The European Securities and Markets Authority (ESMA) is consulting on draft regulatory technical standards on how interests in listed companies should be calculated for the purposes of the disclosure requirements under the revised Transparency Directive 2013/50/EC.  The deadline for responses is 30 May 2014.

Amendments to the Transparency Directive, which must be implemented by 27 November 2015, extend the requirements for major shareholders to notify interests in shares to cover financial instruments which have a similar economic effect to entitlements to acquire shares, regardless of whether or not the instruments grant a right to a physical settlement.

The new EU rules broadly align the European regime with the UK regime in DTR5, which already requires disclosure of interests in financial instruments that create a long economic interest in a UK listed company’s shares.  Once the changes are implemented, investors should be able to apply the same reporting systems and processes in all EU Member States.  

Nevertheless, some changes to the UK regime will be needed to fully to reflect the new Directive requirements, including in relation to the matters set out in the ESMA paper, which proposes draft technical standards in relation to:

  • the method of calculation of the 5% threshold for the market maker and trading book exemptions, including in respect of a group of companies;
  • the method of calculating voting rights in case of financial instruments of similar economic effect to holding shares and entitlements to acquire shares and which are referenced to a basket of shares or an index;
  • the methods of determination of delta for the purposes of calculation of voting rights relating to financial instruments which provide exclusively for a cash settlement; and
  • the cases in which the “client serving” exemptions apply to financial instruments held by a natural person or a legal entity fulfilling orders received from clients or responding to a client’s requests to trade otherwise than on a proprietary basis, or hedging positions arising out of such dealings.

The consultation paper also includes an indicative list of financial instruments which ESMA proposes should be subject to the notification requirements and details of ESMA’s proposals in relation to the scope of the exemptions from the new requirements.