SEC Nominee Treads Cautiously on Question of Takeover Rules

David S. Ruder, the Reagan Administration’s choice to be the new chairman of the Securities and Exchange Commission, got a skeptical hearing Wednesday from a Senate committee that is pushing for new legislation to limit hostile corporate takeovers--legislation that Ruder said would be largely unnecessary.

But after two hours of questioning by the Banking Committee, it appeared certain that the panel would recommend that the full Senate confirm Ruder, 58, a professor of business law and a former dean of the Northwestern University law school.

Sen. Donald W. Riegle Jr. (D-Mich.), one of his toughest questioners, went out of his way to declare that he would vote to confirm. Committee Chairman William Proxmire (D-Wis.), a leader in the drive to impose new regulations on the securities industry, said he was sure Ruder would meet “no trouble either in this committee or the Senate.”

The committee scheduled a vote on Ruder next Tuesday and a vote by the full Senate could come later in the week.

Proxmire and nine other committee members have introduced legislation to require immediate disclosure to the SEC of the acquisition of as little as 3% of a company’s stock. The goal is to force corporate raiders to make their investments public at an earlier stage than is now required.

Ruder for the most part cautiously avoided directly criticizing that proposal, although he said a five-day deadline to register acquisition of 5% of a company’s stock would be adequate. Under existing law, investors--regardless of motive--have 10 days to register acquisition of 5% of the stock of any company.

Lowering the 5% threshold to 3% “would increase disclosure obligations (in the securities industry) and would increase the regulatory burden of the commission,” Ruder explained. “It would not be useful.”

At another point he testified: “By and large, other changes are not needed at this time.” He also told the committee that he believes that regulations to police the financial instruments used in leveraged buyouts should be developed by state authorities rather than at the federal level. (A leveraged buyout is the takeover of a company using borrowed funds. Often, the target company’s assets serve as security for the loans obtained by the acquirer.)

Ruder also raised committee hackles by expressing the view, widely shared in the Reagan Administration, that shareholders, rather than corporate management or employees, are the main interested parties in takeovers. It is shareholders who own the company, he said, and who “are the properly protected group.”

Sen. Terry Sanford (D-N.C.), a sponsor of committee legislation to make takeovers tougher to accomplish, bristled. “I’m disturbed that you take such a narrow view of takeovers,” he said. “You seem to believe that if the stockholder gets more money, it’s all right.”

Proxmire also took issue with Ruder’s solicitude for stockholders. “The greatest interest in takeovers is the employees,” he declared.