Avoiding The Pitfalls Of Global Shareholding Disclosure Reporting And Monitoring In The Age Of COVID-19

The Rationale Is Clear…

Regulators governing shareholding disclosure reporting and monitoring simply want to know when a financial institution’s equity ownership breaches a certain threshold across the following jurisdiction-specific scenarios:

  • Accumulation of a significant shareholding in an issuer/security
  • Investment in a sensitive industry
  • Investment exposure to a company that is the subject of a takeover bid
  • Engagement in short selling

…But Disclosure Monitoring Is A Complex Process Fraught With Pitfalls

While the rationale is clear, complying with regulatory requirements is murky and fraught with pitfalls. More than 95 regulatory jurisdictions around the world enforce some form of shareholding disclosure rules. These rules vary widely from one jurisdiction to the next and change frequently. And, as evidenced during the pandemic, shareholding disclosure reporting and monitoring rules are among the first regulatory changes to occur in times of market volatility.

a framework for data management and current rules and calculations for shareholding disclosure reporting & monitoring.Without up-to-the minute rules incorporated into transparent disclosure calculation processes, firms can breach thresholds astonishingly quickly: some short-selling thresholds now trigger at 0.1 percent. And, in the rush of change, organizations can easily miss key elements, as happened when CONSOB, the Italian regulator, reduced the major shareholding thresholds for certain Italian issuers to 1% and 3% on COVID-19 fears. To disclose accurately, firms had to be aware that investment managers in Italy are generally exempt up to a 5% threshold, and thus were not impacted. More importantly, they had to be able to act quickly on that knowledge.

Grappling With An Intricate Mix Of Factors…

Reporting entities must be able to understand and manage myriad regulatory and process nuances in order to identify in-scope holdings, beneficial ownership, aggregation levels, threshold breaches, and accurately monitor disclosable events. To properly manage this process, firms also must consider factors driven by each entity’s unique business activities and makeup including:

  • The extent of its equity exposures across jurisdictions
  • The scope of exposure to equity derivative instruments
  • The depth of its corporate entity hierarchy
  • The complexity of its fund-group structures

…Is Not For The Faint Hearted!

Consider the sensitive industries disclosure conundrum. For example, there is as yet no uniform reporting regime; definitions of sensitive issuers vary widely across and within jurisdictions; and entities must have access to accurate industry classification data for issuers in order to match their exposures to different rules within and across jurisdictions. The list of potential pitfalls around this single disclosure area goes on. Are cash-settled derivative instruments in scope? Should a firm define its local vs. foreign investor status for sensitive holdings based on where the group office is located, where sub-entities are located, or on some other criteria?

Indeed, many factors combine to drive the complexity that exposes firms to the risk of non-compliance and ramps up costs.

One Size Does Not Fit All

It is mission critical for firms to be able to handle all aspects of global shareholding disclosure reporting and monitoring in a flexible and nuanced manner. Any solution worth its salt must provide a framework for seamless data management, up-to-date rules, and transparent shareholding disclosure calculations that enables firms to easily incorporate their rule interpretations and operating model requirements.

Avoid Shareholding Disclosure Reporting and Monitoring  Pitfalls With AxiomSL

In a new paper, Intricacies of Global Shareholding Disclosures Monitoring and Reporting – Point-in-Time Data, Rules, Thresholds – Across Multiple Jurisdictions, AxiomSL helps organizations identify and avoid the pitfalls of global shareholding disclosure compliance by breaking down its many challenges into three coherent buckets.

  • Regulatory challenges and nuances
  • Market data challenges and nuances
  • Data management and operating model challenges

By implementing AxiomSL’s end-to-end Global Shareholding Disclosures (GSD) solution on the ControllerView® platform, firms can address these challenges and establish transparent, efficient shareholding disclosure reporting and monitoring, worldwide.

To find out how you can avoid shareholding disclosure’s many pitfalls, contact us today.



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