Excerpt from remarks by Mary L. Schapiro, chairman, Securities and Exchange Commission, at the Dec. 15 Transatlantic Corporate Governance Dialogue in Washington.
... Next year, we plan to begin a broad review of our beneficial ownership reporting rules. We ... are considering whether they should be changed in light of modern investment strategies and innovative financial products ...
(A petition for rulemaking) asks the SEC to broaden the definition of beneficial ownership to include interests held by persons who use derivative instruments . . . (and shorten disclosure) to one calendar day because technological advances have rendered the 10-day window obsolete.
Many feel that the 10-day window: results in secret accumulation of securities; results in material information being reported to the marketplace in an untimely fashion; and allows 13D filers to trade ahead of market-moving information and maximize profit. . . .
In response, some argue that: tightening the timeframe may reduce the rate of returns to large shareholders, and thereby result in decreased investments and monitoring of and engagement with management; there is no evidence that changes in trading technologies and practices have led to significant increases in pre-disclosure accumulations of large ownership stakes; and that state law developments, such as the validity of poison pills, staggered boards and control share statutes, have tilted the regulatory balance in issuers' favor. . . .