But Mr. Buffett didn’t build his $10 billion-plus stake in I.B.M. overnight. He started buying eight months ago, beginning in March. You wouldn’t have known that if you had been studiously reading Berkshire Hathaway’s filings — known as 13Fs — in which companies must disclose stock holdings. There was no mention of I.B.M. in Berkshire’s quarterly filing in April, nor in August.
Instead, if you were looking carefully, you might have found an odd footnote that said: “Confidential information has been omitted from the form 13F and filed separately with the commission.”
Translation: Mr. Buffett received special permission from the S.E.C. to keep secret his investment in I.B.M. — and possibly keep secret stakes in other companies that he is building positions in that we have yet to learn about.
Mr. Buffett’s special treatment from the S.E.C. is not new — he has long taken advantage of an obscure rule to avoid disclosing his bets to the public before he is good and ready.
Mr. Buffett — and other billionaire investors like Carl Icahn, Bill Ackman and Nelson Peltz — essentially argue that the simple disclosure of an investment would cause the price to rise so much as to scuttle their strategy....
Mr. Buffett, in an interview, asked me, “How would you feel if you had to announce every story idea you had?”
He said that he did not believe that public investors should always be allowed to piggyback on investment ideas made by professional investors, especially before they are finished buying....The reason for having banks disclose their current trading positions is to help them comply with the Volcker Rule. By announcing every story idea they have, the banks will not be tempted to engage in proprietary trading.
Still, at a time when investors are asking for more and more transparency, there is a sense that the playing field on Wall Street is tilted toward the wealthy....
Over the decades, questions have been raised about the S.E.C.’s confidentiality rule, but have been quickly mooted. Back in 1997, Larry N. Feinberg, the founder of Oracle Partners, memorably told BusinessWeek: “I do not think confidential filings are fair. If I’m going to pull down my pants in public I want everyone to pull down their pants, too.”...
Of course, the purpose of forcing investors and companies to disclose their investment positions is to keep the markets transparent.
But anytime the government is making the markets more opaque, it deserves more scrutiny.