Lucian A. Bebchuk, The Law and Economics of Equity Swap Disclosure, Harv. L. Sch. Program Corp. Governance Working Paper 2022-4 (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.