(Reuters) -Wall Street’s top regulator said on Tuesday it has tightened the timeline for investors to disclose 5% ownership stakes in companies they intend to control, shortening the allowed window from 10 calendar days to five business days.
The U.S. Securities and Exchange Commission’s changes mark an update to half-century-old regulations which officials said have not kept pace with advances in market technology, SEC officials said.
“In our fast-paced markets, it shouldn’t take 10 days for the public to learn about an attempt to change or influence control of a public company,” SEC Chair Gary Gensler said in a statement.
The SEC proposal, first made public in 2022, initially angered some activist investors who claimed that having to step forward sooner could make it unprofitable to build the ownership positions they need for successful takeover campaigns.
The SEC is currently seeking to force Tesla CEO Elon Musk to give evidence in the agency’s investigation of his takeover of the social media platform X, formerly known as Twitter, in which officials say Musk may have made such disclosures late.
As adopted, the rule would also shorten the disclosure deadline for certain institutional investors to 45 days from the end of the quarter in which their ownership stake surpasses 5%. Previously, the deadline was 45 days from the end of the calendar year.
In advance of the announcement, SEC officials told reporters the final rule had been softened in important ways from the original proposal. It had initially called for investors seeking control of a company to reveal within five calendar days, rather than business days, that they have purchased 5% or more of a company’s shares.
Additionally, the initial proposal would have required certain institutional investors — meaning companies that make bulk investments on behalf of others such as pension funds — to disclose stakes of 5% or more within five business days from a month’s end, rather than 45 days from the end of the quarter.
In an apparent break with past practice, the SEC announced the new rule changes after they had already been adopted. Such decisions are often made during public meetings at which the Commission’s five members discuss proposals before voting on them. Prior to the announcement, SEC officials declined to discuss procedural matters.
(Reporting by Douglas Gillison; Editing by David Gregorio and Nick Zieminski)
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