Executive compensation professionals do not come across the Hart-Scott-Rodino Act often. However, it does come up in certain circumstances, as evidenced by the occasional enforcement actions by the DOJ and FTC against a corporate director or executive, so executive compensation professionals need to be aware of the possibility.

The Hart-Scott-Rodino Act is part of antitrust law (thus, the FTC involvement). The HSR Act generally applies to mergers, acquisitions, and joint ventures that exceed a minimum value threshold( the size-of-transaction test) and, in some cases, an additional threshold based on the size of each party (the size-of-person test). But the HSR reporting requirements, by their terms, apply to any acquisitions of equity, including the granting or vesting of compensatory equity awards.

The reason we do not encounter the HSR reporting rules often is because the filing thresholds are quite high. However, some directors and executives, generally a company founder or significant individual investor, will attain those thresholds. Today’s blog is simply to point out that the HSR Act thresholds are adjusted annually and were recently adjusted for 2020, as described in Barb’s blog post:

As announced by the FTC on January 28, effective February 27 the thresholds are as follows:

  • Individuals with company stock holdings of less than $94 million are not required to make filings under the HSR Act (up from $90 million in 2019).
  • Individuals with company stock holdings in excess of $376 million are required to make filings under the HSR Act (up from $359.9 million in 2019).

If the individual's holdings are between the above two thresholds, their acquisition is reportable under the HSR Act if one party to the transaction has assets in excess of $18.8 million and the other party had assets of exceeding $188 million (up from $18 million and $180 million, respectively).