June 27, 2023
Vanessa A. Countryman, Secretary
U.S. Securities and Exchange Commission
Via Online Comment Portal
Re: Modernization of Beneficial Ownership Reporting File Number S7-06-22
I am writing to express my strong opposition to the proposed amendment to Rule 13d-3(e), as outlined in the recent document published by the Securities and Exchange Commission.
After carefully reviewing the details and implications of the proposed amendment, I firmly believe that allowing cash-settled derivative owners the same rights as beneficial owners of the underlying stock would be fundamentally unfair to actual owners of the stock. Furthermore, it opens the door to potential manipulation of voting rights by cash-settled derivative owners, which could undermine the integrity and fairness of corporate governance.
One of the fundamental principles of equity ownership is that owners of a company's stock should possess the rights and privileges associated with that ownership. Granting the same rights to cash-settled derivative owners, who do not have a direct ownership stake in the underlying stock, would create an imbalance and dilute the rights of actual stockholders.
By allowing cash-settled derivative owners to be recognized as beneficial owners, there is a significant risk of manipulative behavior. These derivative owners, without having a genuine interest in the company's long-term success, could potentially exploit their positions to influence voting outcomes for personal gain or other ulterior motives. This manipulation could undermine the democratic principles upon which corporate governance is built, eroding trust in the financial markets.
Moreover, the proposed amendment fails to address the potential for abuse of voting rights by cash-settled derivative owners. Unlike traditional shareholders who have a vested interest in the company's performance, cash-settled derivative owners may hold positions purely for speculative purposes, with little regard for the long-term welfare of the company or its shareholders. Allowing such owners to exert significant influence over corporate decision-making through voting rights would introduce an inherent bias and potentially compromise the interests of genuine stockholders.
In light of these concerns, I urge the Securities and Exchange Commission to carefully reconsider the proposed amendment to Rule 13d-3. It is crucial to preserve the integrity of corporate governance by ensuring that voting rights are granted solely to those who have a genuine ownership stake in the underlying stock. The potential for manipulation and the erosion of shareholder rights should not be taken lightly.
Thank you for your attention to this matter. I sincerely hope that my concerns, along with those of countless other investors, are carefully considered before any final decision is made. I am available for further discussion or to provide additional information if required.
Sherwin D'Souza