EUROPE: Commission report on the EU Acquisitions Directive proposes reform to EU substantial acquisition rules.

Friday February 15 2013

In relation to the Commission report on the EU Acquisitions Directive proposes reform to EU substantial acquisition rules, on 11th February the Commission submitted to the other European institutions a report on the Directive on procedural rules and evaluation criteria for the prudential assessment of acquisitions and increase of holdings in the financial sector (Acquisitions Directive, also referred to as Qualifying Holdings Directive).

Emerging issues

In its report, the Commission states that it is satisfied with how the regime has worked. It found some inconsistencies in application, but proposes that the majority of these be resolved through Level 3 guidance by the European Supervisory Authorities. Issues raised include the following:

• The notion of “indirect qualifying holding”
• The definition of the notion “persons acting in concert” 
• The notion of a “decision to acquire” and involuntary crossing of thresholds
• Inconsistent application of the proportionality principle
• Some assessment criteria laid down in the Qualifying Holdings Directive need to be further clarified
• Some inconsistencies have been observed with regard to the application of the provisions of the Directive on the time limits
• Diverging practices among the Member States as regards conditional approvals of the acquisitions have been observed
• The cooperation between different (sectoral and/or national) supervisory authorities is perceived in some cases as formalistic and time consuming
• The Directive does not contain an explicit assessment criterion allowing competent authorities to assess the impact of the proposed acquisition on the stability of the financial system.

Future measures

The Commission has proposed to address identified inconsistencies in the application by asking the ESAs to update and clarify the 3L3 guidelines. Such clarification would provide more precise guidance on how to apply the proportionality principle; deal with indirect holdings; apply the time limits; and, ensure that the assessment criteria are interpreted and applied consistently in Member States and cross-sectorally. 

During 2013 the Commission will work with national authorities and ESMA to develop guidance to clarify the rules on acting in concert, particularly in the context of takeover bids. Taking into account progress made in this work, the Commission will consider with the ESAs what further action (if any) may be needed to address specific issues arising from the application of the concept of acting in concert in the context of the Qualifying Holdings Directive.

To incorporate financial stability aspects more explicitly in the assessment process, the Commission proposes introducing a resolvability assessment before the transactions take place. The Commission intends to carry out an analysis in the course of 2013 assessing the different options, including the need to frame such a criterion in a way that avoids divergent implementation by competent authorities.

Notably, the Commission has proposed that a similar legal framework for the assessment of acquisitions and increase of holdings could also be introduced for regulated markets, as defined in Article 4 paragraph 1 point 14 of MiFID. Many member states have similar provisions in their domestic rules for prior approval of acquisitions in market institutions.

Click on the above link for the Commission Report.