Japan’s ruling party plans to propose stronger enforcement against suspected violations of shareholder disclosure rules by activist investors. The proposals come as Japan has become one of the world’s busiest markets for activist investing outside of the U.S.

Background

The presence of activists has created healthy tension for management and helped drive positive change, said Fumiaki Kobayashi, who heads a group of Liberal Democratic Party lawmakers examining corporate governance. However, there are cases where short-term demands by some activist shareholders may discourage growth investment, and there are concerns about those who may be disregarding rules.

Kobayashi pointed to recent revisions of disclosure regulations that specified the scope of deemed joint holdings, aimed at addressing concerns over so-called wolfpack activity, in which investors are suspected of acting in concert while avoiding disclosure requirements.

Proposals

The Securities and Exchange Surveillance Commission, the country’s securities watchdog, should be given the resources needed to investigate suspected violations, including additional personnel and greater use of digital tools, Kobayashi added. The group is also likely to recommend a review of the shareholder proposal framework, including tighter requirements for submitting shareholder proposals and the introduction of a statutory mechanism for shareholders to put a non-binding advisory resolution at shareholders’ meetings.

Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.