2312003 Informal Interpretation

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Sheinberg, Samuel I.
From: 	HSRHelp
Sent: 	Tuesday, December 12, 2023 3:21 PM
To: 	Walsh, Kathryn E.; Berg, Karen E.; Musick, Vesselina; Sheinberg, Samuel I.; Six, Anne; Whitehead, Nora;
Fetterman, Michelle; Burton, June; Larson, Peter
Subject: 	FW: HSR Question -- 7A(c)(10) exemption
To:
Cc: HSRHelp <HSRHelp@ftc.gov>
From: Shaffer, Kristin <kshaffer@ftc.gov>
Sent: Tuesday, December 12, 2023 3:20:26 PM (UTC-05:00) Eastern Time (US & Canada)
Subject: RE: HSR Question -- 7A(c)(10) exemption
We agree that 7A(c)(10) applies. If the reacquisition of the voting securities of Company Y by Mr. X (via his GRATs) is not
complete by the second business day, then a filing would need to be made.
Best regards,
Kristin
Kristin Shaffer
Attorney
Premerger Notification Office
Federal Trade Commission
202-326-2388 | kshaffer@ftc.gov
From:
Sent: Monday, December 11, 2023 5:26:11 PM (UTC-05:00) Eastern Time (US & Canada)
To: HSRHelp <HSRHelp@ftc.gov>
Subject: HSR Question -- 7A(c)(10) exemption
Dear PNO,
We are writing to confirm that the following transaction would be exempt under 7A(c)(10) which exempts from HSR
filing requirements “acquisitions of voting securities, if, as a result of such acquisition, the voting securities acquired do
not increase, directly or indirectly, the acquiring person’s per centum share of outstanding voting securities of the
issuer.”
The Facts
Mr. X is the settlor of Trust X and one of its trust advisors, but he is not the UPE of Trust X. Trust X is its own UPE.
Mr. X currently holds over $111.4 million worth of voting shares of Company Y (and significantly less than 50% of the
voting shares of Company Y). Mr. X plans to transfer Company Y voting shares valued at approximately $2.4 million (the
“Shares”) to Trust X. Trust X will not as a result hold Company Y voting shares valued in excess of $111.4 million. Mr. X in
his individual capacity and as one of Trust X’s advisors, along with the other advisors of Trust X, will instruct Trust X’s
trustee to transfer the Shares to two grantor retained annuity trusts ( the “Two GRATS”) in exchange for cash from the
Two GRATs. Trust X’s transfer of the Shares to the Two GRATS will occur on the same day that Mr. X transfers the Shares
to Trust X or possibly the following business day. Mr. X is the UPE of the Two GRATs.
Questions
If Trust X transfers the Shares to the Two GRATS under Mr. X’s HSR control on the same day that Mr. X transfers the
Shares to Trust X, we understand that the c(10) exemption would apply because Mr. X would directly and
indirectly hold the exact same percentage of Company Y shares at the beginning of that day and at the end
of that day. Do you agree the 7A(c)(10) exemption would apply?
If Trust X transfers the Shares to the Two GRATS on the next business day after Trust X acquires the Shares from Mr.
X, we understand that the c(10) exemption would still apply so long as on or before the day on which Mr. X
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transfers the Shares to Trust X, Mr. X had instructed Trust X' s trustee to transfer the Shares to the Tw o
GRATs on the same day Mr. X transfers the Shares to Trust X or by the next business day. Cf. Informa l
Interpretat i on #17011005 (November 28, 2017) in wh ich PNO explained the fo ll ow ing: " In general, under
T+2, w hen an investor buys a securi ty, the brokerage firm must receive payment from the investor no l ater
than 2 business days after the trade is executed. Similarly, w hen an investor se lls a security, the investor
must de li ver the securi ty to the brokerage firm no l ater than 2 business days after the sa l e. Day 1 is the first
business day after the trade day. The PNO has historically applied the T +3 settlement cycle in connection
wi th the 7A(c )( 10) exemption, which exempts from HSR fi ling requirements 'acquisitions of vot ing securities,
if, as a result of such acquisit ion, the voting securit ies acquired do not increase, di rectly or i ndirect ly, the
acquiring person's per centum share of outstanding vot ing securities of the issuer.' T+3 has pr imarily been
used in the app li cation of 7A(c )( 10) w here a company executive exercises stock options through a cashl ess
transaction and i mmediate ly se lls all of the stock that was received pursuant to the opt ion exercise; or,
where an executive arranges for restricted stock to be sold i mmediate ly upon vesting. The PNO will cont i nue
to apply the SEC's sett l ement requirements, and w ill therefore also shift its guidance from T +3 to T+2."
Do you agree that the c(l0) exempt ion w ou ld apply if Trust X transfers the Shares to the Tw o GRATs under Mr . X' s HSR
contro l and pursuant to Mr. X' s instructions on the business day fo ll ow ing Mr. X' s transfer of such Shares to Trust X?
Thanks,
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