The US Securities and Exchange Commission (SEC) has announced that activist investors must disclose the identities of their clients in regulatory filings. This move is expected to increase transparency in the industry, particularly with regards to special purpose vehicles known as “sidecars” used to finance activist campaigns.

Background

Activist investors, such as hedge funds, have long prized secrecy around the identity of their investors, arguing that revealing this information could embolden copycats and limit their ability to make money. However, companies targeted by corporate activists argue that greater transparency, including knowing who is invested, is necessary to defend themselves.

The SEC’s updated interpretations on 13D filings and proxy statements clarify how the agency views its rules on critical filings. The changes signal increased interest in transparency about what investors pushing for boardroom changes or other matters must say about their clients.

Implications

The new guidance may have significant implications for hedge funds and other activist investors. By requiring the disclosure of client identities, the SEC is increasing the level of transparency in the industry, which could lead to more accountability and potentially impact the way activist campaigns are financed.

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