The Pershing Square/Valeant Stock Accumulation: Will it Lead to Regulatory Action?

Recent reports of the undisclosed accumulation of a 9.7% block of Allergan stock by a vehicle formed by Pershing Square and Valeant have raised a number of questions. The below memo discusses some of these questions, including the Schedule 13D “ten-day window” after the 5% threshold is crossed and before a filing is required and whether the Allergan events may lead the SEC to exercise its Dodd-Frank authority to close or greatly shorten that window (consistent with the approach in many other countries). The memo also discusses the applicability of insider trading rules to stock accumulations and raises the question of whether SEC Rule 14e-3 (which prohibits certain trading by third parties having material non-public information regarding a potential tender offer) could be extended so as to apply in other M&A contexts.