The FCC this week issued fines to two broadcasters for issues in connection with the ownership of their stations – in one case the fine was issued simply because the broadcaster did timely not file three consecutive FCC Form 323 Biennial Ownership Reports .  In the second case, the fine was for not requesting FCC approval for a transfer of control of the licensee of the broadcast station.  These cases serve as a reminder that broadcast ownership is closely regulated by the FCC, that broadcasters need to report that ownership once every two years as required by the rules, and to seek approval before any change in control of any company that holds an FCC license.

The station that failed to file the three ownership reports was fined $6000.  As disclosed on the licensee’s license renewal application, the licensee had not filed 2001 and 2003 ownership reports at all, and filed the 2005 report late and did not put it in the station’s public inspection file.  Biennial Ownership Reports on FCC Form 323 must be filed by the licensees of AM, FM and TV station licensees once every two years, on the anniversary date of the filing of their license renewal applications by all licensees except where the licensee is an individual or a general partnership of natural persons (as opposed to a partnership that contains corporations or other business entities as partners).  We regularly send reminders to our clients about the filing of ownership reports.  For more details on the requirements for the biennial filing, see our advisory for reports that were due on August 1 here, and see our schedule of broadcast filing dates for the remainder of 2008 to see if your station has a biennial filing deadline this year). 

In the second case, the FCC entered into a consent decree with a licensee which had sold stock resulting in a transfer of control of the licensee company without seeking and receiving prior FCC approval.  The consent decree required that the licensee pay $5000 to the government, and adopt a compliance policy, reviewing its compliance status every 6 months using the Broadcast Self-Inspection Checklist put out by the FCC so that broadcasters can assess their own compliance with FCC rules, and report to the FCC on the results of those self-inspections every year for three years.

Transfers of control (to the FCC, a "transfer of control is a change in control where the licensee remains the same, such as a sale of stock in a licensee corporation, while a sale of a station from one company to another is referred to as an "assignment of license") can be "pro forma," meaning that they result in no real change in control of the licensee.  For instance, if a licensee corporation is owned by an individual, and the individual decides for tax or estate planning purposes to put his stock into a trust he controls or into another corporation that he controls, the individual still controls the licensee but in a different manner.  As only the form of control has been changed, approval for this transaction can be sought on an FCC Form 316 application, which can be approved very quickly – sometimes in a matter of days from its receipt by the FCC’s processors.  Pro-forma assignment of licenses (e.g. from one corporation to another corporation owned by the same parties) are also approved through the filing of Form 316.

A transfer of control where actual control changes must be sought on FCC Form 315, e.g. where a majority of the stock of a licensee is sold from one person to another.  Notice of the filing of that form must be released on an FCC public notice, and the public has 30 days from the release of that public notice to comment on the application before the application can be granted.  All in all, FCC approval of such an application usually takes at least 45 days, and sometimes longer.  An assignment of license from one company to an unrelated company is filed on FCC Form 314, and processed in the same way as a Form 315.

As these cases remind you, remember to follow the ownership rules and file the required FCC forms to stay out of trouble with the FCC.