Activists Could Face Less Time to Report Large Stakes
Activists may find themselves with less time to report large investments in companies they plan to target.
Speaking at the City & Financial Global conference in London on Wednesday, Securities and Exchange Commission Chairman Gary Gensler said he has asked the agency to consider reducing the typical 10-day timeline that investors have to report stakes in companies that exceed 5%. The rule, which is more than five decades old, may not reflect the “rapidity of current markets and technologies,” Gensler said.
Shortening the window may stir the ire of activists. While the speed of trading—and settlement—has certainly accelerated since the 1970s, the 10-day window allows activists to build up stakes without seeing prices rise due to the disclosure of their position. However, it’s also worth noting that activists have been able to evade filing by holding their positions in derivatives and other instruments.
Proponents of a rule change argue that knowing about the involvement of an activist could affect an individual investor’s decision to hold the stock.
There may be reason to change the rule in light of current market mechanics, but a rule change could have other effects, such as “disincentiviz[ing]” activists who play a role in holding companies accountable, Andrew Freedman, partner and co-head of the shareholder-activism group at Olshan Frome Wolosky, tells Barron’s.
“Don’t fix what hasn’t proven to be broken,” Freedman adds, noting there isn’t evidence that any rapid accumulations of shares have put investors in a bad position.