At issue is the SEC's Schedule 13D disclosure rule, which requires activist investors working as a group to file with the agency when their cumulative holdings are greater than 5% of the company's outstanding shares. The judge in this case ruled that the two investors, the Children's Investment Fund and 3G Capital Partners, breached that threshold while working together early on but didn't make the required filing with the SEC.
"They did so in close coordination with each other and without making the public disclosure required of 5 percent shareholders and groups by the Williams Act, a statute that was enacted to ensure that other shareholders are informed of such accumulations and arrangements," Judge Lewis Kaplin wrote.
But Kaplan, a judge of the U.S. District Court Southern District of New York, also said it would not prohibit TCI and 3G Capital Partners form voting their CSX shares. He added that any penalties would have to be brought by the SEC or Department of Justice. Kaplan also dismissed counterclaims brought by TCI and 3G against CSX. - Ron Orol
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Ron Orol is a Washington-based reporter for The Deal and author of Extreme Value Hedging: How Activist Hedge Fund Managers Are Taking on the World.
A federal judge late Wednesday ruled that two activist hedge fund managers violated Securities and Exchange Commission disclosure rules when buying large stakes in railroad operator CSX Corp. 
