A public company director recently entered into a settlement agreement with the Federal Trade Commission, or FTC, pursuant to which he agreed to pay $720,000 in civil penalties to settle allegations that he violated the Hart-Scott-Rodino Act, or HSR Act, by failing to report purchases of stock from two companies. The HSR Act requires individuals and companies to notify the FTC and the Department of Justice of acquisitions of stock in excess of certain dollar thresholds, and to observe a waiting period before closing the acquisition. While acquisitions of up to 10% of a company’s voting securities made solely for investment purposes are exempt from this requirement, the exemption does not apply if the purchaser is a member of the issuing company’s board of directors.
In the recently-announced settlement, the FTC alleged that the director acquired, over a period of years, shares of two public companies on which he served on the boards of directors, crossing over several filing thresholds under the HSR Act without making the required filings.
For more information regarding the FTC settlement, see the Greenberg Traurig Alert, “Board Director Fined for Failure to File Under the HSR Act for Incremental Acquisitions of Stock of Multiple Issuers.”