Under § 13(d), the acquirer has 10 days before it must file a Schedule 13D disclosure statement. The 10–day window begins to run on the day the acquiring person makes an acquisition that puts his holdings over the five percent threshold. Where a group is formed, the 10–day window begins to run on the day they enter into the requisite agreement to act in concert, provided their aggregate holdings exceed 5% on that date.
Curiously, neither § 13(d) nor the rules thereunder specify whether the days in question are calendar or business days. The courts that have addressed the issue held that filers have ten business days within which to file.[1] Commentators are divided, with some stating that filers have ten calendar days to file[2] and others claiming that it is business days that are relevant.[3] Bizarrely, the SEC has used both in litigation releases.[4] In one of the few efforts to resolve the issue, a Wachtell Lipton associate cogently argued that calendar days is the correct interpretation.[5]
He reviewed the text of the SEC’s rules and its governing statute, the statutory history of the Williams Act, and the prudential concerns which underlie the disclosure requirements more generally, and concluded that all of these factors favor the calendar-day approach.
Across regulation 13d-G, the SEC rule that governs investors’ disclosure obligations, the term “day” is preceded by the term “business” on three occasions, but is not preceded by the term “calendar” at all. Using the line of interpretive logic laid out above, the SEC’s semantic choices are telling: when the agency wants to describe a “business day,” it utilizes those words specifically. Thus, even though the agency is on record as adopting both the business-day and calendar-day approaches, the text of its own rules makes clear that only the latter interpretation is correct. ...
Even if one were to find the text of the governing law too terse, the legislative history of the Williams Act makes clear that the Act contemplates prompt disclosure. This again suggests that the ambiguous term “days” should be read in its shorter varietal—i.e., calendar, not business. ...
Finally, as has been catalogued in a long-running debate elsewhere, there are significant prudential reasons to favor the calendar-day approach. ...
First, a calendar-day approach forces investors to disclose their positions sooner, rather than later. ...
Second, changes in technology have rendered even the 10-day timeline outdated.
It's bizarre that so few observers have commented on the lack of clarity in the statute and rules. It's especially bizarre that the SEC itself seemingly cannot make up its mind.
[1] See, e.g., S.E.C. v. Drexel Burnham Lambert Inc., 837 F. Supp. 587, 589–90 (S.D.N.Y. 1993), aff'd sub nom. S.E.C. v. Posner, 16 F.3d 520 (2d Cir. 1994) (stating without citation of authority that a Schedule 13D must be filed “no later than 10 business days following a 5% accumulation”); Intl. Banknote Co., Inc. v. Muller, 713 F. Supp. 612, 619 (S.D.N.Y. 1989) (holding without citation of authority that, “as a matter of law, defendants could not have been required to file a Schedule 13D until 10 business days from March 9, 1989, the first day that their combined holdings reached 5 percent of the common stock”).
[2] See, e.g., John M. Basnage & William J. Curtin III, Cross-Border Tender Offers and Other Business Combination Transactions and the U.S. Federal Securities Laws: An Overview, 71 Bus. Law. 459, 534 (2016); Mark L. Mitchell & Jeffry M. Netter, The Role of Financial Economics in Securities Fraud Cases: Applications at the Securities and Exchange Commission, 49 Bus. Law. 545, 579 (1994); Robert A. Prentice, The Role of States in Tender Offers: An Analysis of CTS, 1988 Colum. Bus. L. Rev. 1, 7 (1988).
[3] See, e.g., Note, Benjamin Chun, A Brief Comparison of the Chinese and United States Securities Regulations Governing Corporate Takeovers, 12 Colum. J. Asian L. 99, 115 (1998); J. Robert Brown, Jr., Corporate Secrecy, the Federal Securities Laws, and the Disclosure of Ongoing Negotiations, 36 Cath. U.L. Rev. 93, 173 (1986).
[4] Samir H. Doshi, The Timing of Schedule 13D (June 23, 2019), https://corpgov.law.harvard.edu/2019/06/23/the-timing-of-schedule-13d/.
