Posts Tagged ‘Schedule 13D’

Activist Abuses Require SEC Action on Section 13(d) Reporting

Editor’s Note: Theodore N. Mirvis is a partner in the Litigation Department at Wachtell, Lipton, Rosen & Katz. The following post is based on a Wachtell Lipton memorandum by Mr. Mirvis, Andrew R. Brownstein, Adam O. Emmerich, David A. Katz, and David C. Karp. Work from the Program on Corporate Governance about about Section 13(d) and blockholder disclosure includes The Law and Economics of Blockholder Disclosure by Lucian Bebchuk and Robert J. Jackson, Jr., discussed on the forum here.

Three years ago we petitioned the SEC to modernize the beneficial ownership reporting rules under Section 13(d) of the Securities Exchange Act of 1934 (see our rulemaking petition, our memos of March 7, 2011, April 15, 2011, March 3, 2008 and our article in the Harvard Business Law Review). Since we filed our petition, activist hedge funds have grown more brazen in exploiting the existing reporting rules to the disadvantage of ordinary investors.

…continue reading: Activist Abuses Require SEC Action on Section 13(d) Reporting

Canada Proposes Improvements in Early Warning Disclosure, Rights Plans

Posted by Theodore Mirvis, Wachtell, Lipton, Rosen & Katz, on Wednesday March 20, 2013 at 9:10 am
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Editor’s Note: Theodore N. Mirvis is a partner in the Litigation Department at Wachtell, Lipton, Rosen & Katz. The following post is based on a Wachtell Lipton memorandum by Mr. Mirvis, Eric S. Robinson, Adam O. Emmerich, William Savitt and Adam M. Gogolak. Posts regarding the Wachtell Lipton rule-making petition referred to in the post, and Wachtell Lipton’s forthcoming Harvard Business Law Review article on the subject, are available here and here. A post by Lucian Bebchuk and Robert Jackson regarding an article to which the Harvard Business Law Review article responds is available here. Other posts about blockholder disclosure and Schedule 13D are available here.

The Canadian Securities Administrators (CSA) recently proposed changes to Canada’s early warning regime for the disclosure of substantial blockholdings, including to lower the initial reporting trigger to 5% from 10%, to require disclosure no later than the opening of trading on the next business day, and to include equity equivalent derivatives and securities lending arrangements in the ownership calculation. Separately, the CSA proposed a new policy of greater flexibility as to rights plans, including in connection with unsolicited takeover bids. These proposals reflect sensible and necessary improvements to Canadian market regulation, to protect shareholders from the sorts of activist and takeover techniques and abuses that militate for changes in the U.S.’s Section 13(d) rules, and which, in the context of unsolicited takeover bids, the U.S. acceptance of rights plans have largely banished from the U.S.

…continue reading: Canada Proposes Improvements in Early Warning Disclosure, Rights Plans

Rulemaking Petition Calls for Modernization of Section 13 Reporting Rules

Posted by Martin Lipton, Wachtell, Lipton, Rosen & Katz, on Friday February 8, 2013 at 9:28 am
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Editor’s Note: Martin Lipton is a founding partner of Wachtell, Lipton, Rosen & Katz, specializing in mergers and acquisitions and matters affecting corporate policy and strategy. This post is based on a Wachtell Lipton memorandum by Mr. Lipton, Theodore N. Mirvis, Eric S. Robinson, Adam O. Emmerich, William Savitt, and Adam M. Gogolak.

NYSE Euronext, the Society of Corporate Secretaries and Governance Professionals and the National Investor Relations Institute have jointly filed a rulemaking petition with the SEC, seeking prompt updating to the reporting rules under Section 13(f) of the Securities Exchange Act of 1934, as well as supporting a more comprehensive study of the beneficial ownership reporting rules under Section 13. The petitioners urge the SEC to shorten the reporting deadline under Rule 13f-1 from 45 days to two business days after the relevant calendar quarter, and also suggests amending Section 13(f) itself to provide for reporting on at least a monthly, rather than quarterly, basis, to correspond with Dodd-Frank’s mandate for at least monthly disclosure of short sales. We applaud the petitioners for urging the SEC to modernize Section 13’s reporting rules, both with respect to Section 13(f) and more generally.

…continue reading: Rulemaking Petition Calls for Modernization of Section 13 Reporting Rules

Don’t Make Poison Pills More Deadly

Posted by Lucian Bebchuk, Harvard Law School, on Thursday February 7, 2013 at 4:57 pm
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Editor’s Note: Lucian Bebchuk, professor of law, economics and finance at Harvard Law School, is co-author (with Robert J. Jackson Jr.) of The Law and Economics of Blockholder Disclosure. This post draws on Professor Bebchuk’s New York Times DealBook column Don’t Make Poison Pills More Deadly.

In a column published today on the New York Times DealBook, as part of my column series, I focus on an important but largely overlooked aspect of the SEC’s expected consideration of tightening the 13(d) rules governing blockholder disclosure. The column, titled “Don’t Make Poison Pills More Deadly,” is available here, and it develops an argument I made in a Conference Board debate with Martin Lipton, available here.

The column explains that an unintended and harmful effect of the considered reform may be that it will help companies adopt low-threshold poison pills – arrangements that cap the ownership of outside shareholders at levels like 10 or 15 percent. The SEC, I argue, should be careful to avoid such an outcome in any rules it may adopt.

The SEC is planning to consider a rule-making petition, filed by a prominent corporate law firm, that proposes to reduce the 10-day period, as well as to count derivatives toward the 5 percent threshold. The push for tightening disclosure rules is at least partly driven by the benefits that earlier disclosure would provide for corporate insiders. Supporters of the petition have made it clear that tightening disclosure requirements is intended to alert not only the market but also incumbent boards and executives in order to help them put defenses in place more quickly.

…continue reading: Don’t Make Poison Pills More Deadly

Lucian Bebchuk and Martin Lipton to Debate Blockholder Regulation

Posted by Noam Noked, co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Tuesday November 6, 2012 at 10:06 am
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Next Tuesday, November 13, the Conference Board will host a debate in New York City between Lucian Bebchuk, a professor of Law, Economics and Finance at Harvard Law School, and Martin Lipton, a founding partner of Wachtell, Lipton, Rozen & Katz (WLRK) on the regulation of outside blockholders. Those interested in attending the debate can do so by RSVP’ing at the Conference Board website here by Wednesday, November 7.

This debate will be the fourth time over the past decade that Bebchuk and Lipton will engage in an exchange:

The 2012 debate concerns an issue that became prominent last year when WLRK submitted a rulemaking petition (available here) to the SEC, advocating a tightening of the rules governing disclosure by outside blockholders under the Williams Act. In particular, the WLRK petition advocates reducing the period of time before the owner of 5% or more of a public company’s stock must disclose that position, from ten days to one day.

…continue reading: Lucian Bebchuk and Martin Lipton to Debate Blockholder Regulation

Blockholder Disclosure, and the Use and Abuse of Shareholder Power

Posted by June Rhee, Co-editor, HLS Forum on Corporate Governance and Financial Regulation, on Tuesday September 25, 2012 at 8:48 am
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Editor’s Note: The following post comes to us from Adam O. Emmerich, Eric S. Robinson, Theodore Mirvis and William Savitt, attorneys in the corporate and litigation departments at Wachtell, Lipton, Rosen & Katz. This post is based on a paper they co-authored, titled “Fair Markets and Fair Disclosure: Some Thoughts on The Law and Economics of Blockholder Disclosure, and the Use and Abuse of Shareholder Power,” available here. The paper responds to a forthcoming article by Lucian Bebchuk and Robert Jackson Jr., titled “The Law and Economics of Blockholder Disclosure,” that is available here and discussed on the Forum here.

In our article Fair Markets and Fair Disclosure: Some Thoughts on The Law and Economics of Blockholder Disclosure, and the Use and Abuse of Shareholder Power forthcoming in Harvard Business Law Review, Spring 2012, and available at SSRN, we discuss the debate that has ensued following the March 2011 petition by our law firm, Wachtell, Lipton, Rosen & Katz, to the Securities and Exchange Commission to modernize the blockholder reporting rules under Section 13(d) of the Securities Exchange Act of 1934.

The petition sought to ensure that the reporting rules would continue to operate in a way broadly consistent with the statute’s clear purposes that an investor must promptly notify the market when it accumulates a block of publicly traded stock representing more than 5% of an issuer’s outstanding shares, and that loopholes that have arisen by changing market conditions and practices since the statute’s adoption over forty years ago could not continue to be exploited by stockholder activists, to the detriment of market transparency and fairness to all security holders. Among other things, the petition proposed that the time to publicly disclose such block acquisitions be reduced from ten days to one business day, given activists’ current ability to take advantage of the ten-day window to accumulate positions well above 5% prior to any public disclosure, in contravention of the clear purposes of the statute.

…continue reading: Blockholder Disclosure, and the Use and Abuse of Shareholder Power

Don’t Discourage Outside Shareholders

Posted by Lucian Bebchuk, Harvard Law School, on Wednesday August 15, 2012 at 4:58 pm
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Editor’s Note: Lucian Bebchuk is a Professor of Law, Economics, and Finance and Director of the Program on Corporate Governance at Harvard Law School.

The New York Times DealBook published today a piece I wrote, titled Don’t Discourage Outside Shareholders. The piece, available here, focuses on the SEC’s ongoing consideration of a rulemaking petition that advocates tightening the rules governing how quickly shareholders must disclose when they hold 5 percent or more of a company’s shares. I argue that such tightening could well unduly discourage the creation and activism of outside blockholders.

In contrast to the claims of the petition’s authors, the proposal should not be viewed as a “technical” closing of a loophole but rather as one that raises significant policy issues. In considering these issues, considerable weight should be given to the significant empirical evidence that the presence and involvement of outside blockholders enhances a company’s value and performance. Furthermore, the rules governing the balance of power between incumbents and outside blockholders are now substantially tilted in favor of insiders — both relative to earlier times and to other countries — rather than outside shareholders. This tilt counsels against tightening SEC rules in ways that would further disadvantage outsiders.

…continue reading: Don’t Discourage Outside Shareholders

Should the SEC Tighten its 13(d) Rules?

Posted by Lucian Bebchuk, Harvard Law School, and Robert J. Jackson, Jr., Columbia Law School, on Wednesday June 27, 2012 at 9:43 am
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Editor’s Note: Lucian Bebchuk is Professor of Law, Economics, and Finance at Harvard Law School. Robert J. Jackson, Jr. is Associate Professor of Law at Columbia Law School.

The upcoming issue of the Harvard Business Law Review will feature our article The Law and Economics of Blockholder Disclosure. The article is available here, and PowerPoint slides describing the paper’s main points are available here.

The Securities and Exchange Commission is currently considering a rulemaking petition submitted by Wachtell, Lipton, Rosen & Katz (available here) that advocates tightening the rules under the Williams Act and, in particular, reducing the amount of time before the owner of 5% or more of a public company’s stock must disclose that position from ten days to one day. Our article explains why the SEC should not view the proposed tightening as a merely “technical” change necessary to meet the objectives of the Williams Act or modernize the SEC’s regulations. The drafters of the Williams Act made a conscious choice not to impose an inflexible 5% cap on pre-disclosure accumulations of stock to avoid deterring investors from accumulating large blocks of shares. We argue that the proposed changes to the SEC’s rules require a policy analysis that should be carried out in the larger context of the optimal balance of power between incumbent directors and these blockholders.

We discuss the beneficial role that outside blockholders play in corporate governance, and the adverse effect that any tightening of the Williams Act’s disclosure thresholds can be expected to have on such blockholders. We explain that there is currently no evidence that trading patterns and technologies have changed in ways that would make it desirable to tighten these disclosure thresholds. Furthermore, since the passage of the Williams Act, the rules governing the balance of power between incumbents and outside blockholders have already moved significantly in favor of the former—both in absolute terms and in comparison to other jurisdictions—rather than the latter.

Our analysis provides a framework for the comprehensive examination of the rules governing outside blockholders that the SEC should pursue. In the meantime, we argue, the SEC should not adopt new rules that would tighten the disclosure rules that apply to blockholders. Existing research and available empirical evidence provide no basis for concluding that the proposed tightening would protect investors and promote efficiency. Indeed, there is a good basis for concern that such tightening would harm investors and undermine efficiency.

Below is a more detailed account of the analysis in our article:

…continue reading: Should the SEC Tighten its 13(d) Rules?

Section 13(d) Reporting Requirements Need Updating

Posted by David A. Katz, Wachtell, Lipton, Rosen & Katz, on Thursday April 12, 2012 at 9:18 am
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Editor’s Note: David A. Katz is a partner at Wachtell, Lipton, Rosen & Katz specializing in the areas of mergers and acquisitions and complex securities transactions. This post is based on an article by Mr. Katz and Laura A. McIntosh that first appeared in the New York Law Journal. The views expressed are the authors’ and do not necessarily represent the views of the partners of Wachtell, Lipton, Rosen & Katz or the firm as a whole. This post discusses a letter submitted to the SEC by Professor Lucian Bebchuk and Professor Robert J. Jackson Jr. concerning possible changes to Section 13(d) rules, available here.

A year has passed since Wachtell, Lipton, Rosen & Katz submitted a petition to the U.S. Securities and Exchange Commission requesting that it update its Schedule 13D reporting requirements to “clos[e] the Schedule 13D ten-day window between crossing the 5 percent disclosure threshold and the initial filing deadline, and adopt[] a broadened definition of ‘beneficial ownership’ to fully encompass alternative ownership mechanisms.” As the petition noted: “Recent maneuvers by activist investors both in the U.S. and abroad have demonstrated the extent to which current reporting gaps may be exploited, to the detriment of issuers, other investors, and the market as a whole.” [1] The SEC is scheduled to issue a concept release later this spring addressing the concerns raised by the petition. Activist hedge funds have responded strongly—opposing changes to the current Schedule 13D rules—complaining that the suggested changes will significantly hurt their business. Regardless of whether the present reporting scheme allows activist investors to profit by keeping their accumulations secret, it is clear that the present reporting regime is outdated and needs to be reconsidered. At a time when the SEC is requiring greater transparency from public companies and their executives, the same policy concerns demand greater transparency with respect to the acquisition of equity securities of public companies by third parties.

…continue reading: Section 13(d) Reporting Requirements Need Updating

Forward-Looking Statements – Deal Market Trends for 2012

Editor’s Note: David Fox is a partner at Kirkland & Ellis LLP, focusing on complex mergers and acquisitions as a member of the firm’s Corporate Group. This post is based on a Kirkland & Ellis M&A Update.

With the M&A market recovery losing steam in the second half of 2011, dealmakers are faced with increased global macro-economic jitters, election year incertitude and tightened financing markets. But corporations and private funds still have capital to deploy, leading pundits and practitioners alike to be cautiously hopeful that the M&A market in 2012 may show signs of renewed vitality.

With that in mind, we look back at 2011 for lessons learned in the M&A space with implications for the coming year – from the birth of Airgas and further dismantling of staggered boards to the reported (but possibly not exaggerated) death of Omnicare and hyperbolized demise of proxy access.

…continue reading: Forward-Looking Statements – Deal Market Trends for 2012

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