27 Mar COVID-19 Rewrites the Rules for Global Shareholding Disclosures
Asset Managers Need to Adjust Global Shareholding Disclosures Compliance Protocols On-the-Fly
Global Shareholding Disclosures (GSD) rules have been a focal point for global regulatory authorities trying to implement safeguards in response to market shocks resulting from the novel coronavirus pandemic (COVID-19). Over the last two weeks, more than a dozen different rule changes — affecting everything from short-sales to overall ownership reporting — have been implemented, forcing asset managers to adjust their compliance protocols on the fly.
The regulatory objective behind GSD rules is to increase market transparency of major holdings in public issuers whose shares are traded on regulated markets. All told, roughly 95 different regulatory jurisdictions around the world enforce some form of Global Shareholding Disclosures monitoring, and each one does so with their own set of rules, many of which vary widely from one jurisdiction to the next.
Amid the backdrop of a crisis that has not left one corner of the global financial markets unscathed, many of these rules are changing quickly to lower ownership thresholds at which holdings must be reported to local and federal regulators. Short-selling has been a focal point, with several jurisdictions issuing outright bans on short sales, and others requiring more onerous reporting of short-sell trades. There has also been some tightening of thresholds for long positions, most notably in Italy, where the issuer thresholds for long position reporting have been lowered for greater transparency in the market.
AxiomSL has been continually updating its rules library to automatically adjust to these rapidly changing monitoring requirements for short-selling, and the built-in proximity tools have been actively alerting clients when holdings are close to triggering a new monitoring obligation for long positions. Therefore, clients can rest assured that amid these changing thresholds AxiomSL’s monitoring and reporting capabilities continue to enable firms to be confident in their compliance.
Tracking Rule Changes for Global Shareholding Disclosures in Evolving Circumstances
The following is a jurisdiction-by-jurisdiction rundown of the major global rule changes that have gone into effect in response to the COVID-19 pandemic:
- European Union: The EU passed – with immediate effect on March 16, 2020 – emergency legislation that requires short-sellers to report a transaction if their net short position reaches or exceeds 0.1% of the issued share capital.
- South Korea: A six-month ban on short-selling of all listed securities in South Korea was introduced on March 13. The action followed a series of limited bans that were introduced first on March 9 and then extended on March 12.
- Belgium, France, Greece, Italy, Spain, U.K.: Temporary short-selling bans were issued on all listed securities in these jurisdictions on March 18, following a series of limited bans that were introduced on March 13 and March 17.
- Italy: In addition to its temporary short-selling ban, Italy updated its Global Shareholding Disclosures reporting thresholds for significant holdings for the next three months, starting on March 18. The rule is valid for significant holdings of 1% or more for 38 specific companies with equity listed on the Mercato Telematico Azionario (MTA) with Italy as the home member state, and 3% or more for ten small-to-medium sized entities. Asset owners were given ten days to report these holdings. Take note that there is an exemption in place for asset managers (provided by art. 119-bis) which is still valid, and hence the lower thresholds do not currently apply to asset managers.
- Malaysia: The Securities Commission Malaysia and Bursa Malaysia announced on March 20 that short-selling will be suspended until April 30.
- Jordan and Philippines: The Amman Stock Exchange and the Philippine Stock Exchange were shut down until further notice on March 17, halting all trading activity.
Financial institutions require process transparency in order to efficiently comply with Global Shareholding Disclosures across multiple jurisdictions. And they must accommodate seamless change management regardless of what may be happening around the world – managing the normal pace of regulatory changes and quickly adapting to mandates driven by shock events such as the current pandemic. AxiomSL’s ControllerView® data integrity and control platform provides institutions with a strategic, end-to-end reporting capability to transparently and efficiently address GSD requirements. The technologically advanced and flexible platform delivers efficient processing of large volumes of data, validations and reporting. Dynamic drill-down capabilities, intuitive user-controlled workflow automation, and end-to-end user-friendly visualization support institutions as they seek a trustworthy and reliable solution to address challenges in a sometimes volatile and unpredictable world.