M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

Thursday, May 6, 2010

Did Buffet's Berkshire Run Afoul of Disclosure Rules?

Maybe, but so what? The WSJ and Reuters are reporting that Berkshire Hathaway may have run afoul of the Williams Act's early warning disclosure requirements by not filing a timely amendment to its Schedule 13D in connection with its acquisition of Burlington Northern Santa Fe Corp last Fall.  Berkshire filed its second amendment to its Schedule 13D in order to report that it had signed a merger agreement with Burlington Northern on November 3, 2009.  Rule 13d-2 requires that if there are any material changes to the facts set out in the Schedule 13D that the filer is required to amend the filing.  In this case, the original Schedule 13D filed in 2008 noted that the investment was for "investment purposes" and did not disclose any intention to acquire all of BNSF.    Reading the rule strictly, the moment Berkshire's purpose for holding the shares turned from investment to acquiring control, Berkshire had an obligation to amend its 13D (within 10 days).   Presumably the merger negotiations took longer than 10 days to initiate and complete.

OK, so maybe there was a technical violation.   But, there's no NACCO-like fraud allegation or shareholder suit to go along with this violation.  There's just discussion of the SEC looking into the matter.   Is there any remedy worth pursuing here? I guess the SEC could seek an order to cause Berkshire to come into compliance.  But, with its November 3, 2009 filing Berkshire is already in compliance.  There isn't much to be done and there's hardly seems a remedy worth pursuing.   



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One correction: The timing for filing an amendment to a Schedule 13D is “promptly” after a material change, including a change in investment purpose. The term “promptly” is not defined and is instead determined based on the facts and circumstances surrounding the materiality of the change in information triggering the filing obligation. Most practitioners think promptly means the next business day or so. The SEC has brought enforcement actions against tardy filers. See In the Matter of Cooper Laboratories, Inc. Release No. 34-22171 (June 26, 1985).

Posted by: mgardella | May 11, 2010 6:50:22 AM

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