CESR, the Committee of European Securities Regulators, has recently published a consultation paper inviting responses to its proposal to extend the major shareholding notification obligations contained in the Transparency Directive to cover instruments which create a similar economic effect to the holding of shares and entitlements to acquire shares.

Under the Transparency Directive, implemented in Ireland by the Transparency (Directive 2004/109/EC) Regulations 2007, the obligation to notify the acquisition or disposal of voting rights also applies to a person who holds, directly or indirectly, financial instruments which give that person an entitlement to acquire, on his or her own initiative, and under a formal agreement, issued shares to which voting rights are attached. As a result, there is currently no obligation under the Irish Transparency regime to notify acquisitions or disposals of instruments that create a similar economic effect to holding shares and entitlements to acquire shares. Examples would include contracts for difference (CFDs) which do not give the holder on his/her own initiative the right to acquire already issued shares. Another example would be a put option in respect of voting shares pursuant to which X can put those shares to Y who is obliged to acquire them. This gives Y potential access to the voting rights, but Y is not under any disclosure obligation because the arrangement does not result in an entitlement on Y's part to acquire the shares to which the voting rights are attached.

CESR's position is that instruments that create long-term economic exposures, without giving the right to acquire the voting rights, may nonetheless be used to acquire and/or exercise potential influence in a listed company, or allow for what it calls "creeping control". CESR cites a number of recent cases in which instruments were used with the intention of influencing or acquiring control of the company, building up a stake and affecting the company's governance.

CESR also points out that a number of EU Member States have recently announced national initiatives requiring disclosure of financial instruments with similar economic effect to shares and options etc. A number of countries outside the EU have also taken similar action.

In Ireland, the Financial Regulator issued a consultation paper in relation to draft regulations which it was preparing last year, proposing a new disclosure regime for CFDs for companies quoted on the Main market of the Irish Stock Exchange. The ISE has suggested that any such disclosure regime should also be extended to companies traded on its junior market, the IEX. To date, no such regulations have been brought into force.

Responses are invited by 31 March 2010.