CESR is consulting on whether the EU major shareholding notification regime should be extended to require disclosure of instruments having a similar economic effect to holding shares and entitlements to acquire shares.
Its aim is to prevent use of these instruments to build up stakes or exert influence over companies by means of an undisclosed interest. These instruments are currently outside the scope of the Transparency Directive; CESR’s work is intended to complement the planned review of that Directive.
Investors with interests in contracts for differences and similar financial instruments in UK companies have been required to disclose them to the underlying issuer since 1 June 2009, following changes that were made to rule 5 of the Disclosure and Transparency Rules. The consultation paper also notes similar disclosure initiatives that have recently been made in a number of other jurisdictions.
CESR proposes a broad definition of “financial instruments” and discusses whether the scope should extend beyond instruments that are financial instruments for MIFID purposes. The paper includes a discussion of whether these instruments should be accounted for on a “delta-adjusted basis” rather than a nominal basis; use of the former means that a financial instrument relating to 100 shares will not necessarily be disclosed as such but instead by reference to the number of shares that would be needed to perfectly hedge against the instrument (which can fluctuate). Adopting a delta-adjusted basis at EU-level would be consistent with the approach taken by the FSA in respect of DTR 5 (as these operate on a delta-adjusted basis).
CESR’s high level issues paper CESR/09-1215b is available here. The closing date for responses is 31 March 2010.
