Skip to main content
Date
Rule
801.1(c)
Staff
Patrick Sharpe
Response/Comments
John & Dana concur 7-26-83. John. Problem: who has beneficial ownership inthe attached situation? The client or the broker? The situation is identical to theattached example with the exception that the client and broker have an agreementthat the broker can buy and sell and vote voting securities and it cant be revokedfor 90-days. Fed. Reg Pg. 33458. Beneficial ownership is determined by: 1. Riskof loss/benefit of gain 2. Right to vote 3. Investment discretion. The attachedinformal interpretation indicated that the client had beneficial ownership. However, this transaction seems more finely balanced. My feeling is that the clientultimately, has the right to revoke. Thus, has beneficial ownership. Patrick.

Question

(redacted)

July 15, 1983

BY HAND

Patrick Sharpe, Esq.
Federal Trade Commission
Premerger Notification Office
Bureau of Competition
6th & Pennsylvania Avenues, N.W.
Washing ton, D.C. 20580

Dear Patrick:

This will confirm our phone conversation today concerning the issue of beneficial ownership for purposes of the definition of hold in 801.1(c) of the Hart-Scott-Rodino rules. Specifically, I asked you whether beneficial ownership would be found in the following situation:

A bank, investment banker, or broker is given a sum of money to invest and manage by one of its clients. Pursuant to the arrangement, the client delegates to the bank, investment banker, or broker, the power: to select the voting securities (among other types of investments) to be purchased, to sell the voting securities when the bank, investment banker, or broker thinks it opportune to do so, and to vote those shares when necessary. The client, however, can revoke these powers. Moreover, the client retains the power to direct the bank, investment banker, or broker to purchase whatever voting securities the client wishes to purchase, to sell whatever voting securities the client wishes to purchase, to sell whatever voting securities the client has in its account at any time, and to vote the shares in whatever fashion the client wishes. Finally, the client retains the power to overdrive whatever buying, selling or voting decisions the bank, investment banker, or broker wishes to make. The right to obtain the benefit of any increase in value of the voting securities (including dividends) and the risk of loss of value of the voting securities are retained by the client. Of course, the bank, investment banker, or broker will get a fee for managing the clients money (including, conceivably brokerage fees for the buying and selling of the stock). Based on these facts, you confirmed that the client, and not the bank, investment banker, or broker would be the beneficial owner of any voting securities purchased for the clients account.

Thank you again for your quick confirmation and cooperation in this matter.

Very truly yours,

(redacted)

(redacted)

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.

Return to top