Prior FCC Approval Needed For All Transactions Resulting in License Ownership Changes, Even Internal Reorganizations and Mergers

It is important for alarm monitoring companies to be aware that prior FCC approval is needed before completion of any merger or ownership change that will result in a transfer of control or assignment of an FCC license.

FCC approval is generally required even if there is no change in the license holder’s name.  Because failure to comply with these rules may result in significant monetary forfeitures and may delay related transactions, we urge any alarm monitoring companies that are considering a corporate restructuring or ownership change to review their proposed transactions with communications counsel as part of their due diligence, well in advance of the expected transaction closing date.

Almost all alarm companies hold radio licenses of some sort, to relay alarm signals, dispatch patrols, or to communicate with installers, service personnel and staff. 

Section 310(d) of the Communications Act requires FCC approval for any direct or indirect change in ownership of a licensee. Thus, if the parent company of an alarm service provider merges into another company, FCC approval must be acquired even though the name of the alarm service provider did not change, and the merger is "invisible" to the customers. Likewise, the FCC must approve of internal corporate changes, such as the merger of two related alarm companies, or creation of a holding company. 

Section 503(b) of the Act and Section 1.80 of the Commission's Rules further provide that a forfeiture penalty may be assessed against a person who is found to have willfully or repeatedly failed to comply with the Commission's rules. The Commission has held that an act or omission is "willful" if it is a conscious act or omission, whether or not there is any intent to violate the rule. 

With respect to an unauthorized transfer of control involving multiple stations, each station for which control was transferred with-out authority is a separate violation of the Act and the Commission's Rules. As a result, even a seemingly inconsequential change in ownership of a company having multiple FCC licenses, or the parent company of an FCC-licensed entity, could result in the imposition by the FCC of monetary forfeitures of $20,000 or more and could impact upon a company's basic qualifications, including its character qualifications, to hold or obtain any FCC licenses. 

While the FCC did not generally fine private radio licensees for a first offense, over the past two years, this policy has changed and private radio licensees are now routinely fined thousands of dollars for their first violation. 

We strongly recommend that any stock ownership change, merger, asset sale or internal corporate reorganization be re-viewed for FCC compliance well in advance of the closing date. Blooston, Mordkofsky, Jackson & Dickens (202-659-0830) will be glad to assist with this process or to answer any questions.

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