The FTC proposed amendments to the Hart-Scott-Rodino ("HSR") rules, particularly as they apply to financial investors, and requested comment on additional aspects of the mergers and acquisitions framework in anticipation of other possible rule changes.
The first Notice of Proposed Rulemaking would make two changes to the HSR rules. First, it would exempt most transactions in which the acquiring person would hold no more than 10 percent of the target's voting securities as a result of the acquisition. The proposal would repeal HSR Rule 802.9, which currently exempts acquisitions of up to 10 percent, provided the acquisition is "solely for the purpose of investment." Under the proposal, there would be no subjective test of "intent."
In addition, the proposal would amend the definition of "person" to include all "associates" of that person. The effect of that change would be to aggregate the holdings of all funds that are commonly managed (e.g., if a hedge fund manager were to advise three distinct limited partnership funds). Currently (leaving aside the test for the dollar size of an investment), each might acquire up to a 10 percent voting security interest, if passive, without having to make an HSR filing. Under the proposal, the shares of the three funds would have to be aggregated for purposes of determining the requirement to make an HSR filing.
The second release, which is an Advance Notice of Proposed Rulemaking, requests feedback and information on other aspects of the current HSR framework, including on "the size of transaction; real estate investment trusts; non-corporate entities; acquisitions of small amounts of voting securities; influence outside the scope of voting securities; transactions or devices for avoiding the HSR Act requirements; and issues pertaining to the HSR filing process." Comments are requested in anticipation of other possible rule changes.
Comments on both notices must be submitted within 60 days of their respective publications in the Federal Register.
Primary Sources
- FTC Press Release: FTC and DOJ Seek Comments on Proposed Amendments to HSR Rules and Advanced Notice of Proposed HSR Rulemaking
- FTC Notice of Proposed Rulemaking: Proposed Amendments to HSR Rules
- FTC Advance Notice of Proposed Rulemaking: Premerger Notification; Reporting and Waiting Period Requirements
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