Hemispherx Biopharma,Inc. v. Johannesburg Consol. Invs., 2008 U.S. App. LEXIS 26515 (11th Cir. Dec. 29, 2008):

Whether individuals or entities without a beneficial ownership interest in a company's securities can nonetheless become members of a "group" within the meaning of section 13(d)(3) of the Exchange Act is an issue of first impression in this circuit. ***

Section 13(d)(3) is the critical provision in this case. It addresses group membership for purposes of section 13(d) and provides that "[w]hen two or more persons act as a partnership, limited partnership, syndicate, or other group for the purpose of acquiring, holding, or disposing of securities of an issuer, such syndicate or group shall be deemed a 'person' for the purposes of this subsection." 15 U.S.C. § 78m(d)(3)). The SEC regulation under section 13(d)(3) further provides that "[w]hen two or more persons agree to act together for the purpose of acquiring, holding, voting or disposing of equity securities of an issuer, the group formed thereby shall be deemed to have acquired beneficial ownership . . . of all equity securities of that issuer beneficially owned by any such persons." 17 C.F.R. § 240.13d-5(b)(1).

The text of sections 13(d)(1) and 13(d)(3) leaves open the question of whether beneficial ownership of stock is required for group membership within the meaning of paragraph (d)(3). Section 13(d)(3) does not expressly require or rule out a beneficial ownership requirement, or even mention the term "beneficial owner." Nor does the applicable SEC regulation address the question. Rule 13d-5 instructs that when a section 13(d)(3) group is formed, each member of the group "shall be deemed to have acquired beneficial ownership . . . of all equity securities . . . beneficially owned by any such persons." 17 C.F.R. § 240.13d-5(b)(1). Put another way, the regulation provides that when two or more persons act as a section 13(d)(3) group, each individual member is deemed to beneficially own the securities owned by all of them. It does not rule out a non-beneficial owner becoming a member of a section 13(d)(3) group and thereby being treated as a beneficial owner of all of the securities owned by any group member. Nor does it compel that result. The regulation simply does not say one way or the other. But see Rosenberg v. XM Ventures, 274 F.3d 137, 145 (3d Cir. 2001) (finding "support" in Rule 13d-5 for its conclusion that no person who is not already a beneficial owner can be a member of a section 13(d)(3) group). The question, then, is whether the context of section 13(d)(3) and the congressional purpose behind it show that beneficial ownership of securities is required for group membership.

Hemispherx argues that reading a beneficial ownership requirement into section 13(d)(3) is contrary to the statute's plain language, ignores the general definition of the term "person" found in the Exchange Act, misconstrues the relevant SEC regulations, and ignores the principles of partnership law. ***

The more persuasive arguments support the conclusion that a beneficial ownership interest is necessary to become a member of a group within the meaning of section 13(d)(3) of the Exchange Act. That is what the Third Circuit concluded in Rosenberg, 274 F.3d at 147-48. In Rosenberg, the court addressed a claim that the defendants had violated section 16(b) of the Exchange Act.... Because the SEC defined beneficial ownership for purposes of section 16(b) by reference to section 13(d), see 17 C.F.R. § 240.16a-1(a)(1), the court was required "to determine whether beneficial ownership of a subject issuer's equity securities is a necessary element of group membership within the meaning of section 13(d)(3)." Rosenberg, 274 F.3d at 140. It concluded that each individual member of a section 13(d)(3) group must be a beneficial owner of securities. Id. at 147-48 ("[W]e have concluded that. . . each member of a section 13(d) group must hold beneficial ownership of the equity securities of the issuing entity prior to its entry into such a group." (emphasis omitted).

***

Although a person who is not a beneficial owner might have an interest in the securities of the company, that person and his interest will not go undetected because only beneficial owners are included in the group for section 13(d)(1) filing purposes. If the total beneficial ownership of all members exceeds the threshold amount of five percent, a Schedule 13D form must be filed disclosing, among other details, "information as to any contracts, arrangements, or understandings with any person with respect to any securities of the issuer . . . naming the persons with whom such contracts, arrangements, or understandings have been entered into, and giving the details thereof." § 13(d)(1)(E) (codified at 15 U.S.C. § 78m(d)(1)(E)). In that manner, a person required to make section 13(d)(1) disclosures must disclose the identity of everyone, including those who are not beneficial owners, who possesses some form of present or future interest in the securities, along with the details of the arrangements or understandings with those non-beneficial owners.