Among the hundreds of threshold reporting rules throughout Europe that affect investment managers, a significant number apply to long or short positions of 1% or lower. And because the applicable rules are the local laws of wherever the issuer is based or listed, a market participant with exposure in various European issuers could be subject to multiple filing obligations at once. This map illustrates low thresholds of which position holders should be aware:
* This includes the UK, which remains subject to EEA requirements during the Brexit transition period.
0.1% – short (EU Short Selling Regulation, issuer of shares: private notification)**
** The 0.1% initial threshold is a temporary measure introduced by ESMA (lowered from 0.2%).
0.5% – short (EU Short Selling Regulation, issuer of shares: public notification)
0.1% – short (EU Short Selling Regulation, sovereign debt issuer of ≤ €500 billion)
0.5% – short (EU Short Selling Regulation, sovereign debt issuer of > €500 billion)
Belgium imposes an obligation to submit a filing to the FSMA if holding at least 1% of the outstanding shares of a target company or relevant issuer involved in a takeover bid. In addition, many Belgium issuers privately impose upon their shareholders a separate disclosure obligation, at levels starting at 1%.
Once reaching interests of at least 0.5% in an issuer involved in a takeover bid, each acquisition in such issuer must be disclosed to CySec.
Investments in certain issuers with a minimum level of registered capital trigger a disclosure obligation to the CNB for long holdings at a 1% threshold.
European Economic Area (31 jurisdictions)
Under the EU Short Selling Regulation, a market participant must disclose to the relevant national competent authority any short position of at least 0.2% it holds in a company issuer listed on a qualified EEA exchange. As of 16 March 2020, ESMA temporarily reduced this initial threshold to 0.1%. At levels starting at 0.5%, the required disclosure becomes public.
For short positions in sovereign debt, the filing thresholds start at 0.1% (of issued sovereign debt if that amount is at most €500 billion when duration-adjusted) or 0.5% (of issued sovereign debt if that amount is greater than €500 billion when duration adjusted, or if there exists a liquid futures market for the sovereign debt).
In France, a filing obligation can be triggered at long holdings of 0.5% under various scenarios. A negotiated transaction constituting at least 0.5% of issuer outstanding is disclosable to the AMF if it provides for “preferential terms and conditions”. A transaction of 0.5% can also trigger an AMF filing requirement if undertaken pursuant to a borrowing or similar arrangement. In addition, hundreds of issuers in France, including the vast majority of blue chip issuers listed on the CAC40, set forth their own disclosure thresholds beginning at 0.5%.
Shareholders should also take note of a low threshold requirement in the context of an issuer involved in a takeover bid: increasing holdings by at least 1% would then trigger a filing requirement (made to the AMF) upon any subsequent transactions made in that issuer.
When the issuer is involved in a takeover bid, a requirement to file with the HCMC is triggered when increasing holdings by at least 0.5%.
Guernsey is a British Crown dependency that forms part of the Channel Islands. While not officially a part of the United Kingdom, Guernsey (as well as nearby Jersey) applies the rules of the UK Takeover Panel, including the filing requirement when reaching interests of at least 1% in a relevant (Guernsey) issuer involved in a takeover. The filing is made to the UK Takeover Panel.
Reaching at least 1% interests in a relevant issuer involved in a public bid triggers a required disclosure to the Irish Takeover Panel.
Isle of Man
Located in the Irish Sea, the Isle of Man is a British Crown dependency (like Guernsey and Jersey), and imposes the rule that shareholders reaching interests of at least 1% in a relevant (Manx) issuer involved in a takeover must submit a disclosure to the UK Takeover Panel.
As a result of the economic effects of the COVID-19 pandemic, effective 18 March 2020 Italian regulator CONSOB lowered its disclosure thresholds as follows, scheduled to be effective for a three-month period: 3% for investments in shares of Small and Medium Enterprises (SMEs) and 1% for investments in shares of non-SMEs.
Like Guernsey, Jersey is a British Crown dependency that forms part of the Channel Islands. It follows the requirement that shareholders must submit a filing to the UK Takeover Panel when reaching at least 1% interests in a relevant (Jersey) issuer involved in a takeover.
Shareholders considered to be based in a “tax or regulatory haven” must disclose their positions at every percentage point of holdings reached in a Spanish issuer, starting at 1%. (Spain’s changing list of tax havens has included jurisdictions such as Bermuda, the Cayman Islands, the Cook Islands, the British Virgin Islands, the US Virgin Islands, Saint Lucia, Gibraltar, Liechtenstein, Monaco, Isle of Man, and the Channel Islands.)
When reaching interests of at least 1% in a relevant issuer involved in a takeover, the shareholder must submit a filing with the UK Takeover Panel.