EUROPE: Parliament approves amendments to Transparency Directive for EU major shareholdings

Thursday June 13 2013

The European Parliament has voted in favour of amendments to the Transparency Directive which will require the disclosure and aggregation of EU major shareholdings in cash-settled derivatives.

In order to close the existing gap in the notification requirements, the revised Transparency Directive will require disclosure of EU major shareholdings of all financial instruments that could be used to acquire economic interest in listed companies which have the same effect as holdings of equity. The revised Directive will also provide for more harmonisation concerning the rules of notification of major holdings by requiring aggregation of holdings of financial instruments with holdings of shares for the purpose of calculation of the thresholds that trigger the notification requirement.

As a result of the reforms, the definition of financial instrument will be broadened to include all instruments of similar economic effect to holdings of shares and entitlements to acquire shares, whether giving right to a physical settlement or not. It covers cash-settled derivatives as well as similar financial instruments not yet available on the markets but which could be the result of financial innovation.

The general principle of notification of all instruments of similar economic effect to holdings of shares and entitlements to acquire shares is subject to exemptions in order to avoid providing the market with irrelevant information and spare notification costs for market players which by definition should not exercise any influence on voting policies or acquire a secret stock in the underlying company.

The holdings of financial instruments with similar economic effect to holdings of shares and entitlements to acquire these that provide exclusively for a cash-settlement, shall be calculated on a ‘delta-adjusted’ basis. Regulatory standards shall be provided by ESMA on this.

Holdings of financial instruments will be aggregated with holdings of shares for the purpose of calculation of the thresholds that trigger the notification requirement. However, to avoid any confusion as to the nature of holdings, the holder of shares and financial instruments has to specify separately the amount of holdings of shares and the amount of holdings of financial instruments in its notification.

Member states will continue to be permitted to set lower thresholds for notification.

Member States will be required to provide that appropriate administrative sanctions and measures could be applied if violations of the Transparency Directive are identified.

Click on the above link for the FAQs on the revised Transparency Directive.