Amendment Requirements for SEC 13D and 13G Filers
Introduction
The following article is intended to provide an overview of U.S. Securities and Exchange Commission (“SEC”) Sections 13(d) and 13(g) Amendment Requirements. The overview is general in nature, and readers are encouraged to review the specific regulations and/or consult with a compliance professional to determine the applicability to their particular situation.
Amendment Requirements for 13D Filers
Rule 13d-2 of the Securities Exchange Act of 1934 (the "Act") requires you to promptly, within two business days, amend Schedule 13D whenever material changes in the information disclosed on a Schedule 13D occur. A material change includes any material increase or decrease in the percentage of the class of securities you are deemed to "beneficially own." For instance, if you manage more than 5% in the shares of an issuer and the percentage managed increases or decrease by more than 1% (whether through a transaction or other event), you must amend your 13D filing.
You must continue to make appropriate amendments so long as you continue to manage more than 5% of any class of an issuer's voting shares. If you fall below the 5% threshold, you must make one (final) amendment notifying the SEC of this.
There are also other circumstances that qualify as a material change requiring an amendment. For instance, if you acquire warrants that are not exercisable within 60 days, you may still need to amend Schedule 13D to revise your discussion of your plans concerning the acquisition of additional securities and related contracts, even if the amount of voting shares you manage has not yet changed.
Amendment Requirements for 13G Filers
Qualified institutional investors, including investment advisors registered with the SEC or a state, must amend their Schedule 13G within 10 days after the end of the first time their "beneficial ownership" exceeds 10% of the class of equity securities at month end.
After that, qualified institutional investors must amend their Schedule 13G within 10 days from when their "beneficial ownership" increases or decreases by more than 5% of the class of securities over the amount held at the previous month end.
Qualified institutional investors must also file a Schedule 13D within 10 calendar days after they cease being eligible to file a Schedule 13G rather than a Schedule 13D.
In addition, passive investors beneficially owning less than 20% of an equity security must amend their Schedule 13G promptly, within two business days, after acquiring beneficial ownership of more than 10% of the class of equity securities, and after that, within two business days of increasing or decreasing their ownership by more than 5%.
You must also file an annual amendment to the 13G if there have been any changes - immaterial or material - to your filed 13G. This must be done within 45 days of year end. You do not need to file an amendment if there have been no changes to the information filed or if the only change is to the percentage of securities owned resulting solely from a change in the number of shares outstanding.
Important Notes
· You should independently review your Schedule 13D and 13G filing obligations. There are many factual determinations that may impact whether you must make a filing or amend a prior filing, which Schedule you must file (or amend), and when you must make your filing.
· Interactive Brokers will provide you with notices, on a best efforts basis, only when you cross certain thresholds (5%, 10%, 20%) or a significant change in the percentage of shares you manage occurs. There may be other situations that give rise to the need to file or amend a Schedule 13D or Schedule 13G for which you will not receive an alert from Interactive Brokers.
· You should monitor holdings of specific classes of issuer equity securities in the accounts you manage to ensure compliance with your Schedule 13D or 13G filing and amendment obligations.
· Notices do not cover (nor will they take into account) certain securities not commonly traded through Interactive Brokers, namely equities in:
a. an insurance company that would have to be registered except for the exemption from registration in Section 12(g)(2)(G) of the Act;
b. a closed-end investment company registered under the Investment Company Act of 1940; or
c. a Native Corporation pursuant to Section 1639c(d)(6) of title 43.
You should therefore separately account for and analyze any holdings of such equity securities you may have to comply with Section 13(d) of the Act.
· Alerts sent are based exclusively on the beneficial ownership of relevant securities of the specific advisor identified. It does not account for any group aggregation rules that may apply when two or more persons agree to act together for the purpose of acquiring, holding, voting or disposing of the equity securities of an issuer.
· Alerts sent relate solely to holdings in accounts maintained at Interactive Brokers and not any accounts maintained elsewhere. But you should take any accounts you maintain elsewhere into consideration when determining whether you must file or amend a Schedule 13D or 13G and what information to include in those schedules.
· Alerts sent will not take into consideration your Schedule 13D or 13G filing obligations arising prior to the date of Interactive Broker's implementation of this alert program.
· The data we receive about US Micro-Cap securities—generally OTC listed stocks, as well as Nasdaq or NYSE American stocks with a market cap of less than $300MM that trade under $5 per share--from our data provider is not consistently reliable so we have removed those securities from this program. As a result, you will not receive Schedule 13D/13G alerts when you come close to crossing or cross thresholds triggering filing obligations regarding U.S. Micro-Cap securities. You should separately review your holdings in US Micro-Cap stocks to determine your related filing obligations for those holdings.
For Additional Information
For more information on Schedules 13D and 13G, please visit the SEC website at
http://www.sec.gov/answers/sched13.htm and
https://www.sec.gov/divisions/corpfin/guidance/reg13d-interp.htm
SEC Sections 13(d) and 13(g) Filing Requirements
Introduction
The following article is intended to provide an overview of U.S. Securities and Exchange Commission (“SEC”) Sections 13(d) and 13(g) Filing Requirements. The overview is general in nature, and readers are encouraged to review the specific regulations and/or consult with a compliance professional to determine the applicability to their particular situation.
Background on Schedules 13D and 13G
These rules apply to anyone who “beneficially owns” Section 12 securities as defined in the Securities Exchange Act of 1934 (the "Act"). This generally includes shares you own or manage. Specifically, you are deemed to “beneficially own” for purposes of Section 13(d) a security if you have, either directly or indirectly:
• The power to vote or direct the voting of a security;
• The power to dispose or direct the disposition of a security; or
• The right to acquire “beneficial ownership” of such security within 60 days through the exercise of an option or warrant or the exercise of a conversion right in a convertible security.
To determine whether you “beneficially own” more than 5% of a class of equity security, measure the amount you are deemed to “beneficially own” against the total amount of outstanding securities of that class. You may rely upon the issuer’s most recent quarterly or annual report (10-Q or 10-K) filed with the SEC and any current report (Form 8-K) filed later in identifying the amount of outstanding shares. You must include any equity securities you may obtain within 60 days through the conversion or exercise of options, warrants or other as outstanding shares in this calculation. But you do not need to include similar non-exercised or converted shares held by anyone else.
What filings you must make
Your initial Schedule 13D filing must be made within 10 days of the trade date on which you first exceeded the 5% threshold. Disclosures in Schedule 13D must be current through the date of filing.
Schedule 13D filings must also be promptly amended, within two business days, to reflect any material changes. This includes the acquisition or disposition of 1% or more of the reported securities or significant changes in any intent you may have to control the issuer.
Some traders may be able to file an abbreviated filing—called a 13G—instead of a 13D. This option is available to passive investors owning less than 20% of the security or exempt investors owning more than 5% of an issuer’s shares before the issuer’s registration of the class of securities. In addition, SEC or state-registered advisors can only file a Schedule 13G if they have acquired the relevant securities in the ordinary course of the firm’s advisory business and not for the purpose of or with the effect of influencing control of the issuer. Also, the advisor must have notified any discretionary account owner on whose behalf the advisor holds more than 5% of relevant equity securities of his potential reporting obligation. Very specific filing thresholds and deadlines apply to initial and amended Schedule 13G filings.
Important Notes
• Please keep in mind that your clients and your firm’s direct and indirect control persons (which may include partners, shareholders and parent companies) may have their own independent reporting obligations.
• You should independently review your Schedule 13D and 13G filing obligations. There are many factual determinations that may impact whether you must make a filing or amend a prior filing, which Schedule you must file (or amend), and when you must make your filing.
• Interactive Brokers will provide you, on a best efforts basis, with notices only when you cross certain thresholds (5%, 10%, 20%) or a significant change in the percentage of shares you manage occurs. There may be other situations that give rise to the need to file a Schedule 13D or 13G for which you will not receive an alert from Interactive Brokers.
• Interactive Brokers will only send you one initial filing alert for each threshold you cross. We will only resend you an initial filing alert if you cross one of the three thresholds (5%, 10% or 20%) that is higher than the threshold you have crossed before. (i.e., we will not tell you if you crossed the 5% threshold if you have already crossed the 10% threshold.) Therefore, please continually monitor your positions and make the appropriate filing(s) after you receive an initial filing or amendment notice.
• You should monitor holdings of specific classes of issuer equity securities in the accounts you manage to ensure compliance with your Schedule 13D or 13G filing and amendment obligations.
• Notices do not cover (nor will they take into account) certain securities not commonly traded through Interactive Brokers, namely equities in:
a. an insurance company that would have to be registered except for the exemption from registration in Section 12(g)(2)(G) of the Act;
b. a closed-end investment company registered under the Investment Company Act of 1940; or
c. a Native Corporation pursuant to Section 1639c(d)(6) of title 43.
You should therefore separately account for and analyze any holdings of such equity securities you may have to comply with Section 13(d) of the Act.
• Alerts sent are based exclusively on the beneficial ownership of relevant securities of the specific advisor identified. The alerts will not account for any group aggregation rules that may apply when two or more persons agree to act together for the purpose of acquiring, holding, voting or disposing of the equity securities of an issuer.
• Alerts sent relate solely to holdings in accounts maintained at Interactive Brokers and not any accounts maintained elsewhere. But you should take any accounts you maintain elsewhere into consideration when determining whether you must file or amend a Schedule 13D or 13G and what information to include in those schedules.
• Alerts sent will not take into consideration your Schedule 13D or 13G filing obligations arising prior to the date of Interactive Broker's implementation of this alert program.
• The data we receive about US Micro-Cap securities—generally OTC listed stocks, as well as Nasdaq or NYSE American stocks with a market cap of less than $300MM that trade under $5 per share--from our data provider is not consistently reliable so we have removed those securities from this program. As a result, you will not receive Schedule 13D/13G alerts when you come close to crossing or cross thresholds triggering filing obligations regarding U.S. Micro-Cap securities. You should separately review your holdings in US Micro-Cap stocks to determine your related filing obligations for those holdings.
For Additional Information
For more information on Schedules 13D and 13G, please visit the SEC website at:
http://www.sec.gov/answers/sched13.htm and
https://www.sec.gov/divisions/corpfin/guidance/reg13d-interp.htm
Schedule 13D and 13G Reporting by Certain Beneficial Owners of Voting Equity Securities
Overview
The Securities and Exchange Commission (“SEC”) requires large holders of certain securities to file a Schedule 13D. Specifically, people or groups that beneficially own more than 5% of a voting class of any equity security registered under Section 12 of the Securities Exchange Act of 1934 (the “Act”) must file a Schedule 13D with the SEC. In some situations, these people may be eligible to make an abbreviated filing, Schedule 13G instead of Schedule 13D.
What securities trigger this obligation?
Section 13(d) of the Securities Exchange Act of 1934 (the “Act”) imposes reporting obligations on those who own or manage more than 5% of any voting class of the following types of equity securities:
· Any security registered under Section 12 of the Act;
· Any security of an insurance company that would have been required to be so registered except for the exemption in section 12(g)(2)(G) of the Act; and
· Any security issued by a closed-end investment company registered under the Investment Company Act of 1940.
Holding non-voting securities does not trigger any obligation to file a Schedule 13D or 13G. Securities are generally deemed voting if the holders of the class are “presently entitled to vote for election of directors.” Securities that are non-voting but provide the holder with voting rights under certain circumstances remain non-voting until these circumstances occur and the shares actually become voting.
Who qualifies as a “beneficial owner”?
These rules apply to anyone who “beneficially owns” Section 12 securities as defined in the Act. This generally includes persons who directly or indirectly have sole or share voting or investment power with respect to the security. Specifically, you may be deemed to “beneficially own” a security for purposes of Section 13(d) if you have, either directly or indirectly:
· The power to vote or direct the voting of a security;
· The power to dispose or direct the disposition of a security; or
· The right to acquire “beneficial ownership” of such security within 60 days through the exercise of an option or warrant or the exercise of a conversion right in a convertible security.
An indirect beneficial owner is one who is able to control the decisions of the direct beneficial owner. Several persons may share beneficial ownership if they jointly make the voting or investment decisions with respect to the subject securities.
A parent company will be deemed to have indirect or shared beneficial ownership of any shares beneficially owned by its subsidiaries. In situations where subsidiaries exercise voting and investment power over the securities independently from the parent, parent aggregation may not be required.
Under certain circumstances, persons who agree to act together on acquiring, holding, voting or disposing of an issuer’s securities (e.g., pursuant to a shareholders’ agreement) may be deemed members of a group, and each group members is deemed to beneficially own the securities held by the other members of the group. For instance, a group may be deemed formed for these reporting purposes if it retains a common advisor in an attempt to influence a management decision.
Investment advisors are deemed to beneficially own the securities held in any account over which they have discretion. Advisors are also deemed to beneficially own securities held in nondiscretionary accounts to the extent that the advisors have or share de facto authority to direct the voting or disposition of the securities held in the nondiscretionary accounts.
You are generally deemed to beneficially own any securities over which you have the right to acquire beneficial ownership within sixty days. An option or right convertible into an equity security within sixty days will not be deemed to confer beneficial ownership to the holder if the conversion is subject to material contingencies outside of the holder’s control. Any person acquiring a security with the purpose or effect of changing or influencing control of the issuer is deemed to be the beneficial owner of such securities immediately upon their acquisition, without taking into consideration the sixty-day timeframe. Also, you may need to disclose options or rights that are not convertible into an equity security within sixty days or that otherwise do not confer beneficial ownership if there are plans to acquire additional equity securities (Item 4 of Schedule 13D) or contracts concerning the subject securities (Item 6 of Schedule 13D).
Schedule 13D initial filings
“Beneficial owners” must file an initial Schedule 13D within ten days of the trade date of the first acquisition causing their holdings to exceed the 5% threshold. Disclosures in Schedule 13D must be current through the date of filing.
To determine whether you “beneficially own” more than 5% of a class of an equity security, you need to measure the amount you are deemed to “beneficially own” against the total amount of outstanding securities of that class. For information on the total amount of the class currently outstanding, a beneficial owner may rely upon the issuer’s most recent quarterly or annual report (10-Q or 10-K) filed with the SEC and any current report (Form 8-K) filed later. You must include any equity securities you may obtain within 60 days through the conversion or exercise of options, warrants or outstanding shares in this calculation. But you do not need to include similar non-exercised or converted shares held by anyone else. For instance, if an issuer had 100 shares of common stock outstanding and you beneficially own a note convertible within sixty days into ten shares of the issuer’s common stock, then you are deemed to beneficially own 10/110 or 9.09% of the common stock of that issuer.
Schedule 13D seeks general information relating to the beneficial owner, the number of shares beneficially owned, and fairly detailed information on the nature and purpose of ownership of the subject securities. This includes the source and amount of funds or other consideration used for the acquisition (in Item 3), any significant plants or proposals with respect to the issuer (in Item 4), and any other contracts, arrangements or understandings between the beneficial owner and other parties regarding the issuer’s securities (in Item 6). Copies of certain documents must be filed as exhibits to Schedule 13D, in Item 7.
Schedule 13D amended filings
Schedule 13D filings must be promptly amended to reflect any material changes in the information. “Promptly” is generally understood to mean within two business days. The duty to amend Schedule 13D continues until the filer ceases to beneficially own more than 5% of the subject securities. If you fall below the 5% threshold, you must make one (final) amendment notifying the SEC of this.
Material changes may include acquiring or disposing of a material percentage of the class of securities beneficially owned (i.e., 1% or more) or changes in intent to gain control of the issuer. For instance, if you manage more than 5% in the shares of an issuer and the percentage you manage increases or decreases by more than 1% (whether through a transaction or other event), you must amend Schedule 13D. Also, if you reserve the right to engage in certain transactions in the future in the initial filing and then subsequently decide to engage in one of those transactions, you must amend Schedule 13D because you have developed a specific intention as to a disclosable matter in the meantime.
There may be other circumstances that qualify as a material change requiring an amendment. For instance, if you acquire warrants that are not exercisable within 60 days, you may still need to amend Schedule 13D to revise the discussion of plans concerning the acquisition of additional securities and related contracts, even if the amount of voting shares you manage has not yet changed.
Schedule 13G initial and amended filings
Some “beneficial owners” may be able to file an abbreviated filing—called a Schedule 13G—instead of Schedule 13D.
Three categories of beneficial owners may report ownership on the short-form Schedule 13G. The time for filing the initial Schedule 13G and subsequent amendments depends upon which of the following three categories the filer falls into:
1. Qualified institutional investors include most U.S. regulated financial institutions, investment advisors registered with the SEC or a state, other institutional investors, and comparable non-U.S. financial institutions (certifying that they are subject to a regulatory scheme similar to that applicable to their U.S. counterparts) if they acquire the securities:
a. In the ordinary course of business; and
b. Not with the purpose or effect of changing or influencing the control of the issuer nor in connection with or as a participant in any transaction that has such purpose or effect;
2. Passive investors owning less than 20% of the security who have not acquired, and do not hold, the securities with the purpose or effect of changing or influencing the control of the issuer; and
3. Exempt investors include investors owning more than 5% of the equity security before the issuer registering the class under the Act who acquire not more than 2% of these securities within a twelve-month period.
a. It is irrelevant whether exempt investors purchase or hold the securities with the purpose or effect of changing or influencing the control of the issuer.
Unlike Schedule 13D, Schedule 13G requires disclosure of only basic information regarding the beneficial owner and the amount of securities beneficially owned, and does not seek information on legal proceedings or other contracts or understandings relating to the issuer’s securities.
Different filing thresholds and deadlines apply to initial and amended Schedule 13G filings depending on the type of beneficial owner the filer is.
For more information on Schedules 13D and 13D, please review these resources on the SEC’s website:
· Overview: http://www.sec.gov/answers/sched13.htm; and
· Exchange Act Sections 13(d) and 13(g) and Regulation 13D-G Beneficial Ownership Reporting: https://www.sec.gov/divisions/corpfin/guidance/reg13d-interp.htm
Form 13F Reporting by Institutional Investment Managers
Overview
Section 13(f) and Rule 13f-1 of the Securities Exchange Act of 1934 require certain institutional investment managers exercising investment discretion over accounts having an aggregate fair market value of $100 million or more in certain securities specified as “13(f) securities” by the Securities and Exchange Commission (“SEC”) at the end of any trading month to report these holdings to the SEC on Form 13F.
Who is an “institutional investment manager”?
Generally, an institutional investment manager is: (1) an entity that invests in, buys or sells securities for its own account; or (2) a natural person or an entity that exercises investment discretion over the account of any other natural person or entity.
An institutional investment manager exercises investment discretion if the manager has the power to determine which securities are bought or sold for the account(s) under management or makes decisions about which securities are bought or sold for the account(s).
Institutional investment managers may be investment advisors, banks, insurance companies, broker-dealers, pension funds, and corporations. All institutional investment managers that meet the requirements of Section 13(f) must file Form 13F, regardless of whether they are SEC-registered investment advisors.
What are “Section 13(f) securities”?
Section 13(f) securities generally include U.S. exchange-traded stocks, exchange-traded funds, certain convertible securities, equity options, warrants, shares of closed-end investment companies, and certain convertible debt securities. Shares of open-end investment companies (i.e., mutual funds) are not Section 13(f) securities.
Section 13(f) securities are listed in the SEC’s Official List of Section 13(f) Securities [this should be a hyperlink to: https://www.sec.gov/divisions/investment/13flists.htm] updated quarterly. The SEC has stated that institutional investment managers may rely on the most recent list of these securities published by the SEC in determining their filing obligations.
Filing/reporting requirements and deadlines
Form 13F must be filed within 45 days of the end of a calendar quarter. It requires disclosure of the name of the institutional investment manager that files the report, and the name and class, the CUSIP number, the number of shares as of the end of the calendar quarter for which the report is filed, and the total market value with respect to each section 13(f) security over which it exercises investment discretion.
Rule 13f-1 requires an investment manager to make four separate Form 13F filings if it meets the $100 million filing threshold on the last trading day of any month during a calendar year. Institutional investment managers must calculate the aggregate fair market value of their Section 13(f) security holdings as of the last trading day of each month to determine whether or not they meet the $100 million filing threshold.
The four filings must be made at the beginning of the following calendar year and then quarterly after that. The rule requires an investment manager to make all four Form 13F filings even if it falls back under the $100 million threshold after initially exceeding it.
The four mandatory Form 13F filings must be made on the following schedule:
· The first filing is due within 45 days after the year in which the investment manager exceeds the $100 million threshold, i.e., by February 14 of the subsequent calendar year; and
· The next three filings are due within 45 days of the end of the first 3 quarters of that same year.
For instance, if an investment manager exceeds the $100 million threshold in August 2015, it will need to make Form 13F filings by February 16, May 16, August 15 and November 14, 2016. The manager must make all these four filings even if the investment manager only briefly exceeds the $100 million threshold and never exceeds it again. The Form 13F filed must report the fair market value of each Section 13(f) security as of the close of trading on the last trading day of the calendar year (for the first filing) or quarter (for the three subsequent filings), even if that amount is less than $100 million.
An investment manager may need to make one of the following types of filings, depending on whether another investment manager is also reporting some or all of the same holdings:
· A 13F Holdings Report – appropriate if all of the investment manager’s Section 13(f) securities are listed only on its Form 13F;
· A 13F Combination Report – appropriate if some of the investment manager’s Section 13(f) securities are listed on someone else’s Form 13F; or
· A 13F Notice – appropriate if all of the investment manager’s Section 13(f) securities are reported on someone else’s Form 13F.
There are many aggregation, de minimis, shared investment discretion, and other specific reporting rules that may impact what information must or may not be reported on Form 13 and who must report it. For instance, a manager may omit holdings otherwise reportable if it holds, on the last day of the reporting fewer than 10,000 shares (or less than $200,000 principal amount in the case of convertible debt securities) and less than $200,000 aggregate fair market value (including options to purchase such amounts). The SEC also expects any 13F reports to meet certain file format requirements.
For more information on Form 13F and Section 13(f) securities, please review these resources on the SEC’s website:
· SEC Overview of Form 13F: http://www.sec.gov/answers/form13f.htm
· Division of Investment Management – Frequently Asked Questions about Form 13F: https://www.sec.gov/divisions/investment/13ffaq.htm
· Form 13F and Instructions: https://www.sec.gov/about/forms/form13f.pdf
· Official List of Section 13(f) Securities: https://www.sec.gov/divisions/investment/13flists.htm
Important Notes regarding Schedules 13D and 13G initial and amended filing alerts provided by Interactive Brokers
The following are important things that advisors trading through Interactive Brokers (“IBKR”) should keep in mind when reviewing any Schedule 13D and/or Schedule 13G filing alerts they receive from IBKR:
· Advisors should independently review their Schedule 13D and 13G filing obligations. There are many factual determinations that may impact whether an advisor must make a filing or amend a prior filing, which Schedule an advisor must file (or amend), and when an advisor must make its filing.
· Advisors should consider that their clients and their direct and indirect control persons (which may include partners, shareholders and parent companies) may have their own independent reporting obligations. For instance, under certain circumstances, parent companies may be deemed to have indirect or shared beneficial ownership of the shares beneficially owned by their subsidiaries (and thus independent filing obligations) for purposes of these reporting requirements.
· IBKR will provide advisors with alerts or notices only when advisors cross certain thresholds (5%, 10%, 20%) or a significant change in the percentage of shares advisors manage occurs. There may be other situations that give rise to the need to file a Schedule 13D or Schedule 13G for which advisors will not receive an alert from IBKR.
· Advisors should monitor holdings of specific classes of issuer equity securities in the accounts they manage to ensure compliance with their Schedule 13D or Schedule 13G filing and amendment obligations.
· Any Schedule 13D and 13G alerts IBKR sends do not cover or take into account certain securities not commonly traded through IBKR, namely equities in:
a. An insurance company that would have to be registered except for the exemption from registration in Section 12(g)(2)(G) of the Securities Exchange Act of 1934 (the “Act”);
b. A closed-end investment company registered under the Investment Company Act of 1940; or
c. A Native Corporation pursuant to Section 1639c(d)(6) of title 43.
Advisors should therefore separately account for and analyze any holdings of such equity securities they may have to comply with these reporting requirements.
· Any Schedule 13D and Schedule 13G alerts IBKR sends are based exclusively on the beneficial ownership of relevant securities of the specific advisor identified. They do not account for any group aggregation rules that may apply when two or more persons agree to act together for the purpose of acquiring, holding, voting or disposing of the equity securities of an issuer.
· Any Schedule 13D and Schedule 13G alerts IBKR sends relate only to holdings in accounts maintained at IBKR and not any accounts maintained elsewhere. But advisors should take any accounts they maintain elsewhere into consideration when determining whether they must file or amend a Schedule 13D or 13G and what information to include in those schedules.
· IBKR started monitoring for and sending Schedule 13D and Schedule 13G alerts to advisors on 16-FEB-17 and any alerts IBKR sends do not concern advisors’ Schedule 13D or 13G filing obligations arising before that date.
· The data we receive about US Micro-Cap securities—generally OTC listed stocks, as well as Nasdaq or NYSE American stocks with a market cap of less than $300MM that trade under $5 per share--from our data provider is not consistently reliable so we have removed those securities from this program. As a result, you will not receive Schedule 13D/13G alerts when you come close to crossing or cross thresholds triggering filing obligations regarding U.S. Micro-Cap securities. You should separately review your holdings in US Micro-Cap stocks to determine your related filing obligations for those holdings.
If advisors have any questions regarding any Schedule 13D or 13G filing or amendment alerts they have received from IBKR, they should contact IBKR Client Services or email us at Schedule13D&13G@interactivebrokers.com.
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Important Notes regarding Form 13F filing alerts and reports provided by Interactive Brokers
The following are important things that advisors trading through Interactive Brokers (“IB”) should keep in mind when reviewing any Form 13 F-related alerts and reports they receive from IB:
· IB is providing advisors Form 13 F-related alerts for informational purposes only. Advisors should independently review their Form 13F filing obligations. There are numerous aggregation, de minimis, shared investment discretion, and other specific reporting rules that may impact what information must or may not be reported on the form and who must report it. For instance, a manager may omit holdings otherwise reportable if it holds, on the period end date fewer than 10,000 shares (or less than $200,000 principal amount in the case of convertible debt securities) and less than $200,000 aggregate fair market value (including option holdings to purchase only such amounts). The SEC also expects any 13F reports to meet certain file format requirements.
· Form 13 F alerts sent out by IB generally take into account only the holdings of the specific advisor identified, in the absence of a request from the advisor to aggregate its holdings with those of another advisor. The advisor or a related person who controls the advisor may be deemed to have investment discretion with respect to other accounts or holdings not accounted for in this notice. For instance, even if a parent company exercises no discretion over accounts managed by its subsidiaries, the parent may nonetheless be deemed to have shared investment discretion.
· Form 13 F alerts sent by IB relate only to accounts maintained at IB and not any accounts maintained elsewhere. But advisors should take any accounts they maintain elsewhere into consideration when determining whether they must file Form 13F and what information to include in their Form 13F.
· IB started monitoring advisors’ Form 13 F filing obligations on [insert date of when this program was launched] and any alerts and reporting provided by IB to advisors trading on its platform do not concern advisors’ Form 13F filing obligations arising before that date.
If advisors have any questions regarding any Form 13F alerts or reporting they have received from IB, they should contact IB Customer Service or email us at Form13F@interactivebrokers.com.
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Notice to Financial and Non-Financial Counterparties trading OTC products (e.g. CFDs) not cleared by Central Counterparties
European regulators, as part of EMIR, issued technical rules concerning Risk Mitigation Techniques for derivatives not cleared by a Central Counterparty (“CCP”), which detail how the regulators expect these products to be margined from 1st March 2017. In general customers trading products subject to these rules are required to exchange variation margin.
Interactive Brokers (U.K.) Ltd. (“IBUK”) provides Contracts for Difference (‘CFDs’) that fall under these rules, and is your counter party to these trades. IBUK wishes to inform you how IBUK provides information regarding variation margin and reconciliation arrangements. This does not represent a material change from our current practice.
Variation Margin – Applicable where you are classified as FC or NFC+
All financial counterparties (‘FC’) and larger non financial counterparties (‘NFC+’) are subject to the EMIR variation margin rules for OTC derivatives. Whether larger non financial counterparties are subject to the rules is determined by reference to whether their 30-day rolling average of the gross notional OTC derivative positions entered into for non-hedging purposes are above specified clearing thresholds (eg EUR1bn for equity derivatives). IBUK ensures variation margin is exchanged with its counterparties with respect to OTC derivative transactions not centrally cleared by CCP.
IBUK provides customers with timely confirmations of trades each day via two secure platforms: by displaying them on our Trader Work Station (“TWS”) and via the Trade Confirmations and Daily Activity Statements in Account Management. The marked-to-market value of your OTC derivative contracts are shown in your Daily Activity statement.
The variation margin rule requires that variation margin is calculated on a daily basis based on the values of all the outstanding derivatives contracts under the IBUK Client Agreement for Products Carried by IBUK (the “Agreement”) on the previous business day.
Where this marked-to-market value of your transactions reflects a credit exposure for IBUK, IBUK collects variation margin equal to the positive mark-to-market value of its OTC derivatives. The variation margin collection is achieved through reduction in the net equity value available, an offset and/or liquidation of positions in the posting account. You may refer to the supplemental information about margin and the Agreement on the IB UK website for further details. Where the marked-to-market value reflects a credit to you, IBUK will reflect this via an increase in your net
equity.
Whilst the variation margin rule requires that variation margin is calculated on a daily basis, IBUK further expects that clients monitor their accounts continuously, including intraday, so that at all times the account contains sufficient equity to meet margin requirement as calculated by IBUK.
Reconciliation
Activity Statements are provided on a daily, monthly and annual basis. Customers can download this information using a "flex query" tool (which is available in our "account management system) in CSV type format.
You may reconcile the OTC positions detailed on these Trade Confirmations and Activity Statements account against your own records. The regulations state that you should reconcile your positions, contract information, valuation(s) and profits and losses and any related information.
If you note any discrepancies, you can contact IBUK customer service. Contact information for Interactive Brokers customer service is available on the IB website at:
https://www.interactivebrokers.com/en/?f=customerService.
The process for resolving any dispute is discussed in your client agreement with us.
Please note that the rules also require customers of firms that carry portfolios on a gross basis to carry out portfolio compression with the firm but this is not relevant as IBUK maintains your OTC positions on a net basis.
The rules also detail how often particular types of customers need to conduct these
reconciliations:
If you are an FC or a an NFC+ the rules require you to conduct portfolio reconciliations at the following frequencies:
• Daily, whenever you have 500 or more open OTC contracts;
• Weekly, if you have between 51 and 499 OTC contracts open at any time during the week;
• Quarterly, if you have 50 or fewer contracts open at any time during the quarter.
If you are a non-financial counter party not meeting the criteria to be an NFC+ (ie “NFC-“) you are required under the rules to carry out portfolio reconciliations at least:
• Quarterly, if you have more than 100 open OTC contracts open at any time in the quarter;
• Annually, if you have 100 or fewer open contracts at any time in the year.
Please note that this communication is not intended to serve as legal advice.
Interactive Brokers (U.K.) Limited
Overview of "EMIR" Reporting
This document will outline, in general terms, position and trade reporting requirements which fall under the European and Markets Infrastructure Regulation (“EMIR”). The new reporting requirement originates from the ESMA (European Securities and Markets Regulatory Authority), the European regulator’s need to create transparency in markets following the 2008 financial crisis.
What will need to be reported?
- As of February 12, 2014 – trades and positions of derivatives (futures, options, options on futures, CFDs) will need to be reported to a recognized “repository” no later than trade date + 1. Reporting is required for both on-exchange and over the counter derivatives
- As of August 16, 2014 – valuation and collateral reporting requirements for regulated financial firms and large organizations
- Back reporting to August 16, 2012 will be required
Who will be impacted?
- Regulated financial firms established in the European Union
- Organizations established in the European Union
What customers will not be eligible to report through Interactive Brokers?
- Individuals and joint accounts as they are not subject to reporting requirements
- Execution only customers
- Advisor master accounts
- Referrers
- Money/Wealth managers
- SIPP Administrators
- Employee Trak master accounts
- Fund Administrator accounts
If my fund is registered outside of the European Union, will IB report on my behalf?
In general, a fund which is registered or established outside of the European Union will not be required to report under EMIR. If however the fund manager is authorised under the Alternative Investment Fund Managers Directive ("AIFMD"), the fund may become subject to the requirements under EMIR.
Which repository will Interactive Brokers report through?
Interactive Brokers UK Limited will report trades and positions to the CME ETR, which is part of the CME Group.
It is important to note that while IB will report activity through CME ETR, the regulation places the responsibility of reporting on the customer, not the repository or IB.
What steps must I take to ensure my trades and positions are reported to CME ETR?
In order for IB to report on your behalf, you must obtain a Legal Entity Identifier (“LEI”). This is a unique identifier which will allow the regulator to identify a customer.
You may request that IB apply for an LEI on your behalf. In order to do so, you must log into Account Management and complete the steps to obtain an LEI and confirm that you wish for IB to carry out reporting on your behalf.
If you currently have an LEI, you may submit the LEI to IB through Account Management and confirm that you wish for IB to carry out reporting on your behalf.
Is more information available on EMIR reporting?
Yes, you may click here for additional information on EMIR reporting.
Margin Treatment for Foreign Stocks Carried by a U.S. Broker
As a U.S. broker-dealer registered with the Securities & Exchange Commission (SEC) for the purpose of facilitating customer securities transactions, IB LLC is subject to various regulations relating to the extension of credit and margining of those transactions. In the case of foreign equity securities (i.e., non-U.S. issuer), Reg T. allows a U.S. broker to extend margin credit to those which either appear on the Federal Reserve Board's periodically published List of Foreign Margin Stocks, or are deemed to have a have a "ready market" under SEC Rule 15c3-1 or SEC no-action letter.
Prior to November 2012, "ready market" was deemed to include equity securities of a foreign issuer that are listed on what is now known as the FTSE World Index. This definition was based upon a 1993 SEC no-action letter and was premised upon the fact that, while there may not have been a ready market for such securities within the U.S., the securities could be readily resold in the applicable foreign market. In November of 2012, the SEC issued a follow-up no-action letter (www.sec.gov/divisions/marketreg/mr-noaction/2012/finra-112812.pdf) which expanded the population of foreign equity securities deemed to have a ready market to also include those not listed on the FTSE World Index provided that the following four conditions are met:
1. The security is listed on a foreign exchange located within a FTSE World Index recognized country, where the security has been trading on the exchange for at least 90 days;
2. Daily bid, ask and last quotations for the security as provided by the foreign listing exchange are made continuously available to the U.S. broker through an electronic quote system;
3. The median daily trading volume calculated over the preceding 20 business day period of the security on its listing exchange is either at least 100,000 shares or $500,000 (excluding shares purchased by the computing broker);
4. The aggregate unrestricted market capitalization in shares of the security exceed $500 million over each of the preceding 10 business days.
Note: if a security previously meeting the above conditions no longer does so, the broker is provided with a 5 business day window after which time the security will no longer be deemed readily marketable and must be treated as non-marginable.
Foreign equity securities which do not meet the above conditions, will be treated as non-marginable and will therefore have no loan value. Note that for purposes of this no-action letter foreign equity securities do not include options.
Excess Margin Securities
The term "excess margin securities" refers to margin securities carried for the account of a customer having a market value in excess of 140 percent of the total debit balance in the customer's account. These securities are in excess of the securities held in a customer's margin account that are pledged by the customer as collateral for the margin loan and can be used to support the purchase of additional securities on margin
Example:
A customer whose account equity consists solely of a cash balance of USD 10,000 on Day 1 purchases 400 shares of stock ABC at USD 50 per share on Day 2.
| Account Balance | Day 1 | Day 2 |
| Cash | $10,000 | ($10,000) |
| Stock | $0 | $20,000 |
| Total | $10,000 | $10,000 |
On Day 2, the customer's excess margin securities total USD 6,000. This is calculated by subtracting 140% of the margin debit or loan balance from the market value of the stock position ($6,000 = $20,000 - {1.4 * $10,000}).
The term is relevant from a regulatory perspective as the SEC requires that U.S. broker dealers segregate and maintain in a good control location (e.g., DTC or bank) all customer securities which are deemed excess margin securities. Such securities cannot be pledged or loaned to finance the activities of the firm or other customers without specific written permission from the customer. The portion of the securities classified as margin securities ($20,000 - $6,000 or $14,000 in this example) are subject to a lien and may be pledged or loaned by the broker to others to assist in financing the loan made to the customer.
Note that securities which were excess margin at the date of acquisition may later be reclassified as margin securities based upon the customer's subsequent trade and/or margin borrowing activity. For example, if the loan value of excess margin securities is subsequently used to acquire additional securities on margin, a portion of securities will then be reclassified as margin securities and subject to a lien. If the customer subsequently deposits cash or sells securities to reduce or eliminate the margin loan, the securities will be reclassified as excess margin or fully paid and are required to be segregated.
See also "fully paid securities".
