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CEO fined $500,000 for HSR Act violation upon acquisition of stock-based compensation

28 December 2011

SEC Update

A public company CEO recently consented to a federal district court order requiring him to pay a $500,000 civil penalty for violating the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act). The Antitrust Division of the Department of Justice (DOJ) charged the executive for failing to satisfy the notification and waiting period requirements of the HSR Act before acquiring common stock under his company's stock-based compensation programs. The CEO exceeded an HSR Act notification filing threshold through his acquisition of common stock upon the vesting of outstanding restricted stock unit awards and the reinvestment of dividends and short-term interest through his 401(k) account. The DOJ's enforcement action illustrates the potentially costly consequences of a failure to consider HSR Act compliance in the investment planning process for corporate executives who hold or will acquire company stock with a total value greater than the statute's transaction filing thresholds.

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