Complex shareholding disclosure regulations, especially where assets are held across jurisdictions, can quickly translate into a significant headache for asset managers and institutional investors alike. Secure access to the right data and analytics can mean the difference between compliance and a breach of regulations.
- The purpose of shareholding disclosure regulations is to protect all shareholders by requiring investors and asset owners to disclose to regulators when they breach ownership thresholds relating to a specific issuer.
- The current trend in shareholding disclosure regulations is being propelled by factors including net flows into equities. Meanwhile, regulations are also becoming more stringent.
- Because of their complexity, shareholding disclosures present problems for institutional investors and asset managers who accordingly require complete and accurate data.
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What is shareholding disclosure?
Shareholding disclosure regulations have been designed to protect all shareholders by requiring investors and asset owners to disclose to regulators when they breach ownership thresholds relating to a specific issuer. In this way, regulators can remain aware of instances where investors obtain a controlling interest in a company.
While these regulations undoubtedly boost market transparency, protect minority shareholders and help to prevent hostile takeovers, they also involve constant monitoring and ongoing reporting – with time and cost implications for asset managers and institutional investors alike.
Some types of threshold limits include reaching a significant shareholding, short positions, and issuer-driven limits such as anti-takeover, shareholder rights or charter limits.
Although shareholding disclosure obligations are not new, there has been a significant trend towards increasing volumes of disclosures. This is being driven by several factors, including net inflows into equities, with many funds subsequently diversifying internationally and becoming subject to additional disclosure requirements.
The regulatory stance towards disclosures is also becoming more stringent.
Post the 2008 financial crisis, regulator focus shifted somewhat from banks to asset managers, with regulators across the globe taking tougher steps to counter systemic risk in the sector.
This included stepping up efforts to identify breaches in disclosure compliance, and authorities now adopt a zero-tolerance policy to non-disclosure or delays in disclosure. Penalties can be significant, including fines, censure, the loss of advisory license, or even imprisonment.
Nonetheless, compliance with often complex requirements is far from straight forward.
Challenges facing investors and asset managers
Regulations are typically highly complex and differ across jurisdictions, which makes compliance especially complex for investors with international holdings.
For example, the definition of issuer share capital can differ significantly across markets. Some jurisdictions may include preference shares or unlisted share classes, whilst others may include derivatives that have a similar economic effect to shares.
Moreover, regulators in different jurisdictions frequently apply different reporting rules. For example, different official sources may be allowed for total shares and thresholds for disclosure typically vary.
In addition to these cross-jurisdictional complexities, the other core challenge facing firms centres on data – specifically accessing trusted and complete data in a timely manner, but also keeping abreast of corporate events, such as share buy-backs that could push an investor’s percentage ownership over the relevant threshold, leading to a reporting obligation.
Moreover, where sensitive industries – including among others financial, media, telecoms and natural resources – are concerned, there is additional regulatory scrutiny to ensure that no one firm or investor acquires too large a stake.
Given these obligations and the complexities and variations that surround them, a lack of access to accurate data on total shares and voting rights can quickly lead to a host of challenges for institutional investors and asset managers.
Accurate and trusted data
Refinitiv partners with firms to solve these complex challenges and support the full range of data needs.
We offer comprehensive shareholding disclosure data that covers total shares, voting rights and voting shares across all share classes, including unlisted share classes, at instrument and issuer level.
This data is sourced and collated from over 150 trusted sources, and we also receive regular filings from more than 70,000 listed companies. We deliver:
- Data across 100 countries
- Analytics and reference data to support disclosures, including business classification schemes to help determine sensitive industries
- Issuer thresholds for Belgium and France where companies have their own threshold requirements stipulated in their articles of association
We are also highly cognisant of additional regulations in certain jurisdictions and, for example, align sources to match requirements in countries where specific sources are prescribed. We also offer support for exceptions, such as in France, where voting rights change depending on tenure.
Additionally, we offer takeover panel data on target and acquirer companies in 21 markets: Austria, Belgium, Brazil, Canada, Cyprus, Czech Republic, France, Greece, Hong Kong, Ireland, Malaysia, Oman, Qatar, Saudi Arabia, Singapore, Slovenia, South Africa, Spain, Switzerland, Tunisia and the United Kingdom.
This combination of highly comprehensive data provides targeted support across the range of country-specific regulatory requirements that firms encounter.
As with any compliance challenge, the right partner can smooth the path to meeting obligations in a timely manner, not only by supplying accurate and trusted data and analytics, but also by drawing on years of experience in remaining abreast of ongoing regulatory changes.