On 9 November, users of Regulatory Reporting System (RRS) gathered in NY and on the phone, as far away as India, to discuss the latest regulatory developments in the global shareholding disclosure space. It was the fourth annual meeting of the RRS User Group hosted by Solutions Atlantic. This year’s discussion focused on the classification of managed holdings and potential changes that might come about next year in the area of short selling in both the EU and Korea. On hand to discuss these and other relevant topics were regulatory experts from aosphere, LLP.
The second half of the meeting focused on the future. Users provided insight to their evolving business needs as it relates to the functionality of RRS and the team at Solutions Atlantic, proposed additional capabilities that should be considered for the 2018 release. Mitch Greess, had this to say about the session, “We truly value the input from our end users as it relates to the strategic direction of RRS. Having firsthand feedback and insight to their day to day workflow as it relates to global shareholding disclosure enables the team here at Solutions Atlantic to continually deliver a product that is superior to others and continues to be relevant in the hand of our customers.”
From 16 October to 18 October, the National Society of Compliance Professionals’ Annual Meeting will take place in Washington, D.C.
Solutions Atlantic has been an exhibitor at this yearly event for several years. The NSCP Annual Meeting, continues to be the conference of necessity for most compliance professionals in the financial services industry. Regardless of firm type, the conference focuses on the compliance issues that many of our customers face every day. Solutions Atlantic looks forward to greeting our customers in attendance and meeting other attendees to discuss how the Regulatory Reporting System can improve their major shareholding disclosure process through end to end automation.
Solutions Atlantic has expanded the ready submission document set of the Regulatory Reporting System. The market leading solution for SEC Filings and global shareholding disclosure reporting now includes Issuer Request Letters for 10 countries. This broadens the capabilities of RRS to enable customers to readily address the notification requirements of issuers where they have a substantial holding. Some of the countries covered include: France, Germany, Hong Kong, and Singapore.
The Regulatory Reporting System expands its required forms coverage to 55 ready to submit forms across 40 countries. RRS is the only solution that enables customization of form language in the hands of its users. RRS also generates generic forms for countries where no required form is stated.
Solutions Atlantic has expanded its consolidated takeover list to 14 countries; now including Australia, Cyprus, and Malaysia. This consolidated takeover feed supports the takeover reporting obligations simplified by the Regulatory Reporting System. Also released are updated forms for UK TR-1 and Hong Kong SFC Form 2 both of which become effective in the coming weeks.
As previously reported in April 2017, the Icelandic Financial Supervisory Authority announced its proposal to implement the EU Short Selling Regulation into Icelandic law.
SA has released the ESMA SSR Rule for Iceland ahead of the effective date, 1 July 2017.
More about the ESMA SSR rule:
The short selling regulation is a regulation of the European Union (EU)No 236/2012 (Opens in new window) of 14 March 2012 on short selling and certain aspects of credit default swaps. The short selling regulation consists of Regulation (EU) No. 236/2012 as well as the Implementing Regulations and Delegated regulations that implement the so-called technical standards. Technical standards may be RTS (e. Regulatory technical standards) or ITS (e. Implementing technical standards) regarding the further implementation of short-selling regulation. The short selling regulation has four technical standards, Implementing Regulation (EU) 827/2012 (Opens in new window) and delegated regulations (EU). 826/2012 (Opens in new window) , (PDF file) (EU) 918/2012 and (PDF file) (EU) 919/2012.
A new framework regarding short selling of financial instruments and transactions in credit default swaps was introduced with the short selling regulation. The regulation requires holders of net short positions in shares or sovereign debt to make notifications once certain thresholds have been breached. It also outlines further restrictions on investors entering into uncovered short positions in shares or sovereign debt. The competent authorities are given powers to suspend or restrict short selling of such transactions under certain circumstances.
Net short positions in shares
A notification must be made to the competent authorities when a net short position exceeds or falls below the limit of 0.2% of the issued share capital of the company that has had its shares admitted to trading on a regulated market or MTF. In addition a notification must be made every time a net short position is increased by 0.1% in excess of the aforementioned 0.2% limit. Notification must be made public if the net short position in shares exceeds 0.5% of the issued share capital of a company and for each 0.1% above that. Notifications must be made privately or in public when a net short position falls below the aforementioned limits.
Restrictions on uncovered short sales
Short selling of shares and sovereign debt instruments
According to the provisions of the short selling regulation an uncovered short selling of shares and sovereign debt instruments is banned. When entering into a short sale, the investor should have the financial instruments available, or be ready to take appropriate measures to ensure that it will be available on the agreed settlement date of the transaction. The requirements can be met in three ways:
- borrow the shares or the sovereign debt instruments, or make alternative provisions resulting in a similar legal effect,
- enter into an agreement to borrow the share or the sovereign debt or have another absolutely enforceable claim under contract or property law to be transferred ownership of a corresponding number of securities of the same class so that settlement can be effected when it is due,
- have an arrangement with a third party under which that third party has confirmed that the share has been located and has taken measures vis-á-vis third parties necessary for the natural or legal person to have a reasonable expectation that settlement can be effected when it is due.
These restrictions do not apply if the transaction serves to hedge a long position in debt instruments of an issuer, the pricing of which has a high correlation with the pricing of the given sovereign debt.
For complete overview of Iceland ESMA SSR Implementation
The EU issued net short position notification thresholds for sovereign issuers on 1 May, 2017.
According to Article 7(2) of the Short Selling Regulation, ESMA has to publish a list of the thresholds applicable to the sovereign issuers for the purpose of the notification to competent authorities of significant net short position in sovereign debt.
The way these notification thresholds are defined is further specified in the Commission Delegated Regulation No 918/2012 (the “DR”). The DR specifies that initial threshold categories shall be:
- 0.1% applicable where the total amount of outstanding issued sovereign debt is between 0 and 500 billion euros;
- 0.5% applicable where the total amount of outstanding issued sovereign debt is above 500 billion euros or where there is a liquid futures market for the particular sovereign debt.
The additional incremental levels shall be set at 50% of the initial thresholds. The reporting thresholds shall be monetary amounts fixed by applying the percentage thresholds to the outstanding sovereign debt of the sovereign issuer. They will be revised and updated quarterly to reflect changes in the total amount of outstanding sovereign debt of each sovereign issuer.
In addition, the DR states that the amount of outstanding debt should be calculated using a duration adjusted approach. ESMA has published a Q&A document on how to proceed for the duration adjustment.
The table of thresholds contains the name of the sovereign issuer, the amount of outstanding debt duration adjusted, the initial threshold amount and the relevant percentage, the incremental threshold amount and the relevant percentage.
Please note that the figures of the amount of outstanding debt are duration adjusted (not nominal amounts) and are approximations provided by competent authorities.
Provides Audit Services for Global Shareholding Disclosure Workflows
Seeing an ever-growing demand in regulatory changes within the global shareholding disclosure space, Solutions Atlantic today announced it will be providing audit services to help market participants identify gaps in their global shareholding disclosure process.
Since the first of the year, the industry has seen a wave of regulatory announcements ranging from the issuance of new disclosure forms, changes to voting rights, and the tightening of short selling regulations. Missing any one of these regulatory announcements could expose a firm to an enforcement action by regulators for non-compliance. Solutions Atlantic has been in the global shareholding reporting space for more than 15 years, and is recognized for its deep expertise. A number of buy-side firms have come to rely on Solutions Atlantic audits of their shareholding disclosure systems and processes.
“It’s evident by the number of calls coming in that compliance departments are having a real challenge ensuring that they are meeting their global shareholding disclosure obligations with the current systems and processes that they have in place,” said Mitchell Greess, CEO of Solutions Atlantic. “Regardless of whether you have a manual process or an automated solution, periodic reviews need to be done to give compliance a high level of confidence that they have not only applied the rules accurately but that they have not missed any updates to the rules along the way.”
Prior to this service, firms would turn to large consulting and professional services firms which in many circumstances require these firms to educate the consultant on the reporting requirement and or the system being used. With this service, that is no longer the case, firms can readily and affordably gain confidence in their systems and processes without the time-consuming learning curve or a huge budget. PDF Version
Trade compliance is a growing concern with regulators, to that end, Solutions Atlantic has introduced Pre-trade Decision Assistance to enable its clients to test trades before committing to them.
Once again, Solutions Atlantic is paving the way in the shareholding disclosure automation space with its newly released Pre-trade Decision Assistance (PDA) capability. The company today announced the release of PDA as part of its flagship product, the Regulatory Reporting System.
Global shareholding disclosure obligations continue to present real challenges to financial institutions that find themselves with little resources to manage the growing number of reporting requirements. Most recently the Amended Transparency Directive out of the European Union has caused considerable amount of reporting angst among market participants that have to manage the regulatory requirement at both the EU level and the individual country level. Most financial institutions would like to proactively manage their disclosures but limited resources and internal processes haven’t allowed that until now.
Having been a leader in the automation of shareholding disclosures since 2001, Solutions Atlantic in partnership with one of its New York based hedge fund clients, developed Pre-trade Decision Assistance capability to get ahead of disclosure obligations. PDA analyses proposed trades to determine their Shareholding Disclosure consequences.
“First in the market, first to enable users to develop and introduce their own rules, and first to deliver pre-trade decision support – revolutionizing the industry – it’s what our customers expect from us,” said Mitchell Greess, CEO of Solutions Atlantic. “I’m really proud of our team and really excited for our customers who want to utilize this great technology.”
Pre-trade Decision Assistance will enable firms to proactively manage disclosure obligations and in the case of hedge funds – keep their investments out of the public eye. Read more