On September 14, 2009, the staff of the SEC’s Division of Corporation Finance (the “Division”) published Compliance and Disclosure Interpretations (“CDIs”) relating to Sections 13(d) and 13(g) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

The CDIs, which replace the Section 13 guidance contained in the July 1997 Manual of Publicly Available Telephone Interpretations, comprise the Division’s current interpretations of Sections 13(d) and 13(g), including Regulation 13D-G and the related Schedules 13D and 13G. The CDIs are in question-and-answer format and include both previous interpretations and new guidance from the SEC.

As described in more detail below, the original version of the CDIs initially released on September 14 included an interpretation of the 13D filing deadline that caused quite a stir within the securities industry.

In general, Section 13(d) of the Exchange Act requires beneficial owners of more than 5% of a voting equity security registered under Section 12 of the Exchange Act to report their beneficial ownership on Schedule 13D (or, if eligible, on a short form Schedule 13G) within 10 days after the acquisition that caused the 5% threshold to be crossed.

In the CDIs as originally released on September 14, in its answer to Question 103.05, the Division clarified that the 10-day period should be measured from the trade date of the triggering acquisition (as opposed to the settlement date).  However, in its answer, the Division went on to state that

“for purposes of calculating the 10-day time period, the trade date counts as day number one.”

This statement, in addition to being contrary to the plain language reading of Rule 13d-1(a), is also contrary to the widespread industry practice, which counts the day following the trade date as day number one for purposes of calculating the 10-day time period.

Not surprisingly, the Division’s statement caused a great deal of consternation and confusion among securities industry professionals and securities law practitioners alike.

The SEC quickly stepped in to rectify the situation.  On November 16,  the SEC reissued a new version of the CDIs, withdrawing Question 103.05  and replacing it with Question 103.10, which states that

“for purposes of calculating the 10-day time period, the first calendar day after the trade date counts as day number one.”

Thus, the SEC current position on this issue is unequivocally clear:
The 10-day filing deadline for Schedules 13D and 13G should be measured beginning on the first day after the trade date of the triggering acquisition.