The U.S. Senate is considering new legislation to tighten
regulation of activist hedge funds through increased
transparency and disclosure requirements.
The Brokaw Act, a bipartisan financial reform bill introduced by
Senators Tammy Baldwin (D-WI) and David Perdue (R-GA), would
force individuals and mangers to file 13(d) forms within four
days of acquiring more than 5 percent of a companys
shares. Currently, investors have 10 days to do so.
The legislation would also require disclosure of short
positions of more than 5 percent within four days and identify
coordinated groups of hedge funds, known as wolf
packs, as a single group, basing disclosure requirements
on the size of the groups cumulative stake rather than
hedge funds individual holdings.
This bipartisan legislation updates Depression-era
rules to address the financial abuses being carried out by
activist hedge funds who promote short-term gains at the
expense of workers, taxpayers, and local communities,
said Senator Baldwin in a statement Thursday. The Brokaw Act
will increase transparency and strengthen oversight of
predatory hedge funds.
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The legislation is named for Brokaw, Wisconsin. The village,
Senator Baldwins office claims, faces insolvency after
activist firm Starboard Value bought the Wausau Paper Company
and closed a century-old local mill. Starboard Value
demanded short-term returns like buybacks at the expense
of investments in workers, R&D, and the companys
long-term future, the statement continued. The proposal
would fight against increasing short-termism in the
U.S. economy, Baldwins office added.
An earlier version of the Brokaw Act,
co-sponsored by senators Bernie Sanders (I-VT) and Elizabeth
Warren (D-MA), was introduced in March 2016, but failed to
reach a vote before the 114th Congress ended on January 3,
The Senate committee on banking, housing, and urban affairs
is currently reviewing the 2017 proposal.
The Brokaw Acts supporters include Home Depot
recently targeted by sustainable investment firm Arjuna Capital
over lead paint and the labor organization AFL-CIO.