On December 18, 2024, new requirements go into effect that mandate the use of the XML format for Schedules 13D and 13G filings with the US Securities and Exchange Commission (SEC). The XML reporting requirements represent the final change required by the SEC’s wide-ranging amendments to its beneficial ownership reporting rules under Section 13 of the Securities Exchange Act, as described in this October 2023 Cooley alert.
Why the change?
The SEC’s move to require XML filings aims to enhance the accessibility and analysis of information disclosed by institutional investors in their beneficial ownership reports. By standardizing submissions in a structured format, the SEC hopes to streamline data processing and improve comparability of investors’ filings – while enhancing the overall transparency of the ownership information for publicly traded companies. For funds, these new requirements will necessitate a review and alteration of existing disclosure practices.
What does this mean for funds?
- Advance planning will be important – With the pending effectiveness of the XML filing requirements, funds should prepare well in advance of their first Section 13 filing under the new requirements to ensure that they are prepared to comply. This will include reviewing their historical filing disclosures and considering necessary restructuring to facilitate compliance with the XML format.
- Change in filing aesthetics and opportunity to reevaluate filing content – The XML format will change the “look and feel” of Section 13 beneficial ownership reports. The structured data format may enhance the clarity and usability of the information presented, but it also will require funds to adapt to a new way of organizing and reporting their beneficial ownership information. While the change will necessitate a restructuring of funds’ beneficial ownership reports, it also will provide an ideal opportunity for funds to reconsider the information that they present in these filings.
- Potentially increased scrutiny – As Section 13 filings become more standardized, the SEC and market analysts can be expected to increase their scrutiny of disclosed information. Funds must ensure that their reports are not only compliant with the XML filing requirements, but also that the filings accurately reflect their investment positions. In recent years, the SEC has initiated numerous enforcement actions for Section 13 compliance issues, and the new XML requirements could facilitate more SEC enforcement activity.
Conclusion
While perhaps not as significant as the changes to the Schedules 13D and 13G filing deadlines that became effective earlier this year, the XML filing requirements will necessitate careful planning by funds to ensure a smooth transition. As the December 18, 2024 effective date approaches, funds should take proactive steps to prepare for this new landscape – including conferring with counsel to ensure they’re in a position to comply with the new requirements.
The authors
