(Bloomberg) - Hedge funds and other investors would have less time to disclose that they’ve acquired a significant stake in a company under new rules proposed by the U.S. Securities and Exchange Commission.
Fund managers would have only five days to disclose ownership of 5% or more of a company’s shares, down from the current 10 days, under a plan announced by the SEC Thursday. Also, amendments to the filings would have to be filed within one business day.
The proposed changes represent the latest move by the SEC under Chair Gary Gensler to bring more transparency to the private-fund industry. Corporate executives have long argued that the current 10-day window should be shortened because it gives activists too much time to bulk up their stakes before making them public.
Disclosure of investments “can have a material impact on a company’s share price,” Gensler said in a statement. “It is important that shareholders get that information sooner.”
The proposed changes would also clarify when and how certain derivatives count toward the 5% threshold that triggers the reporting requirements, the SEC said. In a separate move in December, the agency released a plan that would restrict hedge funds and family offices from using complex derivatives to secretly build huge stakes in public companies -- the types of trades that fueled the collapse of Archegos Capital Management.
Separately on Thursday, the regulator announced proposed changes to its whistle-blower program that could allow tipsters to receive bigger awards. If a whistle-blower helps the regulator and another federal agency bring enforcement actions, the tipster would receive an award for both cases from the SEC if the other agency’s award isn’t commensurate with the SEC’s payouts.
The proposal could allow the SEC to increase the size of a potential award based on its dollar amount, while eliminating its authority to decrease any payment based solely on its size.
Both proposals will be subject to a period of public comment. The commission will then hold another vote for making the new regulations final.
By Ben Bain and Matt Robinson
