The Mystery Of The Brokaw Act by The Activist Investor Blog
Something doesn’t make sense about this. We wonder whether corporate interests played a couple of liberal Democratic Senators and labor unions into supporting their efforts.
In March, Senators Tammy Baldwin (D-WI) and Jeff Merkley (D-OR) introduced the Brokaw Act. The proposed law will change how investors report holdings on Form 13-D, including:
- shorten the deadline for filing a Form 13-D to two days, from the current ten days
- include derivative holdings in shares needed to cross the 5% filing threshold
- require, somehow, multiple hedge funds to disclose coordinated efforts, to respond to the so-called “wolf pack” problem.
Senators Elizabeth Warren (D-MA) and Bernie Sanders (D-VT) signed on as co-sponsors.
Why “Brokaw”? Wausau Paper had an obsolete plant in Brokaw, WI that needed closing. Activist investor Starboard Value prosecuted an activist project that led Wausau to close several plants, including that one, and eventual sale of the company. Sen. Baldwin no doubt heard of the heartache and dislocation from that plant closing in her home state. This bill represents her response.
It seems the bill has a near-zero chance of becoming law. Besides its sponsorship by four of the most liberal Democratic Senators in the Republican-led Senate, it would also have to get through the House of Representatives in a contentious election year.
We’ll let others comment on how a bill that regulates shareholders more tightly fails to solve the problem of heartache and dislocation from plant closings, and how it instead will entrench boards and executives. We’re more interested in how this came about.
We also know that corporate lackey Wachtell, Lipton has flogged a similar plan for years.
Baldwin does not sit on the Senate Banking Committee, where the bill went for consideration. Neither does Sanders. We can’t imagine either has the background on this obscure subject, or staff with that background, to handle this.
Merkley and Warren are both on Banking. Warren has spent her Senate career focusing on consumer finance issues, so we suspect she might have at best a little familiar with the subject.
Merkley has worked on banking regulation. His subcommittees do not oversee the SEC, though. His staff is probably somewhat familiar with hedge fund regulation, although not intimate with Section 13D.
The bill is highly technical, with specific definitions of derivatives and other arcane terms. Only a skilled lobbyist could have written it. Of course, that’s how most bills start these days.
Sen. Merkley probably couldn’t find Brokaw, WI on a map until this year. We speculate that a corporate lobbyist wrote the bill and interested Baldwin in the subject because of the plant closing. A campaign contribution might have helped, although a quick search of the OpenSecrets databased didn’t lead anywhere.
Baldwin’s natural labor constituency, with its long-standing suspicion of Wall Street and hedge funds, happily supported it. She found a friendly and sympathetic colleague on the Banking Committee in Merkley, and away they went.
Our question is, which lobbyist?