How Fund Managers Can Navigate Sections 13(d) and 16 of the Exchange Act

Shareholders who acquire beneficial ownership of more than 5 percent of the outstanding shares of a class of an issuer’s stock must file reports on Schedule 13G or 13D pursuant to Section 13(d) of the Securities Exchange Act of 1934 (Exchange Act). These reports can come with certain disclosure obligations pertaining to shareholder background information and investment intentions. In addition, Exchange Act Section 16 requires shareholders that own more than 10 percent of a class of an issuer’s stock to report certain transactions involving the issuer’s securities and imposes liability on those shareholders that engage in short selling. To help readers understand issues related to Sections 13(d) and 16 of the Exchange Act, the Hedge Fund Law Report conducted an exclusive interview with Frank Zarb and Louis Rambo, partner and associate, respectively, at Proskauer Rose, in connection with the firm’s recent publication of a new chapter of its Hedge Fund Handbook. This article presents their insights. See “Participants at Eighth Annual Hedge Fund General Counsel Summit Discuss Insider Trading, Proposed Changes to Form 13F and Schedule 13D and Employment-Related Disputes (Part Three of Four)” (Feb. 5, 2015). For additional commentary from Proskauer attorneys, see “What Are the Key Takeaways for Fund Managers From the SEC’s Draft Strategic Plan for 2018-2022?” (Jul. 26, 2018); “New Tax Law Carries Implications for Private Funds” (Feb. 1, 2018); and “Tips and Warnings for Navigating the Big Data Minefield” (Jul. 13, 2017).

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