The Securities and Exchange Commission’s new proposal requiring faster activist disclosures, with more details about derivatives accumulations, won’t put activist investors out of business.
That’s the view of David Katz, a partner at top corporate defender Wachtell, Lipton, Rosen & Katz, who spoke with the Activist Investing Today podcast about why he’s been pushing the SEC for over a decade to make the activist transparency changes it just announced.
“I think that is helpful to the markets as a whole, not just the public companies whose securities are being traded, but the markets have better information and can make better judgments,” Katz said.
The SEC’s proposal, issued Thursday, Feb. 10, would require activists to disclose their positions within five days of acquiring more than 5% of a company’s stock. Currently, activists have 10 days to make that disclosure. In addition, activists who accumulate large derivatives positions would need to disclose those stakes for the first time in existing Schedule 13D filings if the measure is approved. Activists have complained that faster disclosures will limit their ability to accumulate the positions they need to launch campaigns required to hold corporate executives accountable.
“It is not going to put Bill Ackman or any activist out of business,” Katz said. “They still will be able to accumulate the shares, and they still are going to be able to put pressure on companies. It just means they’re going to have to tell the world what they are doing at an earlier stage.”
On the podcast, Katz argued the change would make the U.S. more aligned with other countries that have stricter activist disclosure rules. He added that the measure would be more effective if the SEC ultimately prohibits activists from buying more shares once they cross the 5% threshold until after they have made the disclosure.
“If the SEC changes the rules in a way so that people can’t buy more shares until after they have made disclosure, I think that could have the impact of leveling the playing field with some of these other jurisdictions,” Katz said. “If it does not do that and still allows people to buy during the window when they have to make initial disclosure, it will force people to do less-effective transactions to get there because they would have to do it in a shorter period of time, but activists would still have the loophole; they would just have five days, not 10 days.”
Check out the podcast with Wachtell Lipton’s Katz here:
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