AABA Altaba Inc

By David Benoit 

Activist investors on Monday got a reminder that their investments are subject to antitrust review, a warning that will shine a spotlight on a debate over why that is.

The Federal Trade Commission and Justice Department on Monday announced a settlement with Third Point LLC over allegations the New York hedge fund failed to properly file for antitrust clearance when it built its position in Yahoo Inc. in late 2011.

The government had alleged that Third Point's interactions with Yahoo crossed a threshold requiring investors to notify regulators if they have taken an activist position.

Third Point, founded by outspoken activist Daniel Loeb, won't pay any fine over the matter. The fund entered into a five-year agreement with the FTC and Justice Department to make all appropriate filings.

Activists and some antitrust lawyers have argued that the rule requiring such filings lacks clarity and should be abolished, but the debate hasn't garnered as much attention as a similar discussion regarding securities laws that require investors to disclose when they own more than 5% of a stock.

The FTC's allegations against Third Point, one of the most high-profile activist funds, could change that.

The Hart-Scott-Rodino Act, or HSR, requires acquirers of stock worth more than $76.3 million to alert regulators. The rule is meant to allow the government to get ahead of any deals that may potentially violate antitrust regulations.

Purchases of less than 10% of a company's shares that are made "solely for the purpose of investment" are exempt from the filing requirement. But investors can only rely on that exemption if they are passive, or have "no intention of participating in the formulation, determination or direction of the basic business decisions."

Brent Kendall contributed to this article

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(END) Dow Jones Newswires

August 24, 2015 16:03 ET (20:03 GMT)

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