Update Shareholder Activism, September 30, 2021
EU Commission lowers the initial reporting threshold for net-short positions to 0.1 per cent
The European Commission („EU Commisson“) has published a Delegated Regulation adapting Regulation (EU) No. 236/2012 (“EU Short Selling Regulation”) dated 27 September 2021, which is intended to lower the initial reporting threshold for net short positions under the EU Short Selling Regulation to 0.1 per cent. The Delegated Regulation has not yet been published in the Official Journal of the European Union.
Initial reporting threshold now 0.1 per cent (prior: 0.2 per cent)
The previous reporting threshold for net short positions, being 0.2 percent in accordance with Art. 5 para. 2 of the EU Short Selling Regulation, which had also been temporarily lowered to 0.1 percent in the meantime by an ESMA decision (March 2020, renewed in June, September and December), shall now be generally lowered to 0.1 percent of the issued share capital of the company concerned.
Under the EU Short Selling Regulation, ESMA has the right, in certain circumstances, to submit an opinion to the EU Commission on the adjustment of the reporting threshold. The EU Commission, on the other hand, is empowered, taking into account developments in the financial markets, to adopt delegated acts to amend the relevant reporting threshold. The events following the COVID 19 outbreak and the greater transparency gained by the competent authorities with regard to the volume of net short positions under the reporting threshold lowered according to the ESMA decision have resulted in the reporting threshold now being permanently lowered to 0.1 percent.
Accordingly, under the amended Art. 5 para. 2 of the EU Short Selling Regulation, natural or legal persons who have net short positions in relation to shares admitted to trading on a trading venue in the European Union have to notify the competent national authority under the EU Short Selling Regulation if the position reaches or exceeds 0.1 per cent of the issued share capital of the issuer.
Shares admitted to trading on a trading venue in the EU are subject to lower reporting threshold
In difference to ESMA's previous decision to lower the reporting threshold, which provided this reduction only for shares admitted to trading on a regulated market in the EU, the intended reduction due to the planned amendment of Art. 5 of the EU Short Selling Regulation now applies to all shares admitted to trading on a trading venue within the European Union. This means that the lower threshold now also applies to shares admitted to trading on the German open market (Freiverkehr). The reporting threshold, on the other hand, still does not apply to shares admitted to trading on a regulated market in the European Union if the main trading venue of the shares is outside the European Union. Please note that pursuant to the ESMA administrative practice this requires that the relevant shares are included in the EMSA list of exempted shares under the EU Short Selling Regulation. The list can be found here.
The Delegated Regulation shall enter into force on the twentieth day following its publication in the Official Journal of the European Union. No changes are made to the method of reporting to the national competent authority (in case of Germany: the German Federal Financial Supervisory Authority – Bundesanstalt für Finanzdienstleistungsaufsicht). The threshold for public disclosure of net-short positions (currently at 0.5 per cent) and the incremental threshold of 0.1 per cent for net-short positions above the initial reporting threshold remains the same.
The Delegated Regulation can be downloaded here.