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

See all articles by Lucian A. Bebchuk

Lucian A. Bebchuk

Harvard Law School; European Corporate Governance Institute (ECGI); National Bureau of Economic Research (NBER)

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

Bebchuk, Lucian A., The Law and Economics of Equity Swap Disclosure (March 1, 2022). Harvard Law School Program on Corporate Governance Working Paper 2022-4, Available at SSRN: https://ssrn.com/abstract=4063000 or http://dx.doi.org/10.2139/ssrn.4063000

Lucian A. Bebchuk (Contact Author)

Harvard Law School ( email )

Cambridge, MA 02138
United States
617-495-3138 (Phone)
617-812-0554 (Fax)

HOME PAGE: http://www.law.harvard.edu/faculty/bebchuk/

European Corporate Governance Institute (ECGI) ( email )

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National Bureau of Economic Research (NBER) ( email )

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