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Investment Firm Founder Fayez Sarofim to Pay $720,000 to Settle FTC Charges For Violation of U.S. Premerger Notification Requirements

Investment firm founder Fayez Sarofim has agreed to pay $720,000 in civil penalties to resolve Federal Trade Commission allegations that he violated the Hart-Scott-Rodino Act by failing to report stock purchases from several issuers between 2001 and 2012.

Under the Hart-Scott-Rodino Act, companies and individuals must notify the FTC and the Department of Justice of large acquisitions above certain annually adjusted thresholds and and then observe a waiting period before closing their transaction, while one of the two agencies determines whether the acquisition may result in a substantial lessening of competition. The HSR Act exempts acquisitions of up to ten percent of voting securities if they are made solely for investment purposes, but this exemption is not available to individuals who serve on the board of directors of the issuer at the time the shares are acquired.

The FTC alleged that because Sarofim was serving as a board member at each company for which he acquired voting shares, he was ineligible for an investment-only exemption from filing and his failure to report a series of transactions to U.S. antitrust authorities violated the Act. From 2001 to 2012, Sarofim acquired voting shares of energy infrastructure company Kinder Morgan, Inc., crossing three different filing thresholds without making the filings required under the HSR Act. In 2007, he acquired voting shares in insurance holding company Kemper Corporation and did not file as required under the Act. According to the complaint, he was already serving as a board member at Kinder Morgan and at Kemper’s predecessor company, Unitrin Inc., before he made the respective stock purchases.

The Commission vote to refer the complaint and proposed stipulated court order to the Department of Justice for filing in federal court was 3-0. The Department of Justice filed the complaint and proposed order in the U.S. District Court for the District of Columbia on October 27, 2016.

Consistent with the requirements of the Tunney Act, the proposed settlement, along with the competitive impact statement will be published in the Federal Register. Any person may submit written comments concerning the proposed settlement during a 60-day comment period to Daniel P. Ducore, Assistant Director for Compliance, Bureau of Competition, c/o Federal Trade Commission, 600 Pennsylvania Avenue, NW, CC-8416, Washington, D.C. 20580. E-mailed comments should be sent to: DDUCORE@ftc.gov. At the conclusion of the 60-day comment period, the U.S. District Court for the District of Columbia may approve the proposed settlement upon finding that it is in the public interest.

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