131–135 of 135 posts
My gut sense is that the important time period is length of hold going forward, not length of past hold. Maybe the vote strength should instead go with the period of lockup instead? That is, I agree to hold my shares for ten years, so I get ten votes. Perhaps it could even be slightly nonlinear with respect to the length of time? (years * 1+log(years)) or similar? Edit: LTSE reminds me of LTCM. Not a great connotatio…
Do you perhaps mean years*(1+log(years))?
Earlier quoted context omitted.
> The problem is that there is a financial incentive for someone else who is not working with them to buy up the stock, immediately resell it with the normal guarantees (that they will pass on dividends, allow voting by proxy etc.), but not pass on such re-sell information to the exchange/company. Does the exchange/company have some sort of a right to prevent resale unless tenure information is tracked? Yes, absolute…
> As a result, brokers (i.e. your hypothetical entity that gobbles up all the shares and then loans them or sells economic/voting rights) must be registered with FINRA and are subject to very extensive regulations, including rules from FINRA, the SEC and the public exchanges. I still don't get it, length and complicatedness of rules notwithstanding. Why can't a holding company not subject to these regulations simply…
You can't just buy shares from a registered securities professional (e.g. broker, dealer or underwriter) and then start engaging in "off the books" securities transactions. That is, unless you don't mind a lengthy prison sentence.
The activities you are describing (buy securities and then sell "stakes" and/or profits interests and/or voting rights) fall very squarely within many of the various definitions of securities professional required to register and comply with these extensive regulations. For example, see definitions 11 and 12 here [1]. Also note that the definition of "sell" includes selling any interest in a security--not just selling an entire security outright.
> (11) The term “underwriter” means any person who has purchased from an issuer with a view to, or offers or sells for an issuer in connection with, the distribution of any security, or participates or has a direct or indirect participation in any such undertaking, or participates or has a participation in the direct or indirect underwriting of any such undertaking; but such term shall not include a person whose interest is limited to a commission from an underwriter or dealer not in excess of the usual and customary distributors’ or sellers’ commission. As used in this paragraph the term “issuer” shall include, in addition to an issuer, any person directly or indirectly controlling or controlled by the issuer, or any person under direct or indirect common control with the issuer.
> (12) The term “dealer” means any person who engages either for all or part of his time, directly or indirectly, as agent, broker, or principal, in the business of offering, buying, selling, or otherwise dealing or trading in securities issued by another person.
Here's just a random example from Google of the penalties your hypothetical "off the books" broker could face [2].
[1] https://www.law.cornell.edu/uscode/text/15/77b
[2] http://companycounsel.net/2010/01/21/you-dont-have-to-know-t...
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We can get around this easily enough with a Total Return Swap. This way we can move the economic interest around with out ever moving the shares.
Our system actually handles this gracefully. If you change the beneficial owner, that’s the same as selling the shares (for voting purposes)
How would this work with someone pulling something similar to Altaba? Suppose you have $1B worth of stock, and 10% of the value is in the vested voting rights that you'd lose by selling it. Instead of selling part of it on the open market, you sell shares in a shell corporation that holds that stock. Surely the discount in ShellCorp's stock price compared to UnderlyingCorp is less than 10%? And the cost of setting up…
Perhaps you'd tie voting rights to a named human beneficial owner, so the prospective purchaser of your shell corporation wouldn't inherit them[1] Though it might have the interesting side effect of fund managers who exercise their voting rights being better compensated and staying in their jobs longer... [1]possible to devise some kind of unusual contractual arrangement where the "beneficial owner" retained formal t…
A major reason for that is trying to prevent "gaming" of votes, along the lines of your footnote [1]. Just like right now, I don't think the LTSE proposal would require an outright ban on these arrangements--it just requires the issuer/exchange to make sure the disclosure requirements for "beneficial owners" are sufficient for them to "reset" the voting clock if/when voting power is transferred.
Earlier quoted context omitted.
there is a difference between long term planning and short term execution yes short term execution should be monitored but it should not lead long term execution plans
Owners should be able to decide at any moment it’s time to throw out management and start fresh.