Here at FundApps, we are always keeping a finger on the pulse.
Preparation for implementing the Transparency Directive Amending Directive (TDAD) is in full swing - ahead of the deadline, 26 November, 2015.
This is the first in a series of blog posts on the TDAD aiming to analyse and outline the impacts of the upcoming changes for investors in the issuers trading on EU regulated markets.
As everyone in the industry knows, the Transparency Directive 2004/109/EC, on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market, has been amended.
Unlike an EU regulation, a directive is not a self-executing legal act, it requires implementation. The EU Member States are bound by the resulting effect of a directive and can freely choose the means of achieving that result. In addition, the Amended Transparency Directive precisely sets out which disclosure rules individual Member States can and cannot make more stringent. On that account, one should expect differences in shareholding disclosure rules across the EU, which when implemented, will have to be reviewed and applied.
The new directive will have an impact on the transparency rules in all of the EU Member States, along with the requirements in the EFTA states of Iceland, Liechtenstein and Norway.
What are the main changes to the Transparency Directive?
The scope of the financial instruments subject to disclosure has been expanded and now includes “financial instruments with similar economic effect to shares and entitlements to acquire shares, including if they are cash-settled.”
So what are the conditions for disclosure of such instruments?
- are not already disclosable as entitlements to acquire shares;
- are referenced to already issued shares;
- related to all issuers admitted to trading on a regulated market, there is no distinction between foreign and domestic incorporated issuers;
- can be both physically and cash settled.
It is not a big concern for some of the European regulators. Sufficient changes have already been implemented, including rules in countries such as France, Germany, Portugal or the United Kingdom. Even so, some of the current requirements may still need adjustments to improve accuracy and coherence.
An indicative list of the financial instruments, which will be regularly updated to face up to the latest demands, will be soon published on the ESMA (The European Securities and Markets Authority) website. The ESMA list is not exhaustive, which means instruments that are not on the list may still be disclosable if the relevant conditions for disclosure are met. Another list of the securities subject to disclosure can be found in the directive itself (Article 13 1b. of the TDA).
There will be a requirement to aggregate all types of financial instruments with shares with voting rights for calculation of the thresholds. In practice this change will affect only a handful of countries, e.g. Cyprus, Luxembourg and Spain, where disaggregation is permitted. The diagram below presents the new aggregation structure.
Changes in nature of the holding
In short, every change in holdings from financial instruments to shares will now be disclosable, even if the overall percentage of the total holding of voting rights is not affected. Worth mentioning - the previous version of the TD already provided such a solution, but not all the countries interpreted it in the desired way. Currently countries like Croatia and Greece do not require disclosure in the case of changes in the nature of holding at all. Some other Member States e.g. Belgium and Netherlands only ask for a notification at the end of the calendar year.
The upcoming implementation of the amended Transparency Directive is surely looming large in minds. If you are a FundApps customer, you have no need to worry, our dedicated team of regulatory experts with Allen & Overy platform - aosphere, as a legal provider, ensure the updates to the major shareholding rules are made accurately and in time. And don’t forget - the changes we make are instantly synced to the cloud!
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