In August 2012, the Takeovers Panel issued a consultation paper entitled Disclosure of Equity Derivative Positions. We discussed that paper in an earlier newsletter – click here to view.
The Panel received four submissions in response to that paper, all broadly supportive of its proposals. As a result, in recommendations to the Minister of Commerce released at the end of February, the Panel reinforced its preliminary view that law reform is desirable. Specifically, long cash-settled equity derivative positions, which are currently not required to be disclosed, should be disclosed and aggregated with long physical positions under the relevant legislation.
This reform would involve the following legislative changes:
- the substantial product holder disclosure regime (to be carried over from the Securities Markets Act into the Financial Markets Conduct Bill) should include, in the "substantial holding" definition, relevant interests in cash-settled derivatives where the underlying is a quoted financial product of a listed issuer; and
- the Takeovers Code should require both offeror and target company (and their related parties) to disclose long equity derivative positions referenced to the target's shares.
Our earlier newsletter suggested that, at least in New Zealand, this is a solution looking for a problem. For all the talk of such lofty and laudable goals as promoting the efficient allocation of resources and promoting confidence in our capital markets, there is little evidence suggesting current disclosure laws are holding us back. In the end, the fact that this proposal generated only four submissions speaks volumes for the disinterest of financial market participants in this so-called "problem".
Click here to read the Panel's recommendations to the Minister of Commerce on disclosure of equity derivatives positions.