Securities Law Blog

On July 9, 2026, the U.S. Securities and Exchange Commission (the “SEC”) issued new Corporation Finance Interpretations (“CFIs”) in Q&A format regarding, among other matters, disclosure requirements for Schedule 13D and Schedule 14A, and the application of the SEC’s beneficial ownership rules to cash-settled total return equity swaps (“TRS”).

With respect to Schedule 13D and Schedule 14A, the new CFIs focus on the implications of the formation of an entity for the purpose of raising funds to acquire securities of a specific corporation to engage in an “activism campaign” or a proxy solicitation at that corporation. The new CFIs state that investors in such entity informed of that purpose, including the identity of the targeted corporation, prior to making their investment may need to be disclosed in SEC filings as a financing source under Item 3 of a Schedule 13D filed with respect to securities of that corporation, and/or as a “participant” financing the proxy solicitation at the corporation in related proxy materials (with the attendant disclosure required for deemed participants under the proxy rules). Investment managers and others seeking potential investors should be mindful of this when preparing prospectuses, presentations, investment documents and other materials to be used with, and otherwise when communicating with, potential investors in a new or to-be-formed entity.

Additionally, the new CFIs with respect to TRS clarify how TRS are treated for purposes of the SEC’s beneficial ownership rules. The CFIs state that holders of TRS that do not confer any voting or investment power with respect to, or any right to acquire, the reference equity securities generally do not acquire beneficial ownership of the reference securities, including any equity securities the counterparty to the TRS may hold to hedge its risk. This should provide comfort to TRS holders and counterparties regarding SEC reporting implications of using TRS or similar instruments to build an economic interest in a portfolio company.

The full text of the new CFIs is included below for reference.

Please contact the Olshan attorney with whom you regularly work or one of the attorneys below if you would like to discuss further or have any questions or concerns about the impact of the new guidance on your fund structure.

Question 110.09

Question: An entity (e.g., a limited partnership) is formed for the purpose of raising funds to acquire securities of a specific issuer and engage in an activism campaign at such issuer. Prospective investors in the entity are informed in advance of the specific purpose for which their funds will be used, including the identity of the targeted issuer. If the entity is required to report beneficial ownership of the issuer’s securities on a Schedule 13D, would the identities of the investors in the entity have to be disclosed in the Schedule 13D?

Answer: Yes. Item 3 of Schedule 13D states that if any part of the purchase price is represented by funds “obtained for the purpose of acquiring, holding, trading or voting the securities, a description of the transaction” by which the funds were obtained and the names of the parties to such transaction must be disclosed in the Schedule 13D filing. Accordingly, the identities of the investors in an entity formed for the purpose of acquiring securities of a specific issuer and engaging in an activism campaign at that issuer must be disclosed. [July 9, 2026]

Question 155.02

Question: An entity (e.g., a limited partnership) is formed for the purpose of raising funds to acquire securities of a specific registrant and engage in a proxy solicitation to change the composition of the registrant’s board of directors at the registrant’s upcoming shareholder meeting. Prospective investors in the entity are informed in advance of the specific purpose for which their funds will be used, including the identity of the targeted registrant and the purpose of the planned proxy solicitation. Do the investors in the entity fall within the definition of “participants” under Instruction 3(a)(iv) to Item 4 of Schedule 14A (a “person who finances or joins with another to finance the solicitation of proxies, except persons who contribute not more than $500 and who are not otherwise participants”) for the planned solicitation?

Answer: Yes, with respect to each investor that invested more than $500 in the entity. [July 9, 2026]

Question 105.08

Question: In connection with a standard total return equity swap that settles exclusively in cash, only refers to a class of equity securities (as described in Rule 13d-1(i)(1)) for purposes of identifying a reference security, and otherwise does not confer any voting or investment power with respect to—or any right to acquire—such class (a “TRS”), would the purchaser of the TRS be deemed to acquire beneficial ownership (as determined under Section 13(d) and Rule 13d-3), of the reference securities, including any equity securities the counterparty may hold for hedging purposes, solely as a result of entering into the TRS?

Answer: No. A person who simply enters into a TRS, as defined above, does not acquire beneficial ownership of the reference securities, including any equity securities the counterparty may hold to hedge its risk. In addition, entry into a TRS, absent any arrangement that confers such power or rights outside of the terms of the TRS, is not, by itself, evidence of a plan or scheme to evade the Section 13(d) or 13(g) beneficial ownership reporting obligations as described in Rule 13d-3(b). [July 9, 2026]

Question 105.09

Question: Under what circumstances would a person who enters into a TRS (as defined in CFI 105.08) be “deemed” a beneficial owner of the reference securities, including any equity securities held by a counterparty to hedge its risk, pursuant to Rule 13d-3(b)?

Answer: A person may be “deemed” a beneficial owner of equity securities pursuant to Rule 13d 3(b) if the person uses an arrangement with the purpose or effect of preventing the vesting of beneficial ownership as part of a plan or scheme to evade the reporting requirements of Section 13(d) or 13(g). Given that a standard TRS confers no voting or investment power or right to acquire the reference securities, the TRS would need to be directly or indirectly used in connection with an “arrangement” to prevent the vesting of beneficial ownership by the purchaser of the TRS in order to be part of a plan or scheme to evade reporting obligations. For example, if a person uses a TRS as a means to direct the counterparty how to vote any equity securities used in the counterparty’s hedge or to pre-arrange the acquisition of such securities, the person may be deemed a beneficial owner under Rule 13d-3(b). Entry into a TRS solely for economic exposure to the reference security, without more, does not prevent the vesting of, or create a false appearance regarding, beneficial ownership as part of a plan or scheme to evade the reporting requirements of Section 13(d) or 13(g) for purposes of Rule 13d-3(b). [July 9, 2026]

Question 105.10

Question: What mental state, if any, is contemplated by the term “plan or scheme to evade” as used in Rule 13d-3(b) and, in particular, with respect to entry into a TRS (as defined in CFI 105.08)?

Answer: The mental state contemplated by the words “plan or scheme to evade” is generally the intent to enter into an arrangement that creates a false appearance or an illusion contrary to the actual facts. See Letter from Brian V. Breheny, Deputy Dir., Div. of Corp. Fin., SEC, to Hon. Lewis A. Kaplan, U.S. Dist. Judge, S.D.N.Y. (June 4, 2008), in CSX Corp. v. Children’s Inv. Fund Mgmt, L.L.P., et al., No. 08-Civ. 2764. Therefore, with respect to a TRS, the relevant inquiry under Rule 13d-3(b) would focus on whether the person knew or was reckless in not knowing that use of the TRS would create a false appearance or illusion that the person’s interest is economic alone. For example, entry into a TRS for the purpose or effect of indirectly acquiring the power to vote or a future right to acquire the reference equity security may be viewed as part of a “plan or scheme to evade” as that term is used in Rule 13d-3(b). [July 9, 2026]

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