A ten percent owner is a person or entity that beneficially owns more than ten percent of a class of an issuer’s equity securities that is registered under Section 12 of the Securities Exchange Act of 1934. In U.S. securities regulation, the term is used descriptively to identify a category of security holder whose ownership level triggers specific reporting obligations.
Within insider reporting under Section 16 of the Securities Exchange Act of 1934, ten percent owners are subject to mandatory reporting obligations with respect to the issuer’s registered equity securities.
Regulatory Context
Section 16(a) applies to any person who is the beneficial owner of more than ten percent of a class of equity securities registered under Section 12 of the Exchange Act. Beneficial ownership for this purpose is determined under the SEC’s rules, including Exchange Act Rule 16a-1(a)(1), which governs the determination of whether a person is a more-than-ten-percent beneficial owner, and Rule 16a-1(a)(2), which defines pecuniary interest for reporting holdings and transactions.
The ten percent ownership threshold is measured with respect to a specific class of equity securities. Ownership determinations may include securities held directly as well as securities held indirectly through arrangements such as trusts, partnerships, or other entities, consistent with the SEC’s beneficial ownership framework.
Reporting Treatment
A ten percent owner who meets the Section 16(a) threshold is a reporting person and must disclose beneficial ownership of, and changes in ownership of, the issuer’s equity securities on Form 3, Form 4, and Form 5, as applicable.
The reporting obligation attaches when a person becomes a ten percent owner and continues for as long as the ownership threshold is met, including transactions that reduce ownership below the ten percent level when the person was still a ten percent owner at the time of the transaction. Transactions by ten percent owners are reported using the same transaction codes, tables, and timing requirements that apply to other Section 16 reporting persons.
Relationship to Other Insider Categories
A ten percent owner is distinct from a corporate officer or a director, whose reporting obligations arise from their roles within the issuer rather than from ownership levels. An individual or entity may simultaneously qualify as a ten percent owner and as an officer or director, in which case Section 16 reporting applies on each basis without altering the reporting framework.
The classification of a person as a ten percent owner for Section 16 purposes depends on beneficial ownership calculations, not on voting intent, investment strategy, or involvement in management.
Sources
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15 U.S.C. § 78p(a) — Section 16(a) reporting obligations for ten percent owners
https://www.law.cornell.edu/uscode/text/15/78p -
17 CFR § 240.16a-1 — Beneficial ownership definitions for Section 16 purposes
https://www.law.cornell.edu/cfr/text/17/240.16a-1 -
SEC — Officers, Directors, and Section 16 Reporting
https://www.sec.gov/resources-small-businesses/going-public/officers-directors-10-shareholders -
SEC Form 4 Data Instructions — Applicability of insider reporting to ten percent owners
https://www.sec.gov/files/form4data.pdf