Jun. 27, 2023
This is an amendment to my previous comment on S7-06-22, "Modernization of Beneficial Ownership Reporting," as a retail investor. I believe it would be beneficial to extend the comment period, allowing increased public review. Retail investors like myself may not be as familiar with the nuances of these proposals compared to industry commenters who have more resources and vested interests. Therefore, I request another extension. I support the proposed amendments to revise filing deadlines, as technological advancements have accelerated information dissemination. Shorter deadlines would enhance disclosures, reduce delays, and address information asymmetry issues that could harm investors. However, I am against the proposed amendments to Rule 13d-3, specifically the addition of paragraph (e), which regulates the use of cash-settled derivative securities. This rule proposal risks allowing derivatives holders to influence or control the issuer of the reference securities, potentially leading to unintended consequences. Granting voting rights to derivatives holders, as suggested by some interpretations, would go beyond the intended scope of Rule 13d-3. Cash settled derivatives do not guarantee exercise of underlying rights, and deeming certain derivatives holders as beneficial owners could dilute shareholder rights and complicate the voting process. Ownership rights should be based on directly owning the security, not through derivatives. Therefore, I oppose the proposed amendment to Rule 13d-3(e) and the determination of the number of equity securities for cash-settled derivative holders. The proposed amendment to deem holders of cash-settled derivative securities as beneficial owners also raises concerns. Reporting significant derivative positions, both long and short, separately would be a more appropriate approach. This would enhance transparency without conferring beneficial ownership rights to derivatives holders, aligning with the goal of influencing counterparties' risk management decisions. I am in agreement with the objective of achieving better transparency in the market. Requiring the reporting and public disclosure of significant derivative positions, both long and short, would be a positive step in influencing counterparties' risk management decisions. By providing adequate and timely disclosures of derivatives positions, market participants can make more informed assessments of the potential risks, such as short squeezes, which ultimately protects investors. Transparency in this regard would benefit the overall functioning and integrity of the market. While this letter does not cover all elements of the proposed rule, I believe an extension or rejection of the proposal is in the public interest. The risks and downsides associated with amending Rule 13d-3 outweigh the benefits of revising filing deadlines. Thank you for considering the comments of retail investors in this matter.