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activist investors to profit by keeping their accumulations secret, it is clear that the present reporting regime is outdated and needs to be reconsidered.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.

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