June 26, 2023
Subject: Modernization of Beneficial Ownership Reporting File Number S7-06-22
Dear Ms. Countryman,
I am writing to provide my comments on the proposed amendments to modernize rules governing beneficial ownership reporting requirements. I appreciate the Commission's efforts to increase transparency and fairness in our markets, and I generally support the proposed changes. However, I would like to highlight a few concerns and suggestions.
Firstly, I echo Better Markets' support for the proposal to accelerate the filing deadlines for beneficial ownership reports and expand the scope of beneficial ownership reporting to include certain cash-settled derivatives. I agree that these reforms would increase transparency, fairness, and systemic stability in our markets. However, I also share their concerns about the \"purpose\" test for deeming the holders of certain derivatives as beneficial owners of the reference securities. This test seems inherently difficult to administer and could potentially create a significant loophole in the beneficial ownership reporting framework.
Secondly, I align with Dr. Susanne Trimbath's perspective on the proposed rule that would include cash-settled derivatives holders under beneficial ownership. While I understand the importance of this rule change for reporting purposes, I am concerned about the potential implications for shareholder voting rights. Assigning voting rights to derivative holders could undermine the rights of bona fide shareholders and exacerbate existing issues in the shareholder voting process.
Therefore, I suggest that if derivative holders wish to vote on matters of corporate governance, they should be required to exercise that right through direct beneficial ownership of the underlying security. This approach would help to maintain the integrity of shareholder voting rights while also addressing the need for increased transparency in beneficial ownership reporting.
Thank you for considering my comments. I look forward to seeing how the Commission will address these concerns in the final rule amendments.
Sincerely,
Blake Losee