Controlling Group

I over-promised yesterday, when I said I'd discuss the legal issue today of whether Greenberg is running a "controlling group" in the meaning of New York's law governing who does or doesn't get to control an insurance company.

Researching the matter turns out to be more trouble than I thought, and would expect that words like "control" and "group" have the same meaning in New York state law, in particular in its insurance law, that they have in the federal securities regulatory system.

But maybe not. The point, after all, is different. In federal securities law, the question often arises, "is so-and-so seeking to acquire control of a company without paying a control premium for it?" That is, after all, how the temptation to buy shares through surrogates, acting informally as a 'group,' would arise. An acquirer given its druthers wouldn't announce on the news "I'm going to start buying up AIG shares until I control the company"! That would be akin to saying, "Please demand ever-higher prices from me for that stock -- I'll pay them," and this of course gets to be expensive. Hence the phrase "control premium."

But the acquirers don't get their druthers. If you act surreptitiously, as a 'group,' to acquire the stock without paying such a premium you're in violation of the securities laws and regulations which require candor on such matters, on the theory that its only fair to pay the stockholders that sort of control premium, and you've cheated them out of something if you avoid paying it.

There's more to it than that, but my point is just that the significance of words "control" and "group" in the typical securities litigators' setting is different from the concern of the insurance regulators of a state to keep track of just who it is they are regulating. The meaning of the words may not be the same.

And of course you must suppress any impulse that arises in your throat to say, "maybe group just means plain-old-English 'group'." Tautologies don't enlighten.