GERMANY: BaFin Updates FAQs Regarding Threshold Date for the Acquisition of Instruments

Friday September 25 2020

On 25^th September 2020, the Federal Financial Supervisory Authority (BaFin) published the updated version of FAQs on the transparency requirements under part 6 (section 33 et seq.) and part 7 (section 48 et seq.) of the WpHG.

This update contains explanations on the threshold date for the acquisition of instruments (in rem), guidance on how to withdraw a notification that has already been published and a clarification with regard to the application of the depositary exemption.

Updated FAQs

5a. Question: What is the threshold date for the acquisition of instruments within the meaning of section 38 of the WpHG that are transferred in rem (i.e. according to sections 929 et seq. of the German Civil Code (Bürgerliches Gesetzbuch – BGB))?

Answer: When acquiring instruments within the meaning of section 38 of the WpHG in rem, the acquirer becomes subject to the notification requirement within the meaning of section 38 para. 1 sentence 1 WpHG as soon as the contract is concluded; the transfer in rem, particularly the actual booking of the instrument into the acquirer’s securities account is hence not relevant for the notification obligation within the meaning of section 38 para. 1 sentence 1 WpHG. In formal terms, “instruments in rem” are chain financial instruments that are also subject to a reporting obligation (see Issuer Guidelines, Module B, as of 30.10.2018, p. 43). In practice, a distinction according to how an instrument is transferred and under which conditions is unnecessary in any case; reference is always made to the earliest contract, which permits a calculation of the acquirable voting rights.

6b. Question: How can a notification already published be withdrawn?

Answer: A notification that has already been published has to be withdrawn by using the notification standard form and BaFin’s Reporting and Publication Platform (Melde- und Veröffentlichungsplattform – MVP). Such a notification must be marked as a “correction of a notification of Major Holdings” including the date of the notification which gets withdrawn. The following points should be taken into account in the notification form in order to indicate that the notification in question is the withdrawal of a notification which has already been published:

– Item 2: The reason for the notification should be “Other reason”, together with the explanation that the notification is a withdrawal of a notification, e.g: “Withdrawal of the notification of XX.YY.ZZZZ, published on XX.YY.ZZZZ”.

– Item 5: The (alleged) threshold date of the original notification must be entered here.

– Item 6: Under “New”, the voting rights at the time of the originally notified threshold date are to be entered. Under “Previous notification”, the voting rights of the last notification made before the notification to be withdrawn must be entered.

– Item 7: The voting rights indicated there must also correspond to the voting rights at the time of the originally notified threshold date (see already above under item 6 “New”).

– Item 10: As “Other useful information”, it should be clarified that the information under item 6 reflects the voting rights at the alleged threshold date and that there was no notification obligation at the alleged threshold date, e.g: “The voting rights notification of XX.YY.ZZZZ is hereby withdrawn, as there was no notification obligation. The holdings under 6 “New” and 7 correspond to the holdings on XX.YY.ZZZZ” (Explanation: originally reported threshold date).

If a notification has not yet been published, the notification can be withdrawn informally (e.g. by e-mail) vis-à-vis BaFin and the issuer.

15a. Question: What applies to the application of the depositary exemption (Section 36 para. 3 no. 2 WpHG) if the depositary has only temporarily additional (economic) rights to the shares held in custody?

Answer: The depositary (or also: custodian) exemption only applies if the depositary’s activity is limited to the pure safe-keeping; in the case of additional arrangements, in particular the granting of rights of use, the exemption does not apply (see Issuer Guideline, Modul B, 30.10.2018, p. 38 f.). If the rights of use under the agreed terms can only be exercised under certain conditions and thus only temporarily, e.g. because the right of use is linked to the development of certain (market, price, credit) parameters, the exemption does not apply in principle according to the administrative practice of the BaFin, because the shares are not held exclusively for the purpose of safe-keeping at the time the agreement is concluded or becomes effective. If, however, a declaration by the depositary is required for the exercise of the right of use (an agreed notice of the exercise of the right of use would not be sufficient if it is not a prerequisite for effectiveness, but merely represents a contractual accessory obligation) or if the beneficial owner can exempt the shares held in custody from use by the depositary by way of a declaration, BaFin does not object to the application of the exemption for the period during which the rights of use cannot be exercised by the depositary, provided that the agreed conditions and the declarations are sufficiently documented.

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