In monitoring Securities and Exchange Commission (SEC) comment letters, we recently came across one that might be of interest to our readership because it appears to indicate the SEC staff is closely monitoring the timeliness of reporting under the new Schedule 13D reporting regime adopted in October 2023.
At the heart of those amendments was shortening the various filing deadlines for initial and amended Schedules 13D and 13G. Historically, an investor has been required to make its initial Schedule 13D filing within 10 calendar days after (i) acquiring more than 5 percent beneficial ownership of a covered class or (ii) if it has previously been reporting its position on Schedule 13G, losing its eligibility to continue doing so. The amendments reduce this initial Schedule 13D filing deadline to five business days.
For ease of reference, the below is the SEC comment exchange from the letter (with the SEC comment in bold and response following).
- We note the date of the event reported as requiring the filing of the Statement was February 12, 2024. Rule 13d-1(a) of Regulation 13D-G requires the filing of a Schedule 13D within five business days after the date beneficial ownership of more than five percent of a class of equity securities specified in Rule 13d-1(i)(1) was acquired. Based on the February 12, 2024 event date, the Schedule 13D submitted on May 3, 2024 was not timely filed. Please advise us why the Schedule 13D was not filed within the required five business days after the date of the acquisition.
The Company respectfully advises the Staff that the Schedule 13D was not filed within five business days after the February 12, 2024 event date because the Company initially considered itself eligible to file on Schedule 13G with respect to its holdings in Kyverna Therapeutics, Inc. (“Kyverna”).
The Company was a stockholder of Kyverna since prior to its initial public offering (the “IPO”), which closed on February 12, 2024. At the closing of the IPO, based on its holding of an aggregate of 4,523,924 shares of common stock underlying shares of Series A-1 convertible preferred stock, all of which converted into shares of Kyverna’s common stock at the closing of the IPO, the Company believed that it is entitled to report its beneficial ownership of Kyverna’s equity securities on a Schedule 13G on a later date.
As disclosed in the Schedule 13D, Vida Ventures III, L.P. and Vida Ventures III-A, L.P., funds separately managed from, but affiliated with, the Company acquired a total of 253,136 shares of Kyverna’s common stock at the closing of the IPO. The Company disclosed its beneficial ownership of shares of Kyverna’s common stock, together with such affiliated entities, on a Form 4 promptly following the closing of the IPO, on February 14, 2024. However, the Company was not aware at the time that it was obligated to report such beneficial ownership on a Schedule 13D. Following a review of the affiliated position, including review of Staff guidance with respect to Section 13 filings, the Company determined a 13D was appropriate and filed the Schedule 13D on May 3, 2024. The Company respectfully advises the Staff that future filings by the Company with respect to its beneficial ownership in equity securities of Kyverna will be timely made in accordance with Rule 13d-1(a) of Regulation 13D-G.
It appears the SEC staff accepted the reporting person’s explanation in the above-referenced exchange, as there were no follow-up letters made public. The larger takeaway, however, is that the SEC staff appears to be monitoring these filing deadlines as the new rules are implemented. It could also indicate that the reported SEC enforcement sweep on violations of Section 16(a), Section 13(d) and Item 405 disclosure obligations is continuing.
We look forward to discussing these topics and others at our upcoming Public Company Shareholder Engagement Summit on Friday, Sept. 6, 2024, co-hosted by Barnes & Thornburg, Vanderbilt Law School’s Law and Business Program, National Association of Corporate Directors-Nashville (NACD) and Vanderbilt University’s Hans Stoll Financial Markets Research Center. Complimentary registration for in-person attendance or webcast is here. This event will feature a fireside chat with SEC Commissioner Mark Uyeda and three panels covering issues on shareholder engagement and activism with diverse viewpoints from nationally recognized panelists.
