Explained: Major Shareholding and the European Transparency Directive (TDA)

What is the European Transparency Directive?

The European Transparency Directive (officially known now as the Transparency Directive Amending Directive) is the active directive setting the standards for major shareholding disclosure requirements across the European Union. It was originally introduced in 2004, to harmonise the disclosure obligations across all EU Member States. Member States observed strengths and weaknesses of the directive and in 2013 the European Parliament presented the Transparency Directive Amending Directive.

How is the TDA applied?

The Transparency Directive was implemented as a directive and not as a regulation. This means that each Member State is required to implement the minimum set of standards from the directive but can diverge from the guidelines in their local implementation by introducing additional amendments (known as gold plating).

Our blog "What Are The Regulatory Impacts of Brexit?" explains how this works in the UK following Brexit.

Which areas of the TDA are allowed to be gold plated?

The directive allows for the Member States to gold plate (modify) the following areas with more rigorous requirements:

• Setting lower or additional disclosure thresholds than those set out in the TDA. For example, The Netherlands has gold plated lower initial thresholds (from 5% to 3%).
• Setting shorter deadlines for submission of disclosure forms, relative to the 4 days maximum deadline set in the TDA.
• Applying different thresholds depending on the disclosable issuers incorporation and also depending on the shareholders company type.
• Amending the definition of having an indirect interest in the relevant voting rights, and expanding responsibility to disclose. Meaning that multiple entities could be required to disclose the exact same holding.
• Applying laws and regulations in relation to takeover bids, merger transactions and other transactions affecting the ownership or control of companies. The UK is an example of a jurisdiction that has done this. This is not strictly speaking a gold plated requirement, but an expansion of the major shareholding regime.

For more information on gold plating check out our blog post where we discuss the "risks associated with the "known unknowns".

What type of assets need to be included when calculating your holdings under the  TDA?

All shares which carry voting rights need to be included when calculating whether a disclosure needs to be made. Additionally, all derivatives, regardless of settlement type, are also disclosable if they reference shares which carry votes. This could include, for example, a theoretical holding in an issuer through a derivative on an index such as the FTSE 100 or EuroStoxx 50.

Importantly, it is required to aggregate all shares and financial instruments together when calculating your holdings. But also, each threshold needs to be monitored separately too. This concept is called horizontal aggregation.

What are the disclosure thresholds under the TDA?

The initial threshold for disclosure is set at 5% of the total outstanding voting rights. There are subsequent thresholds at 10, 15, 20, 25, 30, 50 and 75%. A disclosure obligation arises when a position reaches, exceeds or falls below one of these thresholds. The 30% and 75% are not mandatory for the Member States to enforce if thresholds at 33.3% and 66.6% are enforced instead. 

Remember that these are the minimum thresholds - Member States can enforce additional thresholds through gold plating.

What are the filing deadlines for a disclosure under the TDA?

The TDA dictates that disclosure filings should be made immediately after becoming aware of a crossing. No later than within 4 days is seen as acceptable, and any later could result in sanctions. However, some Member States have enforced shorter deadlines through gold plating, so you should always check as soon as you become aware of a disclosure obligation. 

The TDA dictates that disclosure filings should be made immediately after becoming aware of a threshold being crossed. No later than within 4 days is seen as acceptable, and any later could result in sanctions. However, some Member States have enforced shorter deadlines through gold plating, so you should always check as soon as you become aware of a disclosure obligation.

Who needs to disclose?

The TDA leaves the disclosure responsibility with the entity that has the power to exercise the votes attached to a given share. If your firm manages securities but the voting rights rest with another party, then it is not your firm's responsibility to disclose, according to the TDA framework. However, certain gold-plated requirements expand on this responsibility.

Multiple entities within your firm may be defined as having the power to vote, both as a direct holder and as an indirect holder of shares. Therefore, multiple entities or all entities / levels within a corporate structure may be required to disclose their holdings.

How can I ensure that I'm staying compliant?

Here at FundApps, our industry-leading solution automates the Shareholding Disclosure monitoring process for 100+ financial institutions around the world. Our service covers 100 jurisdictions and contains 400+ rules, so you won't have to manually keep track of the different gold plating rules under the Transparency Directive. 

We receive legal and regulatory information from aosphere (an affiliate of Allen and Overy). Our in-house team of regulatory experts then interprets this information and codes it into rules. These rules are used by all FundApps clients, ensuring they remain compliant at all times.

Your positions file is run against the Shareholding Disclosure rules and the system automatically notifies you when disclosures are required.

1. Easily and securely upload your positions data to our cloud-based platform
2. Have your data analysed in a matter of minutes and be automatically notified of any required disclosures
3. Simply file your disclosures with our automatically generated and pre-populated forms

Looking for more training on the TDA?

Earlier in the year we began sharing our 10+ years of shareholding disclosure knowledge with the community through The FundApps Academy. Our latest course is on the Transparency Directive. Here our subject matter expert, Ebbe Filt, delves into all of the different nuances in the Directive, including gold plating and aggregation. Learn how to navigate the TDA with confidence!