A disclosure regime set up for hostile takeovers and tender offers must be updated for today’s modern activism campaign environment, defense adviser Keith Gottfried explains.

On the Activist Investing Today podcast, Gottfried of Gottfried Shareholder Advisory LLC talked about how reporting obligations in activist situations, involving material change 8-K filings, Schedule 13D reports, poison pills and shareholder proposals, just aren’t set up for the current world of insurgency campaigns.

“When a company receives an advance notice of director candidates by an activist, it will go to the 8-K rules to see if there’s an item telling them to disclose that they received nominees,” Gottfried said. “There is no item 8-K requirement. There’s no item saying you must disclose when a dissident has contacted the company and submitted an advanced notice of director candidates or has engaged with the company and threatened a campaign or made a demand.”

In addition, Gottfried explained that activists typically will also provide boilerplate disclosure in Item 4 of Schedule 13D reports about their intent at companies, without a lot of specifics.

“A majority of original 13Ds that are filed will have an extensive litany of things listed that the activist may do but not a lot of specifics in that Item 4,” he said. “There are a limited number of situations when an activist has to file an amended 13D disclosure, and that is because Item 4 didn’t originate in an activism contest. It originated in a hostile takeover context for tender offers, and 13D was an early warning.”

Gottfried said he’d like to see less reliance on boilerplate comments and more detailed disclosure and subsequent 13D filings every time an activist has made a new demand. “If the activist has submitted a books and records demand to the company, it would be helpful to see disclosure on that,” he said.

Advance notice of nomination documents, which sometimes can be 100 pages or longer, and share transactions going back two years, rather than 60 days, are other disclosure updates that are needed, he added.

Check out the podcast with Keith Gottfried below:

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