In a letter to the Federal Trade Commission ("FTC"), the Managed Funds Association ("MFA") and the Council of Institutional Investors (collectively, the "Associations") called for reforms to the premerger notification program of the Hart-Scott-Rodino Act ("HSR Act"). The letter was submitted in connection with upcoming FTC hearings on Competition and Consumer Protection in the Twenty-First Century. The Associations urged the FTC to adopt a flat, 10% de minimis exemption and clarify the meaning of the term "investment-only."

The HSR Act exempts parties from notification and waiting period requirements when acquiring voting shares totaling 10% or less of outstanding voting shares. The Associations argued that this "investment-only" exemption is restrictive and ambiguous, and imposes unnecessary and outsized filing burdens on investors. The Associations suggested that the FTC and the Antitrust Division of the DOJ issue a clarification on the meaning of the term "investment-only." Such a clarification would, according to the Associations, eliminate ambiguity and bring the interpretation of "investment-only" into alignment with the Statement of Basis and Purpose that accompanied the issuance of the HSR Act.

In support of their reform proposals, the Associations cited the substantial increase in non-"activist" shareholder engagement since the HSR Act was passed in 1978, and broad support for reform among industry members and regulators.


The Associations make a compelling argument that the HSR filing requirements, and potential penalties for failing to file, discourage investor participation in reviewing corporate management. This is in contravention of good economic policy, and is inconsistent with the SEC's goal of encouraging shareholders to take an active role in overseeing management.

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