June 28, 2021

Section 13(d) Reform: Gary Gensler Makes His Pitch

A few months ago, I blogged about the possibility that 13(d) reform might be on the SEC’s agenda.  In a speech delivered last week, SEC Chair Gary Gensler confirmed that he has the beneficial ownership reporting rules in his sights. Here’s an excerpt:

In 1968, our Congress mandated that large shareholders of public companies disclose information that helps the public understand their ability to influence or control that company. Under current rules, beneficial owners of more than 5 percent of a public company’s equity securities who have control intent have 10 days to report their ownership.

We haven’t updated that deadline in over 50 years. Those rules might’ve been appropriate for the 1970s, but I have my doubts about whether they continue to make sense given the rapidity of current markets and technologies. I’ve asked staff how we might update these rules, including possibly shortening reporting deadlines.

Activists aren’t going to be thrilled with that development, but public companies and those who represent them are likely to continue their vocal support of a move to shorten filing deadlines. Chair Gensler went on to reference his desire for greater transparency concerning derivative swaps on individual companies that “provide exposure to the company without traditional equity ownership,” so perhaps an expansion of the definition of “beneficial ownership” under Section 13(d) to encompass these derivative positions might also be on the table.

John Jenkins