Hedge Fund Manager Fined for Violating HSR Act By Exercising Stock Options


On May 21, 2007, the Justice Department (following a request by the Federal Trade Commission) charged a hedge fund manager with failing to comply with the Hart-Scott-Rodino (HSR) Act notification and waiting period requirements before exercising options to acquire stock in Motient Corp.

Key Implications

As we previously highlighted in a November 2006 Legal Update, the U.S. antitrust agencies are increasingly scrutinizing whether financial investors, including hedge funds, are complying with the HSR rules.[1] In particular, the agencies are closely examining whether hedge funds and other

private equity firms are improperly relying on the “investment-only” exemption to the HSR reporting

requirements. Thus, it is important for financial investors, including wealthy individuals with significant stock holdings, to consult with antitrust counsel to determine whether their proposed investments, including the exercise of stock options, could trigger HSR reporting obligations. This is true even when they are not seeking to own all, or ultimately to control all, of the company whose

securities are being acquired.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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