January 27, 2022

Section 13(d) Reform: The Latest Scuttlebutt

Apparently, SEC Chair Gary Gensler had a brief media availability last week in which he shared some thoughts on the status of potential reforms to the beneficial ownership reporting rules under Section 13(d) of the Exchange Act.  The financial media doesn’t appear to have picked up on this, although CNBC’s Eamon Javers did tweet out a report on Gensler’s comments.  According to that report, the SEC chair’s primary concern is addressing information asymmetries created by the 10-day lag between the acquisition of a 5% or greater stake and the deadline for reporting it:

Gensler said he is considering tightening the deadline to disclose such large holdings, which is currently set at 10 days. Large active traders are likely to hate this, because it’s harder for them to make money if they have to reveal strategies to the public too soon. Still, Gensler said “I would anticipate we’d have something on that.” He said he is worried about “information asymmetry,” because the public doesn’t know there’s a big player buying up shares during the 10-day period.

He said: “Right now, if you crossed the 5% threshold on day 1, and you have 10 days to file, that activist might in that period of time, just go up from 5 to 6% or they might go from 5 to 15% but there’s nine days the selling shareholders in the public don’t know that information.” More Gensler: “And that’s what motivates me, is some of that information asymmetry. So, we’re looking at that. I would anticipate that we’d have something on that.”

Unfortunately, Gary Gensler didn’t provide any insight as to the timing of a rule proposal, but it clearly remains on his “to do” list.

John Jenkins