1209004 Informal Interpretation

Date:
Rule:
801.10
Staff:
Michael Verne
Response/Comments:

  - Agree.

Question

From:

(Redacted)

Sent:

Tuesday, September 18, 2012 2:08 AM

To:

Verne, B. Michael; Walsh, Kathryn

Subject:

Size of the Parties Test

Weare writing to see if you agree with our view concerning how the Size of theParties test is applied to our set of facts as described below. In addition wehave asked a question which also appears below.

Weare aware that Section 801.11(c)(2) indicates that where a person has aregularly prepared balance sheet, that person's total assets are as stated onsuch balance sheet. We have a client, Mr. A, a natural person, who has a MoneyManager which regularly prepares a quarterly balance sheet for Mr. A. Thebalance sheet prepared by the Money Manager is strictly for the benefit of Mr.A and is not circulated to or relied upon by third parties. My question: Doesthe lack of distribution or reliance upon by a third party effect the PNO'sview as to whether the balance sheet would qualify as a regularly preparedbalance sheet under the HSR Rules? I have not been able to find any PNOprecedent on this question.

Mr.A does not currently meet the $13.6 million Size of the Parties test as hislast regularly prepared balance sheet indicated total assets of less than $13.6million. He will acquire securities of Company X in October by exercising stockoptions and/or through the settlement of restricted stock awards and as aresult of the upcoming October transaction Mr. A will hold an amount of votingsecurities of Company X in amount which will exceed $68.2 million. As the Sizeof the Person test is a blight line test which is applied at the closing of atransaction, we believe a filing will not be necessary in connection with Mr.A's October acquisition of voting securities of Company X.

Inaddition, Mr. A will be entitled to acquire additional voting securities ofCompany X on a monthly basis pursuant to the terms of an Employee Benefit Plan,which has been in place for a number of years, in which both additional stockoptions will become exercisable and restricted stock awards settle each month.After Mr. A exercises options and/or receives settled restricted stock awardsin October, as described above, he will hold an amount of voting securities ofCompany X which if added to his most recent balance sheet would satisfy tile$13.6 million Size of the Party test. Although Mr. A will acquire additionalsecurities of Company X in November and December, his next regularly preparedbalance sheet will not be prepared until tile conclusion of the fourth quarterof 2012. Do you agree with our view that tile Mr. A will not meet the Size ofthe Parties test until his next regularly prepared balance sheet is prepared?

About Informal Interpretations

Informal interpretations provide guidance from previous staff interpretations on the applicability of the HSR rules to specific fact situations. You should not rely on them as a substitute for reading the Act and the Rules themselves. These materials do not, and are not intended to, constitute legal advice.

Learn more about Informal Interpretations.