UNITED STATES: SEC to Consider Shorter Reporting Deadline for 13D Disclosures

Wednesday June 30 2021

Chairman Gary Gensler of the Securities and Exchange Commission (SEC) has announced that the SEC may consider updating various rules related to transparency.

One such area is beneficial ownership. In 1968, Congress mandated that large shareholders of public companies disclose information that helps the public understand their ability to influence or control that company. Under current rules, beneficial owners of more than 5 percent of a public company’s equity securities who have control intent have 10 days to report their ownership.

These deadline hasn’t been updated in over 50 years. In his speech at London City Week, Gary Gensler stated that those rules might’ve been appropriate for the 1970s, but that he has doubts bout whether they continue to make sense given the rapidity of current markets and technologies. Therefore, he has asked staff how the SEC might update these rules, including possibly shortening reporting deadlines.

Another area mentioned in the speech is around security-based swaps — essentially, derivatives on individual companies that provide exposure to the company without traditional equity ownership. The disclosures there aren’t as robust as they are in the rest of the market. The collapse in March of the family office Archegos Capital Management is a reminder of why that could be relevant.

Thirdly, Gary Gensler believed the SEC can bring more transparency to short selling.

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