COVID-19 re-writes global shareholding disclosure rules
14 April 2020
Asset managers need to adjust compliance protocols on-the-fly. AxiomSL investigates the challenges they face
Image: Shutterstock
Global shareholding disclosure (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). In recent 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 GSD, and each one does so with their own set of rules, many of which vary widely from one jurisdiction to the next.
In the current market crisis, many of these rules are changing quickly to lower the ownership threshold at which holdings need to be reported to local and federal regulators. Short selling has been a particular focal point, with several jurisdictions issuing outright bans on short sales and others requiring more onerous reporting of significant trades.
AxiomSL has been continually updating its software to automatically adjust to these rapidly changing reporting requirements and is proximity tools have been actively alerting clients when holdings are close to triggering a new monitoring obligation.
Tracking GSD rule changes:
Following is jurisdiction-to-jurisdiction a rundown of the major global rule changes that have gone into effect in response to the COVID-19 pandemic:
• EU: The EU passed – with immediate effect on 16 March – emergency legislation that requires short-sellers to report a transaction if their net short position reaches or exceeds 0.1 percent of the issued share capital.
• South Korea: A six-month ban on short selling of all listed securities in South Korea was introduced on 13 March. The action followed a series of limited bans that were introduced first on 9 March and then extended on 12 March.
• Belgium, France, Greece, Italy, Spain, UK: Temporary short selling bans were issued on all listed securities in these jurisdictions on 18 March, following a series of limited bans that were introduced on 13 March and 17 March.
• Italy: In addition to its temporary short selling ban, Italy updated its GSD reporting thresholds for significant holdings for the next three months, starting on 18 March. The rule is valid for significant holdings of 1 percent or more for 38 companies with equity listed on the Mercato Telematico Azionario, and 3 percent or more for 10 small-to-medium sized entities. Asset owners were given 10 days to report these holdings.
• Malaysia: The Securities Commission Malaysia and Bursa Malaysia announced on March 20 that short-selling will be suspended until 30.
• Jordan and Philippines: The Amman Stock Exchange and Philippines Stock exchange was shut down until further notice on 17 March, halting all trading activity in the country.
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 GSD, and each one does so with their own set of rules, many of which vary widely from one jurisdiction to the next.
In the current market crisis, many of these rules are changing quickly to lower the ownership threshold at which holdings need to be reported to local and federal regulators. Short selling has been a particular focal point, with several jurisdictions issuing outright bans on short sales and others requiring more onerous reporting of significant trades.
AxiomSL has been continually updating its software to automatically adjust to these rapidly changing reporting requirements and is proximity tools have been actively alerting clients when holdings are close to triggering a new monitoring obligation.
Tracking GSD rule changes:
Following is jurisdiction-to-jurisdiction a rundown of the major global rule changes that have gone into effect in response to the COVID-19 pandemic:
• EU: The EU passed – with immediate effect on 16 March – emergency legislation that requires short-sellers to report a transaction if their net short position reaches or exceeds 0.1 percent of the issued share capital.
• South Korea: A six-month ban on short selling of all listed securities in South Korea was introduced on 13 March. The action followed a series of limited bans that were introduced first on 9 March and then extended on 12 March.
• Belgium, France, Greece, Italy, Spain, UK: Temporary short selling bans were issued on all listed securities in these jurisdictions on 18 March, following a series of limited bans that were introduced on 13 March and 17 March.
• Italy: In addition to its temporary short selling ban, Italy updated its GSD reporting thresholds for significant holdings for the next three months, starting on 18 March. The rule is valid for significant holdings of 1 percent or more for 38 companies with equity listed on the Mercato Telematico Azionario, and 3 percent or more for 10 small-to-medium sized entities. Asset owners were given 10 days to report these holdings.
• Malaysia: The Securities Commission Malaysia and Bursa Malaysia announced on March 20 that short-selling will be suspended until 30.
• Jordan and Philippines: The Amman Stock Exchange and Philippines Stock exchange was shut down until further notice on 17 March, halting all trading activity in the country.
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