The major shareholding notification regime under the Disclosure and Transparency Rules (DTRs) is being amended with effect from 26 November 2015. Other changes are also being made to the DTRs from that date, including a requirement for issuers to notify the Financial Conduct Authority (FCA) and other competent authorities of their home member state. Sanctions for breach of the DTRs are also being amended.
On 20 March 2015, HM Treasury and the FCA published a consultation paper setting out proposed amendments to the Financial Services and Markets Act 2000 (FSMA) and the DTRs. The proposed changes to domestic legislation are required by an amending EU Directive to the Transparency Directive (known as the Transparency Directive Amending Directive).
On 6 November 2015, HM Treasury and the FCA published a policy statement which explains how the Government will implement the Amending Directive (to the extent not already implemented) as well as addressing feedback received during the consultation.
The policy statement confirms that the amended DTRs will come into force on 26 November 2015. It is worth noting the UK has already implemented some changes required by the Amending Directive including:
- introducing a new DTR 4.3A requiring certain logging and forestry companies to report on payments made to governments; and
- abolishing the requirement for companies to publish interim management statements.
Home member state notification
The Amending Directive requires companies to disclose their home member state to: the competent authority of their home member state; the competent authority of the member state where they have their registered office (if different); and the competent authorities of all host member states. The DTRs will reflect this.
In addition, a company whose home member state is the UK, or who chooses the UK as its home member state, must disclose that to the FCA. The FCA has published a standard form for this purpose and:
- asks companies who have a choice of home member state but who have not yet notified it of their choice to do so by 26 February 2016 using the standard form;
- requests that issuers incorporated in a member state who do not have a choice of home member state inform it of their home member state by 26 November 2015 (if they have not already done so);
- notes that, although issuers who have already disclosed their home member state to the FCA do not have to do so again under the Amending Directive, the new form seeks more detail than is currently requested and therefore asks all existing issuers to update their notifications using the revised form.
Major shareholding notifications
The Amending Directive mandates that, for breaching the rules around major shareholding notifications, voting rights can be suspended. The FCA will need to apply to court for voting rights to be suspended in these circumstances and it may only do so for serious breaches of the rules. The FCA's new powers, to be included in FSMA, will complement a UK public company's powers under Part 22 of the Companies Act 2006 and any powers the company may have in its articles of association or other constitutional documents.
The DTRs were already super-equivalent with the existing Transparency Directive in respect of notification requirements relating to instruments which have similar economic effect to holding shares. Now that the Amending Directive extends the EU notification regime to these instruments, the DTRs have been amended to more closely align with the EU legislation.
The specific exemption for client-serving intermediary transactions has been removed (although the trading book exemption may apply to these transactions). There is a new exemption for shares acquired for stabilisation purposes.
Stock lending transactions will be treated in the same way as all other holdings and should be notified by both the borrower and lender at the usual thresholds. A proposal to apply higher thresholds to stock lending transactions is not being implemented.
Publication of financial reports
Half yearly financial reports must be published within two months (rather than three) from the end of the period to which they relate.
Companies will be required to make their annual and half yearly financial reports publically available for at least ten years. The FCA originally proposed applying the revised timeframe only to reports published on or after the date the new rules enter into force. The policy statement reflects FCA's revised position, which is that financial reports made publicly available less than five years before 26 November 2015 should remain so for at least ten years, and this period of time will start counting from the date the reports were originally published.
Sanctions regime – persons subject to sanctions
Currently only directors can be sanctioned under FSMA. The Act will be amended so any person holding an office similar to that of director or the members of entities which are not bodies corporate can be sanctioned for breaches of the DTRs.
The amended DTRs
The amended DTRs are set out in the Disclosure and Transparency Rules Sourcebook (Transparency Directive Amending Directive) Instrument 2015).
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