1.1.5. Beneficial Ownership Reports of Major Shareholders: Schedule 13D or 13G
Having beneficial ownership of something means being entitled to the benefits of owning it. For example, when you buy a stock through your broker, the broker is often recorded as the owner because it is holding the stock for you. But you are the beneficial owner, so when the stock pays a dividend or is sold at a gain, you receive the benefit.
A person, or a group of persons acting together, who directly or indirectly acquires beneficial ownership of more than 5% of a voting class of the securities of a public company must file a Schedule 13D with the SEC within 10 days after the purchase. Once a Schedule 13D is on file, the purchaser must file an amended schedule whenever there is a material change in the person’s beneficial ownership. (The SEC considers a “material change” to involve at least 1% of the class of securities owned.) If the person’s ownership falls below 5%, the person must file an amended schedule indicating this, and then the person’s filing obligation ends.
Schedule 13D is quite detailed and requires the disclosure of information about the security and issuer, the identity and background of the purchaser, the source of funds for the transaction, and what interest in the securities the purchaser holds. The purchaser must disclose any contracts, arrangements, understandings or relationships with the issuer. Perhaps most importantly, the purchaser must disclose the purpose of the transaction. There is also a section for exhibits, which can be quite