Monthly Archives: March 2016

Shortening the Ten-Day Filing Window

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In 2011, ABC submitted this comment letter to the Securities and Exchange Commission (SEC) in support of a petition for rulemaking by the law firm Wachtel, Lipton, Rosen & Katz.  Wachtel’s petition called for shortening the ten-day filing window under SEC rules between the time a shareholder or group of shareholders amasses a five percent position in a publicly-traded company and when it must report that fact to the Commission.

The ten-day period, as noted in our letter, is an anachronism that has been exploited by hedge funds and other large activist investors to trade on material, inside information.  ABC argued for immediate disclosure of a five percent position.

The SEC never took action on this matter and the Wachtel petition languished.

Now, interestingly enough, a group of liberal Democratic Senators, including Bernie Sanders, has introduced legislation that would, among other things, shorten the ten day period to two.  The bill is called the Brokaw Act (S. 2720).  It is named for a town in Wisconsin that saw its paper mill closed due to hedge fund maneuvering, according to the bill’s chief sponsor, Senator Tammy Baldwin of Wisconsin.  Other sponsors of the Baldwin Act are Jeff Merkley (D, OR) and Elizabeth Warren (D, MA).

Hedge funds are important players in the capital markets and corporate takeovers can lead to great economic efficiencies.  But the ten-day window between the time a five percent position in a publicly traded company is acquired and the disclosure of that fact cannot be justified in a period  of rapid information dispersal.  The window should be narrowed, if not closed, ideally by the Commission or, if not, via the Brokaw Act.

 

Hope for Tax Reform?

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The Presidential campaign season thus far has not been remarkable for sparking intelligent public policy discussions.  And that does not bode well for how our nation’s economic problems will be addressed after the election.  Trade policy seems to be in the deep freeze.  Immigration reform has been infantilized.  And the most dangerous issue of all:  our large and rising national indebtedness, has been all but ignored or, worse, wished away with bizarre proposals about expanding entitlement programs whose effect, if adopted, would make the situation worse.

Is tax reform any different?  Perhaps not.  But there may be reason for very qualified optimism that something might be done next year.

For one thing, all of the Presidential candidates have reasonably detailed tax reform proposals that, if nothing else, would seem to signify a desire for reform.  Simultaneously, the two tax writing committees of Congress, the House Ways and Means Committee and the Senate Finance Committee are working on ideas that the next President could adopt, partially or in full, in an effort to achieve a bipartisan reform bill.

As for the American Business Conference, we continue to press for comprehensive tax reform.  Comprehensive instead of business because companies are organized for tax purposes in different ways.  That means changing the corporate tax alone will not help all firms.  To do the job right, we must change for the better the individual as well as the corporate tax.  It’s a tougher lift, to be sure, but it is the way to go.

Recently, ABC has associated itself with a coalition calling itself Parity for Main Street Employers.  This letter, sent to senior members of Ways and Means and Senate Finance, outlines the tax ideas of the group.  As ABC has done for some time now, the letter calls for integrating the corporate tax so as to eliminate the double taxation of corporate profits.  Second, it calls for a restoration of rate parity between pass through businesses and C corporations.  The end result would be an equitable, pro-growth taxation of all businesses instead of the uncompetitive mess we now endure.

The only thing that is missing from the letter, in our view, is that it does not mention reform of the way the nation taxes foreign profits.  On that point, ABC continues to press, in other fora, for adoption of a territorial system.