June 16, 2015

Is the SEC Investigating Potential 13(d) Group Violations?

Here’s an excerpt from this blog by Cooley’s Cydney Posner:

The WSJ reports that the SEC is investigating whether some hedge fund activists formed 13D “groups” but failed to make appropriate disclosure of their alliances. Under Rule 13d-5, when two or more persons agree to act together for the purpose of acquiring, holding, voting or disposing of equity securities, all of those persons together form a “group,” and are deemed to beneficially own all of securities owned by persons in the group. If the group together owns 5% or more of a company’s shares, all of the persons in the group may be required to make filings with the SEC. According to the WSJ report, SEC Enforcement has opened multiple investigations, sending requests for information to a number of hedge funds. The issue is whether, in targeting companies, they coordinated their efforts, or “acted in concert,” to target companies in a way that led to the formation of “groups,” but failed to make appropriate filings.