Disclosures and Transparency
Implementation of the Transparency Directive Amending Directive (TDAD) (2013/50) has led to some changes to the Disclosure Rules and Transparency Rules sourcebook (DTR) which came into effect on 26 November 2015. The FCA are also taking the opportunity to implement miscellaneous other changes not directly relating to TDAD which they believe will improve or clarify existing rules.
As TDAD amends certain Articles in the Transparency Directive (TD) (2004/109) it will be necessary to read both Directives together. Any references to an Article below should be taken to mean the Article in TD as amended by TDAD.
As we know, DTR 5.1.2 requires a person to notify the issuer (and the FCA if the notification relates to shares admitted to trading on a regulated market – see DTR 5.9) when such person holds voting rights that reach, exceed or fall below certain levels. This is subject to DTR 5.1.3 which permits certain voting rights to be disregarded when determining whether there is a notification obligation. Changes include:
- the exemption afforded to shares acquired by a borrower under a stock lending agreement (DTR 5.1.3(6)) is removed
- the exemption afforded to shares relating to clearing and settlement, custodians and market makers is extended to shares underlying financial instruments within DTR 5.3.1(1) (see below), and
- shares acquired for stabilisation purposes will potentially fall within the exemptions (DTR 5.1.3(7)).
There will be no change to the ‘investment manager’ reporting thresholds of 5% and 10% etc. although DTR 5.1.5 will be revised so that the reporting threshold is the same for all investment managers – under the current wording of DTR 5.1.5(2) the 5% threshold starting point is only applicable to UK, EEA and, under special FCA powers, US investment managers. Those in other jurisdictions were subject to the super-equivalent thresholds of 3%, 4% etc. (DTR 5.1.2(1)).
DTR 5.3 concerns notification requirements in respect of financial instruments with similar economic effect and effectively reflected the FCA’s super-equivalent regime. TDAD extended the notification requirements under Article 13 to include such instruments. Given this, DTR 5.3 has been substantially revised, including removal of the ‘nil-paid rights’ exemption in DTR 5.3.1(2A) as this was really FCA guidance on its own provisions. Reference to an ESMA ‘indicative list’ is included in DTR 5.3, which is essentially a list of financial instruments that are subject to notification requirements.
In view of the numerous changes that will apply, the above should be regarded as a non-exhaustive high-level summary and reference should be made to the revised rules set out in Appendix 1 of PS15/26, the FCA’s and HMT’s joint policy statement.
As mentioned above, the changes apply from 26 November 2015. Those holding voting rights after that date will need to bear in mind the changes when calculating such voting rights.
Note that notifications will need to include a breakdown by type of financial instruments held and distinguish between those instruments that confer a right to physical settlement and to cash settlement (DTR 5.3.5).