In late August 2015, the Federal Trade Commission (“FTC”) announced a settlement with three investment funds managed by Third Point LLC (“Third Point”) for alleged violations of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”) involving improper reliance on the “investment only exemption.” Although the FTC did not impose a civil penalty on Third Point (this was its first violation), the settlement imposes a five year moratorium on actions described below and requires that Third Point implement a detailed compliance program to prevent future violations.

Generally, the investment only exemption provided by Section 7A(c)(9) of the HSR Act and Section 802.9 of the rules is only available if (1) an acquisition of voting securities is made “solely for the purpose of investment,” and (2) if the acquiring person would hold 10% or less of the outstanding voting securities of the issuer, regardless of the dollar value of the voting securities so acquired or held.

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