Earlier this month, the SEC issued new Corporate Finance Interpretations (CFIs). These CFIs clarify the SEC’s stance on ambiguities in disclosure rules. The new updates touch on Schedule 13D beneficial ownership tables. The SEC’s position is that individual investors must be named as part of Schedule 13D for activist investing firms. The following language is included in CFI 110.09:
“Item 3 of Schedule 13D states that if any part of the purchase price is represented by funds ‘obtained for the purpose of acquiring, holding, trading or voting the securities, a description of the transaction’ by which the funds were obtained and the names of the parties to such transaction must be disclosed in the Schedule 13D filing. Accordingly, the identities of the investors in an entity formed for the purpose of acquiring securities of a specific issuer and engaging in an activism campaign at that issuer must be disclosed.”
This represents another erosion of shareholder rights and privileges under current SEC leadership. Companies argue that the identities of activist investors are necessary information required to defend against activist campaigns. Funds, on the other hand, are reluctant to publicly name their investors, fearing that this information may undermine their strategies and performance.
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