The Law and Economics of Equity Swap Disclosure
Harvard Law School Program on Corporate Governance Working Paper 2022-4
11 Pages Posted: 22 Mar 2022 Last revised: 1 Jun 2022
Date Written: March 1, 2022
Abstract
The Securities and Exchange Commission has put forward for public comment that would mandate immediate disclosure of the acquisition of any equity swap position with a dollar value exceeding $300 million. This paper examines the proposal. I first show that the proposed rule would impose a serious cost – its detrimental effect on hedge fund activism – that the Commission seems to have overlooked. I then discuss the problematic disparity between the treatment of equity swaps and equity securities that the proposed rule would introduce, and I explain that the rationales put forward by the Commission for the proposed rule cannot justify introducing such a disparity. Finally, I identify a number of issues that the Commission should analyze before putting forward for public comment any proposed rule governing disclosure of equity swaps. Without analyzing these issues, I conclude, the Commission would not have an adequately informed basis for adopting the proposed rule.
JEL Classification: G30, G34, K22
Suggested Citation: Suggested Citation