Activist Investing Basically Insider Trading, Sayeth Gary Gensler [Dealbreaker]

He’s got a lot of plans for the hedge fund industry, and it’s not going to like them.

As we’ve seen and spoken about at some length, Securities and Exchange Commission Chairman Gary Gensler has a longand growing to-do list. And having taken nine months to draw it up, he’s maybe got a little less than a year to get it all done.

If Republicans gain control of the House or Senate next year, the committees that oversee the SEC would likely summon Mr. Gensler to testify more frequently at hearings on Capitol Hill. They could also threaten to cut the agency’s budget or forbid it from pursuing certain policies via amendments to must-pass pieces of legislation.

“There’s the very big risk that his agenda could get caught up in a change in the control of the Congress, and that would be very difficult for him and the SEC,” said Hal Scott, an emeritus law professor at Harvard Law School.

Perhaps with this in mind, Gensler is at last getting busy.

The U.S. Securities and Exchange Commission will look at what fund managers charge as part of a broader effort to boost efficiency, competition and transparency in markets, Gensler said Wednesday…. In addition to the asset management industry, Gensler said staff would review equity, bond and Treasury trading for areas to make improvements.

Another area of focus for the SEC this year will be the role predictive analytics and artificial intelligence play in financial markets, Gensler said.

Well, if that wasn’t enough to make hedge fund manager blow coffee through their noses all over their inflows, perhaps this novel take on insider trading will do it.

The agency is considering changing the rules under which hedge funds disclose that they have acquired 5% of a public company’s stock, Gensler said during a virtual Q&A at the Exchequer Club in Washington, D.C…. “I would anticipate we’d have something on that,” Gensler said, adding that he is worried about “information asymmetry,” because the public doesn’t know there’s a big player buying up shares during the 10-day period….

“It’s material nonpublic information that there’s an activist acquiring stock, who has an intent to influence and generally speaking, there’s a pop if you look at the economics from the day they announced … there’s usually a pop in the stock at least single-digit percent,” Gensler said. “So the selling shareholders during those days don’t have some material information.”

Hedge Fund Fees in Crosshairs as Gensler Lays Out SEC’s 2022 Agenda [Bloomberg]
SEC eyes tighter disclosure deadlines for hedge funds building big stakes in companies [CNBC]
SEC Under Pressure to Implement Agenda in 2022, While Democrats Control Congress [WSJ]
Global hedge fund industry assets top $4 trillion for the first time [Reuters]

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