Unlikely allies, including roughly 80 law and finance professors, as well as hedge funds and labor activists, are pushing back on regulations proposed by the Securities and Exchange Commission around swaps, a type of financial instrument that gives investors a roundabout way to gain access to a stock, the New York Times reported. These groups are united by concerns that the proposed regulations could chip away at the market for activist investors, the shareholders who agitate for changes at publicly traded companies. Among the critics are members of corporate boards whom activists could agitate against. A group including law professors from Harvard, Stanford and Texas A&M Universities was among those that submitted letters to the commission before Monday, the deadline for comments. In December, the commission proposed rules that would force investors to disclose swap positions they had amassed in companies within one day if they exceeded $300 million, 5 percent of a company or, in certain circumstances, as little as $150 million. The proposal followed the collapse of Archegos Capital Management, which used billions in swaps to make what turned out to be bad bets — a sudden failure that cost global banks billions in losses and roiled the stock market. The one-day reporting requirement for swaps in the SEC’s proposal is even shorter than the time in which chief executives must disclose their own trading in their company’s stock; chief executives have two business days to disclose stock purchases or sales. The law professors and others argue that forcing activist investors to report their positions in swaps so quickly would make it uneconomical to take big positions in companies. They say that other investors could immediately trade against them, or corporate boards could swiftly put in place defenses or other attacks against activists trying to build a big enough stake to force changes.
