Which countries have the toughest shareholding disclosure obligations?
In this three-part blog series, we’ve so far discovered the toughest regulations when it comes to deadlines and complex calculations. Now, as promised in our last blog, we’ll dive into some scary sanctions that can be imposed on those who don’t comply with major shareholding regulations across the globe.
Although the Canadian securities laws related to the disclosure requirements of Early Warning Reports, AMRS Reports and Insider Reports do not specify sanctions for non-compliance, this offense can lead to criminal and administrative sanctions against corporate directors and officers who authorize, permit or allow the breach (Section 122 of the Securities Act). Failure to comply with shareholding disclosure requirements will most likely lead to administrative sanctions. However, failure to comply may constitute an offense subject to prosecution, which may lead to imprisonment for no more than 5 years less a day and a fine up to CAD $5 million.
The implementation of the Amended Transparency Directive (TDA) had a significant impact on the proposed sanctions across EEA countries - see for example how it affected Germany and other EEA countries.
One of the most notable sanctions under this directive, was either a fine of up to EUR €10 million, or 5% of annual turnover, or up to twice profits gained or losses avoided for legal entities; and the higher of up to EUR 2 million or up to twice profits gained for individuals.
In comparison, France’s regulator, the AMF, has stipulated (Article L. 621-15 III bis, III ter, and V of the Monetary and Financial Code) administrative sanctions that might be as high as EUR €100 million, or for legal entities 15% of the total annual turnover, and if relevant, up to 10 times the amount of profits gained or losses avoided.
Additionally, the AMF also proposes criminal and civil sanctions. Criminal sanctions (Article L. 247-2-I of the French Commercial Code) - of a fixed fine of EUR €18,000 - may apply to the directors, the members of the directorate, the managers or the general managers of legal entities that have breached the disclosure rules; and the automatic civil sanction (Article L. 233-14 of the French Commercial Code) for this type of breach is the suspension of voting rights attached to the shares exceeding the fraction not disclosed for a period of 2 to 5 years.
As we saw in our previous blog, the FSC (Financial Services Commission) is a tough one when it comes disclosure deadlines and it has proven to be a tough one when it comes to sanctions as well.
Under the 5% regime, failure to submit a report can lead to criminal sanctions that include imprisonment of up to three years, or a fine of up to KRW 100 million (Article 445 of the FISCMA). Furthermore, submission of false information or omission of material facts can lead to harsher criminal sanctions such as imprisonment of up to five years or a fine not exceeding KRW 200 million (Article 444 of the FISCMA). This offense can also lead to the suspension of voting rights, or a disposal order of the infringing securities for up to 6 months (Article 150(1) of the FISCMA).
Additionally, failure to submit a copy of the disclosure report to the issuer, or providing different or missing information, can result in an administrative fine, that effective from October 19, 2017, can amount to KRW 100 million (Article 449(37) of the FISCMA).
Similarly, under the 10% regime there are also criminal sanctions related to the submission of false information or failure to submit a report. These transgressions are punishable by a fine not exceeding KRW 30 million and imprisonment of up to one year (Article 445(48) of the FISCMA).
Having the most accurate, up-to-date and demonstrable controls in place so that your firm complies with shareholding disclosure obligations around the world is crucial to not only avoiding potentially heavy fines or other sanctions, but to ensure that your firm doesn’t suffer reputational damage. Our service can do just that, and comes with full transparency and auditability.
We help financial institutions to stay compliant in over 90 jurisdictions around the world, analysing over US $3 trillion in client assets.