SEC Staff Issues Helpful CFIs Clarifying Beneficial Ownership Implications of Cash-Settled Equity Total Return Swaps

Short summary

The SEC's Division of Corporation Finance issued three new interpretations (CFIs 105.08–105.10) clarifying that entering into a standard cash-settled equity total return swap does not, by itself, confer beneficial ownership of the reference securities under Section 13(d). The guidance also narrows the circumstances under which a TRS could be deemed part of a 'plan or scheme to evade' beneficial ownership reporting, requiring evidence of intent to create a false appearance of purely economic interest. The CFIs align with prevailing market practice and provide welcome certainty for private fund managers and investors using TRSs for long equity exposure.

• •SEC Staff confirms standard cash-settled equity TRSs alone do not trigger beneficial ownership under Section 13(d)
• •Rule 13d-3(b) deemed ownership requires intent to create a false appearance of purely economic interest
• •Guidance is consistent with market practice and benefits private fund managers using TRSs for equity exposure

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