Corporates and Investors Go In Opposite Directions Over SEC Proposal on Shareholder Reporting

The headquarters of the U.S. Securities and Exchange Commission (SEC) are seen in Wash., on July 6, 2009. Reuters/Jim Bourg

Corporates and their most prominent investors are at odds over new regulations meant to “modernize” how shareholders report their holdings, reports Financial Times.

In February, the Securities and Exchange Commission proposed new rules to increase transparency in stock markets by shortening the 10-day window to 5 days for investors to reveal when they have built a stake of over 5 percent in a company.

The rules would also clarify the definition of an investor “group.” Currently, the regulatory framework does not require proof of an agreement between two or more persons as a prerequisite to establishing the existence of a group.

But some courts have suggested that a group can only be formed if an agreement exists among its purported members.

FedEx Corporation’s general counsel Mark Allen wrote that the SEC’s proposals would help to “protect investors” and “maintain fair, orderly and efficient markets.”

But two of its largest active shareholders, T Rowe Price and Dodge & Cox, do not think the same. “We think the SEC has significantly overstated the benefits of that reporting to long-term investors and underestimated the harm that it will have,” T Rowe said in its submission.

Dodge & Cox said the proposals “[strike] at the heart of our business” and would allow “free riders and predatory traders to profit from managers’ work.”

Bill Ackman’s Pershing Square said the latest proposal “presents a rare occurrence as a serious problem, and proposes a sweeping and thoroughly disruptive solution that would harm market participants and issuers alike.”

The SEC will consider the public comments as it drafts a final rule, which will then be put for voting.

By Vandana Singh

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