On 17th October 2013, the EU Council adopted the Transparency Directive Amending Directive (TDAD). On the 6thNovember 2013, the TDAD was published in the Official Journal and came into force on 26thNovember 2013. The final regulatory technical standards (RTS) were published on 13thMay 2015. Each Member State was required to implement this within 24 months of that date. Therefore, Member States had until 26th November 2015 to implement the changes.
The UK provisions are set out in DTR5. The UK super-equivalent obligations require disclosure of major shareholdings at 3%, 4%, 5%, 6%, 7%, 8%, 9%, 10% and each 1% threshold thereafter up to 100%. The thresholds apply to UK companies listed on UK regulated markets and UK prescribed markets. The Transparency Directive limits apply to Non-UK companies on UK regulated markets.
The UK additional thresholds will remain. Beyond that, the TDAD amendments brought the EU rules broadly in line with UK DTR 5 which has, since June 2009, required the disclosure of financial instruments which give a long position in an issuer’s shares. The UK Rules were super-equivalent and already included contracts for difference positions, and holdings of other financial instruments which have a similar economic effect to (but are not) qualifying financial instruments (i.e. they do not have a legal right to acquire shares, but have a similar effect in practice).
However, there will still be some impact in respect of UK disclosures as summarised below:
Disclosures relating to non-UK incorporated issuers with the UK as their Home Member State will also be subject to the requirement to disclose related financial instruments;
Going forward, the rules will only relate to instruments relating to shares in issue, the previous DTR provisions captured interests in shares that had not yet been issued;
- Investment Managers exemption – All investment managers, irrespective of their jurisdiction will now be exempt from the disclosure obligations other than those of EU minimum, i.e. 5%, 10% and higher thresholds. The DTR has been amended which will allow all investment managers (including those in the UK) to disclose at the EU minimum standard. Previously, only EEA and US investment managers could avail of the exemption and all other investment managers were subject to the super-equivalent thresholds
- Client Serving Intermediary – Unlike the existing UK regime, the TDAD does not provide a standalone, uncapped exemption from the vote holder notification rules for entities operating in a client-serving capacity. Instead, a client-serving intermediary will have to rely on the existing trading book exemption, which is capped at 5%. Therefore, the UK has removed the standalone client-serving intermediary exemption. Financial instruments with similar economic effect held in a client-serving capacity will need to be aggregated with the holder’s position in other financial instruments of the same issuer. If the aggregated holding reaches or crosses the 5% trading book exemption threshold, the holder will have to disclose that holding.
- Stock Lending and Borrowing: under previous rules, stock lenders could conclude that, on entering a loan agreement, both parties disposed of (lend) and acquired (right of recall) matching interests in the same shares, thereby netting off their interests and releasing them fromthe obligation to notify a change in position. Following the TDAD and ESMA RTS, the previous exemptions for stock borrow and lending have been removed. Initially the FCA had proposed requiring disclosure from the EU thresholds –so beginning at 5%, however following feedback it was decided that no separate provisions on reporting were required and stock lending transactions will need to be treated in the same way as all other holdings and should be notified at the appropriate thresholds set out in the DTRs
- There have also been changes as regards calculation of delta and the treatment of depository receipts which are identical to the requirements of the TDAD.
The FCA has also removed much of the specific guidance contained in DTR 5 and replaced with references to ESMA’s RTS.
Note that the FCA updated its form for notifying major shareholdings which came into force on 30th June 2017. Member States have discretion to make changes to the ESMA standard notification form as they see appropriate. In the UK, the FCA have decided to make some amendments to the content of the form as follows:
- Include a new box to identify non-UK issuers
- Include a box to indicate the date on which issuer was notified (to reflect the current TR-1 form requirement)
- Include an email address to which the form and annex should be sent to the FCA (firstname.lastname@example.org)
Request our full briefing paper on the Transparency Directive Amending Directive and its impact on UK DTR 5.