Ford Motor Co. did not violate the Securities Exchange Act of 1934 when it paid a distribution to securities holders nearly two weeks after the automaker announced it would resume paying deferred distributions because there was no evidence the company sought to intentionally mislead the public, the U.S. Court of Appeals for the Third Circuit has ruled. The appellate court’s decision dismissed an investor’s lawsuit alleging Ford violated the Exchange Act requirement to pay distributions within 10 days of the announcement date.
In 2002, Ford sought to raise capital by selling preferred securities in a Delaware statutory trust, according to court documents. The trust, Ford Motor Co. Capital Trust II, would purchase debentures, or fixed-rate interest securities, from Ford. The interest payments would then be distributed as quarterly dividends to holders of the trust’s preferred securities. Under the debenture contract, Ford can exercise an option to defer quarterly interest payments for a maximum of 20 quarters, the court said in its opinion.
