The Independent Directors Council (IDC) recently submitted a comment letter on the Federal Trade Commission’s (FTC) notice of proposed amendments to the premerger notification rules (Proposed Amendments). These rules govern premerger notification filings that the FTC uses to determine in advance whether transactions are likely to be anticompetitive under the Hart-Scott-Rodino Antitrust Improvements Act (HSR Act). The Proposed Amendments would expand the definition of “person” to include “associates,” which would include managing entities and entities under common operation or “investment decision management” with a managing entity. “Investment decision management” is not defined in the definition of “associate” but based on hypothetical scenarios included in the rule would encompass the power to make investment decisions on behalf of another entity. The Proposed Amendments would, therefore, cover an adviser with discretionary investment authority and all its managed funds and subject them to additional reporting requirements under the HSR Act, even if some funds advised by the adviser are not involved in acquiring securities that could trigger a filing under the HSR Act. The FTC explained that the Proposed Amendments are intended to address the proliferation of investment funds and master limited partnerships that are used to facilitate acquisitions that may require review under the HSR Act and rules thereunder. The FTC invited comment on whether index funds and ETFs should be treated differently for purposes of these proposed amendments.
The IDC’s comment letter on the Proposed Amendments (IDC Letter) argues that funds should be excluded from the expanded definition of “person” due to their corporate governance structure and compliance with regulations under the 1940 Act. The IDC Letter notes that the Proposed Amendments, in this respect, are no different than prior proposals that the FTC considered when rules under the HSR Act were originally adopted in 1978 that would have introduced similar aggregation requirements for funds, which were previously rejected by the FTC at that time.
The Proposed Amendments and IDC Letter are available at the links below: