In our September 2009 Legal News we reported that, following the turmoil experienced on global financial markets during autumn 2008, the Committee of European Securities Regulators (CESR) had issued a consultation paper setting out its proposal for a pan-European short-selling disclosure regime.
Having concluded its consultation, CESR, in March 2010, submitted a report to the European Institutions recommending the introduction of a pan-European disclosure regime for net short positions in shares.
The regime proposed by CESR is a two-tier model for the disclosure of net short positions in all shares that are admitted to trading on a European Economic Area (EEA) regulated market and/or an EEA Multilateral Trading Facility when the primary market of those shares is located in the EEA.
Under the proposed regime, at the lower threshold of 0.2% positions should be disclosed privately to the relevant competent authority. In addition, steps of 0.1% would trigger further disclosure obligations. After the position reaches the higher threshold of 0.5% and any additional steps of 0.1% thereafter, the position should be disclosed to the competent authority and also publicly to the market as a whole. Disclosure reports of short positions – whether to the Regulator or to the market – would be made on the trading day following that on which the relevant threshold or additional step has been crossed.
CESR believes that there should be uniform format and content for the disclosure of short positions across its members and so there should be maximum harmonisation in this regard. Accordingly, CESR recommends that disclosures should contain the identity of the short position holder, the identity of the issuer, the size of the position held and the date on which the position was created or was no longer held.
As regards the legal basis for a permanent disclosure regime, CESR has recommended that there should be new European legislation in the area, either via the enactment of a separate directive or regulation or through amendments to the Transparency Directive. Given that CESR envisages a number of areas of divergence from the long position disclosure regime, its preference is to proceed via a new directive or regulation, rather than through an amendment to the Transparency Directive.