CYPRUS: CySEC Issues Circular clarifying Major Shareholding Transparency Requirements

Thursday July 28 2016

The Securities and Exchange Commission of Cyprus (CySEC) has issued Circular E 154 outlining amendments made to the Transparency Requirements (Securities Admitted to Trading on Regulated Market) Law 2007-2016, pursuant to the Transparency Directive (Amending Directive) 2013/50/EU (TDAD).

The law applies to issuers of transferable securities listed for trading on a regulated market that have Cyprus as their home Member State and to transferable securities that are traded on the stock exchange, apart from instruments of payment and money market instruments.

The law also imposes reporting and notification requirements on Cypriot issuers and their shareholders. Shareholders are required to notify a Cypriot issuer and CySEC regarding the percentage of an issuer`s voting rights that they hold through acquisition or disposal where that percentage reaches, exceeds or falls below 5%, 10%, 15%, 20%, 25%, 30%, 50% or 75%.

Key changes introduced by Transparency Directive Amending Directive (TDAD)

Issuer: an `issuer` is a natural person or legal entity governed by private or public law (including a state) whose securities are admitted to trading on a regulated market. The TDAD expressly includes issuers of depositary receipts representing non-listed securities.

Home Member State: The key changes to the definition of `home member state` include the fact that an issuer of debt securities worth less than €1,000 per unit or an issuer of shares incorporated in a third country (i.e., an EU or EEA member state) may now choose its home member state from member states in which its securities are admitted to trading on a regulated market.

Notification requirements extended: Previously, the law focused on financial instruments which give the holder voting rights in a Cypriot issuer. The TDAD clarifies that the notification requirements apply when the financial instruments give the holder an unconditional right and discretion to acquire shares with voting rights attached.

Further, the amending directive extends the notification requirements for major holdings of voting rights to include direct and indirect holdings of financial instruments that have the same economic effect as the holding of shares, whether or not they confer a right of physical settlement.

Under the amending directive, holdings of financial instruments will be aggregated with holdings of shares and voting rights for calculating notification requirement thresholds.

Increased sanctions have also been introduced, which include the suspension of voting rights and fines of €10m or 5% of annual turnover for legal entities (€2m or twice the profits gained for individuals), whichever is greater.

Amendment Law 35(I) – 2016 (Cyprus)

In Cyprus the Amendment Law 35 (I) – 2016, which is effective from 08 April 2016 is available on the CYSEC website at CYSEC Transparency Website under the primary legislation tab, (Greek only).

Circular E 154 published on 27 July clarifies the below amendments introduced by the Amendment Law:

• The selection and demonstration of issuer’s home Member State;
• The Issuer`s obligations in relation to periodic and ongoing information;
• Information to be provided by persons on their shares; and
• The powers of the ECC for the imposition of administrative penalties and / or administrative measures.

The definition of home Member State has been revised in new Articles 5, 8 and 8A of Amendment Law 35(I) – 2016, and the notification form (standard ESMA form) is available on the CYSEC website, under the “printed matter” tab. Persons required to disclose their home Member State must do so prior to 31 August 2016, provided they have not previously done so after 08 April 2016. The standard ESMA notification of major shareholdings is also available on the website under the “printed matter” tab”.

New Article 31(A) outlines the thresholds which when breached require a notification, and Article 31(2) sets out how these are to be calculated. The maximum period for notification to the issuer and CYSEC in accordance with the provisions of Articles 28, 30, 31 and 31A of Law 190 (I) / 2007 is three business days (Article 33 (1)).

Click the link at the top of the page for more information.