New SSH / D & O disclosure requirements under the FMC Act

8 December 2014

One of the impacts of the Phase 2 of the FMC Act coming into force on 1 December is that new requirements apply to the disclosure of interests of substantial security holders (now called product holders) in listed issuers.
The new requirements are contained in Part 5 of the FMC Act, and replace the old SSH and d & o disclosure regime under the Securities Markets Act 1988.  To recap, a person has a substantial product holding in a listed issuer if they have a relevant interest in “quoted voting products” that comprise 5% or more of a class of quoted voting products of the listed issuer. Such a holding must be disclosed – as must movements of plus or minus 1% in that holding.
Generally, the disclosure requirements are very similar to those under the old regime – but there are new forms.
New obligation – cash-settled derivatives

There is one area where the new requirements under the FMC Act go wider than the old disclosure regime – relating to cash-settled derivatives.  Under the FMC Act, a person is deemed to have a relevant interest in financial products where they have relevant interests in certain cash-settled derivatives. As a result, such an interest requires disclosure if it meets the other (threshold / movement) requirements of the disclosure regime. Consequently, investors who have an interest in such a cash-settled derivative where the underlying financial product (security) is a “quoted voting product” (shares or products that are convertible into shares) will need to factor this interest into their disclosures. In short, such a derivative position may give rise to a disclosable holding or impact on a holding that is already disclosable.

 
As a result of the changes that came into effect on 1 December, if a person has a relevant interest in a cash-settled derivative where the underlying security in respect of that derivative is a quoted voting product of a listed issuer – they are deemed to have a relevant interest in the number of the underlying quoted voting products (in addition to any other relevant interest that they may have in the financial products of that class). The formula that determined in a manner prescribed by the Financial Market Conduct Regulations 2014.

Further information

If you would like more information about any of the matters discussed in this note, please contact me.