The SEC moves deliberately—and sometimes slowly. Other times, however, its most important changes are not immediately appreciated by the Bar. So it may be with the SEC’s February 10th proposed new rules amending the disclosure of beneficial ownership under §13(d) of the Williams Act. Wachtell, Lipton, Rosen & Katz filed a petition asking the SEC to shorten the 10 day “window” under §13(d) of the Securities Exchange Act in May 2011, and on Feb. 10, 2022—a mere 11 years later—the SEC responded with proposed revised rules that would shorten the window from 10 days to 5 days (meaning that those who acquire over 5% of a class of an equity security of a public corporation will have to disclose their stake in half the time as before).

What took so long? The short answer is that the formal debate over whether technological developments shortened the time needed to file a Schedule 13D was not the real issue that separated the business community (which wanted the window closed) and the investment community (which largely opposed any such shortening). The latter community (and particularly hedge funds) argued that a shorter window would give them less time to consider an activist’s proposals for the target and decide whether to invest before this information became public. In effect, they wanted to have this non-public information for up to 10 days before the public saw it and the market moved in response. Institutional investors essentially claimed that if they had less time, they would invest less, and there would be fewer activist engagements with ultimately less profits for all shareholders. The business community responded that this claim justified withholding material information from the market so that market professionals could make dubious profits trading on asymmetric information.

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