The FCC this week released a Public Notice announcing comment deadlines on rulemaking proposals relating to the FCC Biennial Ownership Reports. The first set of proposals deals with a Notice of Proposed Rulemaking issued earlier this month, proposing a series of changes to the process for filing these reports. The proposals include a requirement that the all persons with attributable interests in broadcast stations get a unique FCC Registration Number (an "FRN"), which will require filing their Social Security numbers with the FCC. The second proceeding is one released in 2009, but is only now being published in the Federal Register triggering the comment deadline. This proposal suggests that certain nonattributable owners be identified and reported on these Biennial Ownership Reports despite their nonattributable status. Comments on these proposals will be due on February 14, 2013, with reply comments due on March 1, 2013.
The Biennial Ownership report, in its current form, was initially adopted in 2009. The new reports were to gather information not just about the ownership of broadcasters, but also about their race, ethnicity and gender, so that the FCC could get a better handle on the presence of minority owners in broadcasting. The first report on the new form was to be filed in November 2009, but that deadline was pushed back to July 2010 when issues with the new form developed. The second Biennial Ownership report was to have been filed by commercial stations in late 2011 (two years after the original date), and the next is due later this year. The information in the first two reports was compiled into the information that formed the basis of the FCC’s December request for comments on the impact of proposed changes in the multiple ownership rules on minority ownership.
The 2009 proposal, referred to as the Fifth Further Notice of Proposed Rulemaking, seeks comment on whether to expand the commercial broadcast ownership reporting requirements to include certain nonattributable entities. "Nonattributable entities" are ones that essentially don’t count in a multiple ownership analysis. Specifically, the notice proposed to require the reporting of nonattributable interests in two situations, only one of which is likely to have any significant impact. First, the Commission proposed that nonattributable parties be reported on ownership reports where their EDP interests exceed 33% but are nevertheless nonattributable as these interests are held in certain "eligible entities." (See our discussion here on the Equity Debt Plus or EDP policy). However, after the Third Circuit decision throwing out the FCC’s eligible entity definitions as the Court found them to be insufficient to encourage minority ownership (as they instead focused on small businesses), this exception seemingly applies to no virtually one. The other class of nonattributable owners who the FCC proposes to require the filing of identifying information is minority shareholders in a company with a single majority shareholder. In those companies, as control is vested in the hands of the single majority shareholder, the FCC has previously not required any information about other stockholders in the company. Essentially, unless these shareholders were also officers or directors, they could keep their interest quiet. Under this proposal, the FCC would not only require that these minority shareholders be reported – but these investors would need to get FRNs and give the FCC their social security numbers. The FCC asks whether this could discourage some of these investors to invest in broadcast licensees, as argued by some parties who had commented on this issue in earlier phases of this proceeding.
The proposal issued earlier this year, Sixth FNPRM, seeks further comment on a number of issues relating to the FCC’s ownership reports for commercial and noncommercial broadcast stations, FCC Forms 323 and 323-E. These requests are partially motivated by the perception of the FCC that the information that they have captured so far through these reports was not sufficiently detailed or complete so as to give a full picture of minority ownership. Questions asked include the following:
· Whether to require that all individuals who are to be reported on an ownership report (including those unattributable owners about whom the Commission may decide to require reporting as described above) to have their own unique FRN – requiring that they provide a Social Security number to the FCC to obtain that FCC registration number. When the FCC adopted the new obligations for the ownership reports in 2009, they allowed licensees to get Special Use FRNs for those parties with attributable interests who were reluctant to provide Social Security Numbers. If adopted, this proposal would end that practice of Special Use FRNs.
· Whether to require that parties who file Form 323-E (ownership report for noncommercial stations) to obtain an FRN for individuals with attributable interest in licensees reported on this form. Previously, the obligations applied only to commercial stations, though the FCC has proposed to extend the new biennial ownership reporting obligations to noncommercial stations (including the obligations to provide the race or ethnicity and gender of all attributable owners). For noncommercial stations, the attributable owners are usually the officers and directors of the licensee;
· Whether to extend the biennial ownership report filing period so that these reports would be filed on December 1, rather than November 1 of every other year. The reports would still report ownership of a licensee as of October 1, but the additional 30 days would provide more time for licensees to acquire and compile all of the necessary information. As we set out on our Broadcasters Calendar for 2013, these reports are currently due to be filed for commercial stations this coming November.
The issues raised in the Sixth Report and Order have been controversial, as some investors, officers and directors seem to be reluctant to provide their Social Security Numbers (or their Taxpayer ID numbers for companies with attributable interests) to the FCC – even though this is providing the Federal government with numbers that the Federal government itself issues to individuals and companies. But there still are concerns expressed by many broadcasters about security issues, and about the potential that this information will somehow be compromised. If this would be an issue for your investors, officers and directors, file your comments on these issues by the February due date.