On February 9, the Committee of European Securities Regulators (CESR) published its proposals for extending the disclosure of major shareholdings regime under the European Transparency Directive.

The current regime requires investors to make disclosures of holdings of voting rights attached to shares and voting rights an investor is entitled to acquire when certain thresholds are crossed. There is no current disclosure requirement for instruments with a similar economic effect, such as cash settled contracts for difference. The UK and some other countries address this in national legislation.

CESR has recognized that instruments of this kind could be used to acquire or exercise influence in a company, and in its proposals it cites a number of examples of where this has happened. To ensure greater transparency in situations such as these, CESR is proposing that the regime for notification of major shareholding should be extended to include all instruments that give a similar economic effect to holding shares and entitlements to acquire shares in the broadest sense. In CESR’s opinion this approach balances the need for legal certainty with the potential for avoidance.

CESR notes that, where appropriate, its proposals are consistent with its approach to the European short selling regime. However, it makes it clear that CESR considers these are two separate regimes and serve different purposes.

In its proposals, CESR also makes it clear that these instruments are an important source of liquidity to the market and that it is not seeking to discourage their use but only to make their resulting economic exposure transparent.

To read the proposals in full, click here.