), 13, 16 and 23 of the Securities Exchange
Act of 1934.
Lists of Subjects in 17 CFR Part 240
Reporting and recordkeeping requirements, Securities.
Text of Amendments
In accordance with the foregoing, Title 17, Chapter II of the Code
of Federal Regulations is amended as follows:
PART 240--GENERAL RULES AND REGULATIONS, SECURITIES EXCHANGE ACT OF
1934
1. The authority citation for Part 240 continues to read, in part,
as follows:
Authority: 15 U.S.C. 77c, 77d, 77g, 77j, 77s, 77z-2, 77eee,
77ggg, 77nnn, 77sss, 77ttt, 78c, 78d, 78f, 78i, 78j, 78k, 78k-1,
78l, 78m, 78n, 78o, 78p, 78q, 78s, 78u-5, 78w, 78x, 78ll(d), 79q,
79t, 80a-20, 80a-23, 80a-29, 80a-37, 80b-3, 80b-4 and 80b-11, unless
otherwise noted.
* * * * *
2. By amending Sec. 240.13d-1 to revise paragraph (a), the
introductory text of paragraph (b)(1), paragraphs (b)(1)(ii) and
(b)(2), to remove paragraphs (b)(3) and (b)(4) and to redesignate
paragraphs (c), (d), (e) and (f) as paragraphs (d), (i), (j) and (k),
revise newly designated paragraph (d) and to add paragraphs (c), (e),
(f), (g) and (h) to read as follows:
Sec. 240.13d-1 Filing of schedules 13D and 13G.
(a) Any person who, after acquiring directly or indirectly the
beneficial ownership of any equity security of a class which is
specified in paragraph (i) of this section, is directly or indirectly
the beneficial owner of more than five percent of the class shall,
within 10 days after the acquisition, file with the Commission, a
statement containing the information required by Schedule 13D
(Sec. 240.13d-101).
(b)(1) A person who would otherwise be obligated under paragraph
(a) of this section to file a statement on Schedule 13D (Sec. 240.13d-
101) may, in lieu thereof, file with the Commission, a short-form
statement on Schedule 13G (Sec. 240.13d-102), Provided, That:
(i) * * *
(ii) Such person is:
(A) A broker or dealer registered under section 15 of the Act (15
U.S.C. 78o);
(B) A bank as defined in section 3(a)(6) of the Act (15 U.S.C.
78c);
(C) An insurance company as defined in section 3(a)(19) of the Act
(15 U.S.C. 78c);
(D) An investment company registered under section 8 of the
Investment Company Act of 1940 (15 U.S.C. 80a-8);
(E) Any person registered as an investment adviser under Section
203 of the Investment Advisers Act of 1940 (15 U.S.C. 80b-3) or under
the laws of any state;
(F) An employee benefit plan as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C.
1001 et seq. (``ERISA'') that is subject to the provisions of ERISA, or
any such plan that is not subject to ERISA that is maintained primarily
for the benefit of the employees of a state or local government or
instrumentality, or an endowment fund;
(G) A parent holding company or control person, provided the
aggregate amount held directly by the parent or control person, and
directly and indirectly by their subsidiaries or affiliates that are
not persons specified in Sec. 240.13d-1(b)(1)(ii)(A) through (I), does
not exceed one percent of the securities of the subject class;
(H) A savings association as defined in Section 3(b) of the Federal
Deposit Insurance Act (12 U.S.C. 1813);
[[Page 2866]]
(I) A church plan that is excluded from the definition of an
investment company under section 3(c)(14) of the Investment Company Act
of 1940 (15 U.S.C. 80a-3); and
(J) A group, provided that all the members are persons specified in
Sec. 240.13d-1(b)(1)(ii)(A) through (I); and
(iii) * * *
(2) The Schedule 13G filed pursuant to paragraph (b)(1) of this
section shall be filed within 45 days after the end of the calendar
year in which the person became obligated under paragraph (b)(1) of
this section to report the person's beneficial ownership as of the last
day of the calendar year, Provided, That it shall not be necessary to
file a Schedule 13G unless the percentage of the class of equity
security specified in paragraph (i) of this section beneficially owned
as of the end of the calendar year is more than five percent; However,
if the person's direct or indirect beneficial ownership exceeds 10
percent of the class of equity securities prior to the end of the
calendar year, the initial Schedule 13G shall be filed within 10 days
after the end of the first month in which the person's direct or
indirect beneficial ownership exceeds 10 percent of the class of equity
securities, computed as of the last day of the month.
(c) A person who would otherwise be obligated under paragraph (a)
of this section to file a statement on Schedule 13D (Sec. 240.13d-101)
may, in lieu thereof, file with the Commission, within 10 days after an
acquisition described in paragraph (a) of this section, a short-form
statement on Schedule 13G (Sec. 240.13d-102). Provided, That the
person:
(1) Has not acquired the securities with any purpose, or with the
effect of, changing or influencing the control of the issuer, or in
connection with or as a participant in any transaction having that
purpose or effect, including any transaction subject to Sec. 240.13d-
3(b);
(2) Is not a person reporting pursuant to paragraph (b)(1) of this
section; and
(3) Is not directly or indirectly the beneficial owner of 20
percent or more of the class.
(d) Any person who is or becomes directly or indirectly the
beneficial owner of more than five percent of any equity security of a
class specified in paragraph (i) of this section and who is not
required to file a statement under paragraph (a) of this section by
virtue of the exemption provided by Section 13(d)(6)(A) or (B) of the
Act (15 U.S.C. 78m(d)(6)(A) or 78m(d)(6)(B)), or because the beneficial
ownership was acquired prior to December 22, 1970, or because the
person otherwise (except for the exemption provided by Section
13(d)(6)(C) of the Act (15 U.S.C. 78m(d)(6)(C))) is not required to
file a statement, shall file with the Commission, within 45 days after
the end of the calendar year in which the person became obligated to
report under this paragraph (d), a statement containing the information
required by Schedule 13G (Sec. 240.13d-102).
(e)(1) Notwithstanding paragraphs (b) and (c) of this section and
Sec. 240.13d-2(b), a person that has reported that it is the beneficial
owner of more than five percent of a class of equity securities in a
statement on Schedule 13G (Sec. 240.13d-102) pursuant to paragraph (b)
or (c) of this section, or is required to report the acquisition but
has not yet filed the schedule, shall immediately become subject to
Secs. 240.13d-1(a) and 240.13d-2(a) and shall file a statement on
Schedule 13D (Sec. 240.13d-101) within 10 days if, and shall remain
subject to those requirements for so long as, the person:
(i) Has acquired or holds the securities with a purpose or effect
of changing or influencing control of the issuer, or in connection with
or as a participant in any transaction having that purpose or effect,
including any transaction subject to Sec. 240.13d-3(b); and
(ii) Is at that time the beneficial owner of more than five percent
of a class of equity securities described in Sec. 240.13d-1(i).
(2) From the time the person has acquired or holds the securities
with a purpose or effect of changing or influencing control of the
issuer, or in connection with or as a participant in any transaction
having that purpose or effect until the expiration of the tenth day
from the date of the filing of the Schedule 13D (Sec. 240.13d-101)
pursuant to this section, that person shall not:
(i) Vote or direct the voting of the securities described therein;
or
(ii) Acquire an additional beneficial ownership interest in any
equity securities of the issuer of the securities, nor of any person
controlling the issuer.
(f)(1) Notwithstanding paragraph (c) of this section and
Sec. 240.13d-2(b), persons reporting on Schedule 13G (Sec. 240.13d-102)
pursuant to paragraph (c) of this section shall immediately become
subject to Secs. 240.13d-1(a) and 240.13d-2(a) and shall remain subject
to those requirements for so long as, and shall file a statement on
Schedule 13D (Sec. 240.13d-101) within 10 days of the date on which,
the person's beneficial ownership equals or exceeds 20 percent of the
class of equity securities.
(2) From the time of the acquisition of 20 percent or more of the
class of equity securities until the expiration of the tenth day from
the date of the filing of the Schedule 13D (Sec. 240.13d-101) pursuant
to this section, the person shall not:
(i) Vote or direct the voting of the securities described therein,
or
(ii) Acquire an additional beneficial ownership interest in any
equity securities of the issuer of the securities, nor of any person
controlling the issuer.
(g) Any person who has reported an acquisition of securities in a
statement on Schedule 13G (Sec. 240.13d-102) pursuant to paragraph (b)
of this section, or has become obligated to report on the Schedule 13G
(Sec. 240.13d-102) but has not yet filed the Schedule, and thereafter
ceases to be a person specified in paragraph (b)(1)(ii) of this section
or determines that it no longer has acquired or holds the securities in
the ordinary course of business shall immediately become subject to
Sec. 240.13d-1(a) or Sec. 240.13d-1(c) (if the person satisfies the
requirements specified in Sec. 240.13d-1(c)), and Secs. 240.13d-2 (a),
(b) or (d), and shall file, within 10 days thereafter, a statement on
Schedule 13D (Sec. 240.13d-101) or amendment to Schedule 13G, as
applicable, if the person is a beneficial owner at that time of more
than five percent of the class of equity securities.
(h) Any person who has filed a Schedule 13D (Sec. 240.13d-101)
pursuant to paragraph (e), (f) or (g) of this section may again report
its beneficial ownership on Schedule 13G (Sec. 240.13d-102) pursuant to
paragraphs (b) or (c) of this section provided the person qualifies
thereunder, as applicable, by filing a Schedule 13G (Sec. 240.13d-102)
once the person determines that the provisions of paragraph (e), (f) or
(g) of this section no longer apply.
* * * * *
3. By amending Sec. 240.13d-2 by revising paragraphs (a), (b), and
the note to Sec. 240.13d-2; redesignating paragraph (c) as paragraph
(e), and adding paragraphs (c) and (d) to read as follows:
Sec. 240.13d-2 Filing of amendments to Schedules 13D or 13G.
(a) If any material change occurs in the facts set forth in the
Schedule 13D (Sec. 240.13d-101) required by Sec. 240.13d-1(a),
including, but not limited to, any material increase or decrease in the
percentage of the class beneficially owned, the person or persons who
were required to file the statement shall promptly file or cause to be
filed with the Commission an amendment disclosing that change. An
acquisition or disposition of beneficial ownership of securities in an
amount equal to one percent or more of the class of securities shall be
deemed ``material'' for purposes
[[Page 2867]]
of this section; acquisitions or dispositions of less than those
amounts may be material, depending upon the facts and circumstances.
(b) Notwithstanding paragraph (a) of this section, and provided
that the person filing a Schedule 13G (Sec. 240.13d-102) pursuant to
Sec. 240.13d-1(b) or Sec. 240.13d-1(c) continues to meet the
requirements set forth therein, any person who has filed a Schedule 13G
(Sec. 240.13d-102) pursuant to Sec. 240.13d-1(b), Sec. 240.13d-1(c) or
Sec. 240.13d-1(d) shall amend the statement within forty-five days
after the end of each calendar year if, as of the end of the calendar
year, there are any changes in the information reported in the previous
filing on that Schedule: Provided, however, That an amendment need not
be filed with respect to a change in the percent of class outstanding
previously reported if the change results solely from a change in the
aggregate number of securities outstanding. Once an amendment has been
filed reflecting beneficial ownership of five percent or less of the
class of securities, no additional filings are required unless the
person thereafter becomes the beneficial owner of more than five
percent of the class and is required to file pursuant to Sec. 240.13d-
1.
(c) Any person relying on Sec. 240.13d-1(b) that has filed its
initial Schedule 13G (Sec. 240.13d-102) pursuant to that paragraph
shall, in addition to filing any amendments pursuant to Sec. 240.13d-
2(b), file an amendment on Schedule 13G (Sec. 240.13d-102) within 10
days after the end of the first month in which the person's direct or
indirect beneficial ownership, computed as of the last day of the
month, exceeds 10 percent of the class of equity securities.
Thereafter, that person shall, in addition to filing any amendments
pursuant to Sec. 240.13d-2(b), file an amendment on Schedule 13G
(Sec. 240.13d-102) within 10 days after the end of the first month in
which the person's direct or indirect beneficial ownership, computed as
of the last day of the month, increases or decreases by more than five
percent of the class of equity securities. Once an amendment has been
filed reflecting beneficial ownership of five percent or less of the
class of securities, no additional filings are required by this
paragraph (c).
(d) Any person relying on Sec. 240.13d-1(c) and has filed its
initial Schedule 13G (Sec. 240.13d-102) pursuant to that paragraph
shall, in addition to filing any amendments pursuant to Sec. 240.13d-
2(b), file an amendment on Schedule 13G (Sec. 240.13d-102) promptly
upon acquiring, directly or indirectly, greater than 10 percent of a
class of equity securities specified in Sec. 240.13d-1(d), and
thereafter promptly upon increasing or decreasing its beneficial
ownership by more than five percent of the class of equity securities.
Once an amendment has been filed reflecting beneficial ownership of
five percent or less of the class of securities, no additional filings
are required by this paragraph (d).
* * * * *
Note to Sec. 240.13d-2: For persons filing a short-form statement
pursuant to Rule 13d-1 (b) or (c), see also Rules 13d-1 (e), (f), and
(g).
4. By amending Sec. 240.13d-3 by revising paragraph (d)(1)(ii) to
read as follows:
Sec. 240.13d-3 Determination of beneficial ownership.
* * * * *
(d) * * *
(1) * * *
(ii) Paragraph (d)(1)(i) of this section remains applicable for the
purpose of determining the obligation to file with respect to the
underlying security even though the option, warrant, right or
convertible security is of a class of equity security, as defined in
Sec. 240.13d-1(i), and may therefore give rise to a separate obligation
to file.
* * * * *
5. By adding Sec. 240.13d-7 to read as follows:
Sec. 240.13d-7 Dissemination.
One copy of the Schedule filed pursuant to Secs. 240.13d-1 and
240.13d-2 shall be sent to the issuer of the security at its principal
executive office, by registered or certified mail. A copy of Schedules
filed pursuant to Secs. 240.13d-1(a) and 240.13d-2(a) shall also be
sent to each national securities exchange where the security is traded.
6. By amending Sec. 240.13d-101 by revising the language preceding
the first box on the cover page, revising the note on the cover page,
revising Instruction (2) for the Cover Page, and in Item 7 revise the
cite ``Rule 13d-1(f) ``(Sec. 240.13d-1(f))'' to read ``Sec. 240.13d-
1(k)'' as follows:
Sec. 240.13d-101 Schedule 13D--Information to be included in
statements filed pursuant to Sec. 240.13d-1(a) and amendments thereto
filed pursuant to Sec. 240.13d-2(a).
* * * * *
If the filing person has previously filed a statement on Schedule
13G to report the acquisition that is the subject of this Schedule 13D,
and is filing this schedule because of Secs. 240.13d-1(e), 240.13d-1(f)
or 240.13d-1(g), check the following box.
* * * * *
Note: Schedules filed in paper format shall include a signed
original and five copies of the schedule, including all exhibits.
See Sec. 240.13d-7(b) for other parties to whom copies are to be
sent.
* * * * *
Instructions for Cover Page
* * * * *
(2) If any of the shares beneficially owned by a reporting person
are held as a member of a group and the membership is expressly
affirmed, please check row 2(a). If the reporting person disclaims
membership in a group or describes a relationship with other person but
does not affirm the existence of a group, please check row 2(b) [unless
it is a joint filing pursuant to Rule 13d-1(k)(1) in which case it may
not be necessary to check row 2(b)].
* * * * *
7. By amending Sec. 240.13d-102 by revising the section heading,
before the first paragraph on the cover page add a line for the date of
the reportable event and boxes to check for the appropriate filing
provision, revising Instruction (2) for the Cover Page, revising
Instruction A following the Notes, revising Items 3, 4, 8, and 10, and
revising the Note at the end of the schedule, to read as follows:
Sec. 240.13d-102 Schedule 13G--Information to be included in
statements filed pursuant to Sec. 240.13d-1(b), (c) and (d) and
amendments thereto filed pursuant to Sec. 240.13d-2.
* * * * *
----------------------------------------------------------------------
(Date of Event Which Requires Filing of this Statement)
Check the appropriate box to designate the rule pursuant to which
this Schedule is filed:
[ ] Rule 13d-1(b)
[ ] Rule 13d-(c)
[ ] Rule 13d-1(d)
* * * * *
Instructions for Cover Page
* * * * *
(2) If any of the shares beneficially owned by a reporting person
are held as a member of a group and that membership is expressly
affirmed, please check row 2(a). If the reporting person disclaims
membership in a group or describes a relationship with other person but
does not affirm the existence of a group, please check row 2(b) [unless
it is a joint filing pursuant to Rule 13d-1(k)(1) in which case it may
not be necessary to check row 2(b)].
* * * * *
Notes
* * * * *
Instructions. A. Statements filed pursuant to Rule 13d-1(b)
containing the information required by this
[[Page 2868]]
schedule shall be filed not later than February 14 following the
calendar year covered by the statement or within the time specified in
Rules 13d-1(b)(2) and 13d-2(c). Statements filed pursuant to Rule 13d-
1(c) shall be filed within the time specified in Rules 13d-1(c), 13d-
2(b) and 13d-2(d). Statements filed pursuant to Rule 13d-1(c) shall be
filed not later than February 14 following the calendar year covered by
the statement pursuant to Rules 13d-1(d) and 13d-2(b).
* * * * *
Item 3. If this statement is filed pursuant to Secs. 240.13d-1(b)
or 240.13d-2(b) or (c), check whether the person filing is a:
(a) [ ] Broker or dealer registered under section 15 of the Act (15
U.S.C. 78o).
(b) [ ] Bank as defined in section 3(a)(6) of the Act (15 U.S.C.
78c).
(c) [ ] Insurance company as defined in section 3(a)(19) of the Act
(15 U.S.C. 78c).
(d) [ ] Investment company registered under section 8 of the
Investment Company Act of 1940 (15 U.S.C 80a-8).
(e) [ ] An investment adviser in accordance with Sec. 240.13d-
1(b)(1)(ii)(E);
(f) [ ] An employee benefit plan or endowment fund in accordance
with Sec. 240.13d-1(b)(1)(ii)(F);
(g) [ ] A parent holding company or control person in accordance
with Sec. 240.13d-1(b)(1)(ii)(G);
(h) [ ] A savings associations as defined in Section 3(b) of the
Federal Deposit Insurance Act (12 U.S.C. 1813);
(i) [ ] A church plan that is excluded from the definition of an
investment company under section 3(c)(14) of the Investment Company Act
of 1940 (15 U.S.C. 80a-3);
(j) [ ] Group, in accordance with Sec. 240.13d-1(b)(1)(ii)(J).
If this statement is filed pursuant to Sec. 240.13d-1(c), check
this box. [ ]
Item 4. Ownership
Provide the following information regarding the aggregate number
and percentage of the class of securities of the issuer identified in
Item 1.
(a) Amount beneficially owned: __________.
(b) Percent of class: __________.
(c) Number of shares as to which the person has:
(i) Sole power to vote or to direct the vote __________.
(ii) Shared power to vote or to direct the vote __________.
(iii) Sole power to dispose or to direct the disposition of
__________.
(iv) Shared power to dispose or to direct the disposition of
__________.
Instruction. For computations regarding securities which represent
a right to acquire an underlying security see Sec. 240.13d-3(d)(1).
* * * * *
Item 8. Identification and Classification of Members of the Group
If a group has filed this schedule pursuant to Sec. 240.13d-
1(b)(1)(ii)(J), so indicate under Item 3(h) and attach an exhibit
stating the identity and Item 3 classification of each member of the
group. If a group has filed this schedule pursuant to Sec. 240.13d-
1(d), attach an exhibit stating the identity of each member of the
group.
* * * * *
Item 10. Certifications
(a) The following certification shall be included if the statement
is filed pursuant to Sec. 240.13d-1(b):
By signing below I certify that, to the best of my knowledge and
belief, the securities referred to above were acquired and are held in
the ordinary course of business and were not acquired and are not held
for the purpose of or with the effect of changing or influencing the
control of the issuer of the securities and were not acquired and are
not held in connection with or as a participant in any transaction
having that purpose or effect.
(b) The following certification shall be included if the statement
is filed pursuant to Sec. 240.13d-1(c):
By signing below I certify that, to the best of my knowledge and
belief, the securities referred to above were not acquired and are not
held for the purpose of or with the effect of changing or influencing
the control of the issuer of the securities and were not acquired and
are not held in connection with or as a participant in any transaction
having that purpose or effect.
* * * * *
Note: Schedules filed in paper format shall include a signed
original and five copies of the schedule, including all exhibits.
See Sec. 240.13d-7(b) for other parties for whom copies are to be
sent.
* * * * *
8. By amending Sec. 240.16a-1 to revise paragraphs (a)(1)(i), (ii),
(iii), (iv), (v), (vi) and (vii), redesignate paragraph (a)(1)(viii) as
paragraph (a)(1)(xi) and to add paragraphs (a)(1)(viii), (ix) and (x)
to read as follows:
Sec. 240.16a-1 Definition of terms.
* * * * *
(a) * * *
(1) * * *
(i) A broker or dealer registered under section 15 of the Act (15
U.S.C. 78o);
(ii) A bank as defined in section 3(a)(6) of the Act (15 U.S.C.
78c);
(iii) An insurance company as defined in section 3(a)(19) of the
Act (15 U.S.C. 78c);
(iv) An investment company registered under section 8 of the
Investment Company Act of 1940 (15 U.S.C. 80a-8);
(v) Any person registered as an investment adviser under Section
203 of the Investment Advisers Act of 1940 (15 U.S.C. 80b-3) or under
the laws of any state;
(vi) An employee benefit plan as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C.
1001 et seq. (``ERISA'') that is subject to the provisions of ERISA, or
any such plan that is not subject to ERISA that is maintained primarily
for the benefit of the employees of a state or local government or
instrumentality, or an endowment fund;
(vii) A parent holding company or control person, provided the
aggregate amount held directly by the parent or control person, and
directly and indirectly by their subsidiaries or affiliates that are
not persons specified in paragraphs (a)(1)(i) through (ix), does not
exceed one percent of the securities of the subject class;
(viii) A savings association as defined in Section 3(b) of the
Federal Deposit Insurance Act (12 U.S.C. 1813);
(ix) A church plan that is excluded from the definition of an
investment company under section 3(c)(14) of the Investment Company Act
of 1940 (15 U.S.C. 80a-3); and
(x) A group, provided that all the members are persons specified in
Sec. 240.16a-1(a)(1)(i) through (ix).
* * * * *
By the Commission.
Dated: January 12, 1998.
Jonathan G. Katz,
Secretary.
[FR Doc. 98-1084 Filed 1-15-98; 8:45 am]
BILLING CODE 8010-01-P