You’ll recall that last summer, The Vanguard Group, Inc. announced plans to split into two wholly owned U.S. investment advisors: Vanguard Capital Management (“VCM”) and Vanguard Portfolio Management (“VPM”) – and that split became effective in January.
Last week, The Vanguard Group, Inc. filed over a thousand Schedule 13G amendments – as you can see from this list of filings – disclosing that it should no longer be treated as the beneficial owner of any of the portfolio company shares held by the funds managed by VCM and VPM. This landslide of Schedule 13G amendments was preceded by a slew of initial Schedule 13G filings in February from Vanguard Portfolio Management LLC, which reports how many shares of each company are beneficially owned by this newly formed investor.
What do you do now if you haven’t filed your proxy yet with the SEC? Obviously, the first thing is to check and see if any of these filings have been made for your company. If so, there are a number of approaches you can take for your disclosure that should be acceptable. The key is properly describing what you know based on the filings that have been made – including filings made before the most recent Schedule 13G amendments – in the footnotes to the “Beneficial Ownership Table.”
What do you do if you already filed your proxy when these Schedule 13G amendments were filed? You probably don’t need to do anything since Item 403 of Regulation S-K only requires you to report beneficial ownership known to the company “as of the most recent practicable date.” There is no SEC Staff guidance regarding what is the “most recent practicable date” so common sense has historically dictated what is reasonable here.
And “known to the company” typically means that a company has done its diligence by checking to see what beneficial ownership filings have been made – as Item 6(d) of Schedule 14A qualifies the obligation of a company to “furnish” third-party ownership by limiting what is disclosed “to the extent known by the persons on whose behalf the solicitation is made.”
Under Instruction 3 to Item 403, companies are deemed to have knowledge of any Schedule 13Ds and 13Gs filed with the SEC. Instruction 3 to Item 403 does make clear that the company can’t rely on the information in these filings if it “knows or has reason to believe that such information is not complete or accurate or that a statement or amendment should have been filed and was not.”
If the company has knowledge that leads it to believe that the ownership information included in the Schedule 13Ds and 13Gs filed with the SEC is not accurate, you would have to go with the latest known information you have – and footnote the number used in the table to explain why your number doesn’t match what was filed in the Schedule by the 5% owner.
Authored by
Broc Romanek