An investment advisor and two sister investment funds violated U.S. law when they failed to disclose their takeover dreams when acquiring more than US$66 million worth of Yahoo stock in 2011, the Federal Trade Commission has charged.
Investment advisor Third Point Partners and funds, Third Point Ultra, and Third Point Offshore Fund violated U.S. premerger reporting laws during their purchase of Yahoo stock, the FTC said Monday.
The three related companies, which have agreed to settle the FTC charges, reported the stock purchases were made solely for investment purposes, but the companies contacted people about becoming CEO or board members of Yahoo and took steps to field an alternate slate of directors for Yahoo's board, the U.S. Department of Justice said in a complaint filed on behalf of the FTC.
Third Point Partners didn't immediately respond to a request for comment on the settlement.
The stock purchases by the Third Point companies happened about a year before Marissa Mayer was named CEO of Yahoo in July 2012.
The FTC charged the companies with failing to observe the filing and waiting requirements of the Hart-Scott-Rodino (HSR) Act before purchasing shares in Yahoo.
The HSR Act requires that companies and individuals notify the FTC and the DOJ of most large transactions that affect U.S. commerce. The purchasers are required to observe a waiting period before closing their transactions, while one of the agencies determines whether the transactions could hurt competition. The law exempts reporting requirements on purchases of up to 10 percent of a company's stock if they are made solely for investment purposes.
The investment exemption is a narrow one "limited to those situations in which the investor has no intention to influence the management of the target firm," FTC Bureau of Competition Director Deborah Feinstein said in a statement. "Here, Third Point's conduct demonstrated that it intended to have more than a passive interest in Yahoo."
Under the proposed settlement, the companies are prohibited from relying on the investment-only exemption if they have contacted third parties to gauge their interest in joining the board of the target company, communicated with the target company about proposed candidates for its board, or taken other active roles in the target company. The FTC and DOJ decided not to seek civil penalties in the case, saying the violation was inadvertent and short-lived.
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