The SEC Doesn’t Like It When Hedge Funds Talk to Each Other


So what is this story about?

The Securities and Exchange Commission is investigating whether some activist investors teamed up to target companies without disclosing their alliances, potentially in violation of federal securities rules, according to people familiar with the matter.

The SEC’s enforcement division has recently opened multiple investigations and sent requests for information to a number of hedge funds, according to some of the people.

The relevant rule is that if you acquire more than 5 percent of a company’s stock, you need to disclose your ownership and plans onSchedule 13D, so everyone can know how much you own and what you’re up to. But also, if you and someone else “agree to act together for the purpose of acquiring, holding, voting or disposing of equity securities of an issuer,” then you have to add your ownership together for the 13D rules. So if Hedge Fund A buys 3 percent of a company’s stock, and Hedge Fund B buys 2 percent, and Hedge Fund C buys 1 percent, then none of them needs to do any 13D disclosure.But if they have an agreement with one another about “acquiring, holding, voting or disposing of” those shares, then they all need to disclose their ownership and purchase history and plans for the company and the fact that they’re working together…

The SEC Doesn’t Like It When Hedge Funds Talk to Each Other

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