United States of America
In the Matter of
Berkshire Hathaway Inc.
|ORDER AFFIRMING THE DETERMINATION OF THE DIVISION OF INVESTMENT MANAGEMENT TO DENY CONFIDENTIAL TREATMENT|
The Securities and Exchange Commission ("Commission") deems it appropriate and consistent with the public interest and protection of investors, pursuant to Rule 431(a) of the Commission's Rules of Practice ("Rules of Practice"), to affirm the determination of the Division of Investment Management ("Division") to deny the request for confidential treatment of information for the calendar quarter ended September 30, 2002 filed by Berkshire Hathaway Inc. ("Berkshire") pursuant to Section 13(f) of the Securities Exchange Act of 1934 ("Exchange Act").
1. Berkshire's Petition for Review, filed on February 28, 2003, describes Berkshire as a diversified holding company whose subsidiaries are engaged in numerous businesses, including property and casualty insurance and reinsurance.
2. Under Section 13(f)(5)(A) of the Exchange Act, Berkshire is an institutional investment manager that exercises investment discretion over $100 million or more in reportable securities, as defined in Rule 13f-1(c) under the Exchange Act.
3. Berkshire is subject to the reporting requirements of Rule 13f-1(a) under the Exchange Act, which requires Berkshire to file Form 13F reports with the Commission on a quarterly basis.
4. On November 14, 2002, Berkshire filed a request, pursuant to Rule 24b-2 under the Exchange Act, for confidential treatment of information required to be filed with the Commission pursuant to Section 13(f) of the Exchange Act ("Form 13F information") for the calendar quarter ended September 2002. Berkshire also filed a public Form 13F report for the calendar quarter ended September 2002.
5. On February 13, 2003, the Division, acting under delegated authority, sent Berkshire a letter that denied Berkshire's request for confidential treatment of Form 13F information for the calendar quarter ended September 2002 ("Denial Letter').
6. On February 21, 2003, Berkshire filed a Notice of Intention to Petition for Review indicating that it would appeal to the Commission the Division's decision to deny confidential treatment of Form 13F information.
7. On February 24, 2003, Berkshire filed an amendment to its public Form 13F report for the calendar quarter ended September 2002 that disclosed one of the securities positions included in Berkshire's request for confidential treatment of Form 13F information for the calendar quarter ended September 2002.
8. On February 28, 2003, Berkshire filed a Petition for Review, appealing the Division's February 13, 2003 denial of Berkshire's request for confidential treatment of Form 13F information for the calendar quarter ended September 2002.
9. On May 6, 2003, Berkshire filed an amendment to its public Form 13F report for the calendar quarter ended September 2002 that disclosed one of the securities positions included in Berkshire's request for confidential treatment of Form 13F information for the calendar quarter ended September 2002. Berkshire's public disclosure of that securities position, which was also included in its Petition for Review, makes the Commission's review of the denial of confidential treatment for that position moot.
We have carefully considered Berkshire's Petition for Review in this matter and the Division's Denial Letter. The Division states that Berkshire failed to demonstrate a likelihood of substantial competitive harm from the disclosure of its acquisition program for two securities. Berkshire essentially relies on general statements and exhibits involving other selected securities, indicating that revelation of Berkshire's position in the securities which are the subject of their Petition would, because of its CEO's (Mr. Buffett's) reputation for successful stock selection, adversely affect Berkshire's acquisition program. Berkshire argues that other market participants would on learning of Berkshire's interest join in acquiring the stock, causing a material increase in the price of the stock, thus making pursuit of the acquisition program more costly. Berkshire provided a list of instances where disclosure of Berkshire's positions in other securities was followed by increases in the prices of the securities in question. (Exhibit 1 to Berkshire's Petition for Review.)
The Division's denial of Berkshire's request rests largely on its view that Berkshire has not adequately demonstrated the likelihood of substantial competitive harm in that the information provided regarding these particular securities is essentially general and does not provide sufficient information regarding "whether [Berkshire's] ability to acquire or liquidate a securities position, in the context of the market for those securities, is likely to be impaired if its investment strategy were made known to the public." (Denial Letter, pages 3-4, citing the Division's June 17, 1998 letter to confidential treatment filers.) (Emphasis added.)
The Division, in requiring more specific information to substantiate the likelihood of competitive harm, in the context of this record, appears to be within the guidelines set out for filers and in accordance with the purposes of Section 13(f) and the rules and current Division guidance thereunder.
We recognize that there have been a number of occasions where disclosure of Berkshire's stock purchase or selling programs has resulted in temporary spikes in the market, and may to varying extents "foreclose [Berkshire's] ability to increase its holdings in that security at prices Mr. Buffett concludes are attractive." (Berkshire's Petition for Review, page 4.) However, we hesitate to declare that such disclosures will inevitably lead to market disruption so severe as to cause substantial competitive harm to Berkshire's competitive position in all cases. That would lead to a virtual per se justification for confidentiality for Berkshire, without specification of limits or specific time frames for any acquisition (or sales) program Berkshire sees fit to undertake. In our view, Berkshire's request appears over-broad. The Division's request for additional substantiation of this aspect of Berkshire's request, including discussion and analysis of the market conditions and the likely effect of disclosure, at the times in question for these securities, and more specific reasons for Berkshire's assertion that its ability to acquire or sell these securities would be so adversely affected as to cause it substantial competitive harm, therefore appears appropriate. Moreover, we believe that the Division's request that Berkshire address both the status and expected duration of Berkshire's programs in these securities was also appropriate. Information concerning matters such as "historical price of and an average daily trading volume for these securities" (Denial Letter, page 4) and a more specific description of the planned program of acquisition or disposition could assist in informing the Commission's assessment of the impact of granting or denying Berkshire's request.
The Commission affirms the Division's February 13, 2003 decision to deny Berkshire's request because it failed to justify the requested one-year time period for confidential treatment, and failed to demonstrate that disclosure would be likely to cause substantial harm to Berkshire's competitive position.
IT IS ORDERED that, after considering Berkshire's Petition for Review under Rule 431(b)(1) of the Commission's Rules of Practice and under the standards for review set forth in Rule 411(b)(1)(iii) of the Rules of Practice, the Commission, pursuant to Rule 431(a) of the Rules of Practice, affirms the Division of Investment Management's decision to deny Berkshire's Form 13F confidential treatment request for the calendar quarter ended September 2002.
IT IS FURTHER ORDERED that the automatic stay of delegated action pursuant to Rule 431(e) of the Rules of Practice is hereby lifted.
By the Commission.
Jonathan G. Katz
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