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New York District Court Finds Violations of SEC Disclosure Requirements by Hedge Funds’ Acquisition of Swap Interests in a Target and by Acting as a Group Without Public Disclosure
June 16, 2008 Full PDF
The recent decision in CSX Corporation v. The Children's Investment Fund Management (UK) LLP, et al., 08 Civ. 2764 (LAK), has significant disclosure implications for hedge funds. Judge Lewis A. Kaplan of the Southern District of New York concludes that hedge funds may be a "group" for disclosure purposes under Section 13(d)(3) of the Exchange Act where communications between them indicate they are working together, requiring disclosure when their combined holdings reach 5%. Judge Kaplan also holds that parties who accumulate swap positions in the equity of a target may be deemed beneficial owners of the shares under Rule 13d-3(b), requiring disclosure when direct holdings and swaps combined reach 5%.