Jun. 26, 2023
Dear Securities and Exchange Commission, I am writing to provide my comments and express my support for the proposed rule S7-06-22, which aims to modernize beneficial ownership reporting and enhance transparency and fairness in our financial markets. I appreciate the efforts made by the SEC to identify major shareholders and potential conflicts of interest, promoting a more accountable financial system. The proposed rule presents an opportunity to further strengthen these efforts and ensure a more transparent and equitable market environment. Transparency is a cornerstone of a healthy and efficient financial market. By requiring the disclosure of beneficial ownership, the proposed rule can provide a clearer view of market dynamics and enable investors to make more informed decisions. The identification of major shareholders and potential conflicts of interest can help foster a more accountable financial system. Therefore, I believe that the amendments proposed in rule S7-06-22 are crucial for enhancing transparency in stock ownership and ensuring a fair and free market. I particularly encourage the adoption of structured, machine-readable data language for filing Schedules 13D and 13G. This standardized reporting format would not only streamline the reporting process but also ensure the efficient analysis and comparison of ownership data. By adopting a structured data approach, the SEC can enhance the accuracy and accessibility of beneficial ownership information, leading to more effective market oversight. One significant area where the proposed rule can bring much-needed transparency is in hedge funds' short positions. Short selling is a legitimate investment strategy, but it can also be used to manipulate stock prices and distort market dynamics. The timely disclosure of short positions would enable market participants to assess the overall market sentiment accurately and prevent potential abuses. However, it is crucial that the implementation of this provision is carefully executed to avoid unintended consequences. One concern I have is the potential dilution of voting power for actual shareholders if cash settled derivatives owners are considered beneficial shareholders. While it is essential to capture the ownership of derivatives that provide economic exposure to underlying securities, it is equally crucial to maintain the integrity of voting rights. Clear guidelines should be provided to ensure that only those with direct ownership and economic interests in the underlying securities are granted voting power. This would help protect the rights of actual shareholders and maintain a fair representation of their interests. The SEC has a critical role in developing clear guidelines and rules that strike the right balance between transparency and fairness. Ambiguities or unintended consequences in the implementation of the proposed rule could create confusion and potentially undermine market integrity. I encourage the SEC to provide detailed guidance to market participants and take into account potential challenges and unintended consequences that may arise. In advocating for the protection of voting rights, it is crucial to ensure that the votes of actual shareholders carry meaningful weight. Granting beneficial ownership status only when the underlying security is delivered, as proposed in the rule, would protect existing shareholders from dilution and ensure that their voting power is not diminished. This provision would contribute to maintaining the fairness and representativeness of corporate governance. The transparency and reporting requirements outlined in the proposed rule also play a crucial role in maintaining market integrity and deterring market manipulation. Timely reporting of short position changes prevents the accumulation of hidden short positions, ensuring that investors have access to up-to-date and accurate information about market activities. Enhanced oversight through structured data enables better monitoring and identification of potential risks, leading to necessary regulatory actions. By deterring coordinated actions aimed at suppressing stock prices, the proposed rule promotes a level playing field for all market participants. In conclusion, I firmly believe that the adoption and enforcement of SEC Rule Proposal S7-06-22 are crucial steps towards enhancing transparency and fairness in the market. The proposed amendments have the potential to provide a clearer view of stock ownership, identify potential conflicts of interest, and promote a more accountable financial system. I appreciate the SEC's efforts in recognizing the importance of structured, machine-readable data language for filing beneficial ownership reports. By embracing standardized reporting formats, the SEC can ensure efficient and accurate analysis of ownership data, leading to more effective market oversight. While supporting the overall objectives of the proposed rule, I do express concern about the potential dilution of voting power for actual shareholders if cash settled derivatives owners are considered beneficial shareholders. It is imperative that the SEC provides clear guidelines to strike the right balance between capturing ownership and maintaining the integrity of voting rights. Transparency, timely reporting, enhanced oversight, and deterrence against market manipulation are vital for the integrity and fairness of our financial markets. The adoption of this rule will foster fair competition, prevent unfair advantages for specific market participants, and contribute to a more level and equitable market. It is my hope that the SEC addresses the raised concerns and prioritizes the protection of shareholder rights in the final rule. I would like to express my gratitude to the SEC for providing an opportunity for public comment on this important rule proposal. By considering these comments and incorporating them into the final rule, the SEC can take significant strides towards building a more efficient and accountable financial system, benefiting investors and the overall health of the market. Thank you for your attention to these matters, and I trust that the SEC will carefully evaluate these comments to ensure the transparency and fairness that our financial markets deserve. Sincerely, Regarded