Update Notification Requirements:
Policy rule published and consequences for current positions
1. AFM published Policy Rule on cash settled instruments
We refer to our corporate alert of last Friday in relation to the entry into force of the amended section 5:45 (10) of the Dutch Financial Supervision Act (the "Wft") on 1 January 2012. The amendment introduced a new notification requirement for large positions in cash settled instruments. The AFM has now published a policy rule in relation to the new notification requirement.
The policy rule indicates how interests in cash settled instruments must be calculated. Cash settled instruments will have to be reported on a delta adjusted basis as of 1 October 2012. The 'delta' of a derivative position shows how the payout of that derivative changes in relation to a change in the price of the underlying share. However, until 30 September 2012 such positions may also be reported on the basis of the nominal value of the shares represented by a cash settled instrument. When notifying interests in cash settled instruments on the basis of nominal values, an explanatory note must be filed setting out the main terms of the instrument. This allows third parties to determine the impact on a delta adjusted basis.
The policy rule also contains a special regime with respect to cash settled interests in indices or baskets of shares.
2. Consequences for current positions
The new notification requirement for cash settled instruments may also impact the calculation of overall positions held with regard to shares in listed companies and may require a new notification. A new notification obligation can arise as a result of the recalculation of the current positions that must now also include cash settled instruments.
Prior to the amendment, both direct and indirect holdings and voting interests required notification if certain thresholds were reached or crossed. As a result of the amendment now also cash settled instruments must be taken into consideration and added to the overall calculation. By way of a simplified example, this means that if you held a 4% (in)direct stake in listed company X with an additional 2 % through cash settled instruments prior to 1 January 2012, a notification obligation arises as of 1 January 2012 as a result of the entry into force of the new notification requirement. This is caused by the fact that in this example, the total holding (6%) exceeds a 5% reporting threshold.
Note that a transitional regime applies that effectively extends the filing period one time to four weeks from 31 December 2011. This transitional regime does not apply to changes in holdings as a result of transactions occurred after 31 December 2011.
3. Yearly update
Although unrelated to the introduction of a notification requirement in respect of cash settled instruments, we take this opportunity to also draw your attention to the yearly update obligation pursuant to Section 5:41 Wft. A periodic notification obligation may arise as a result of a change in the composition of the large position that differs from the previous notification made. If this composition differs at 31 December at 12 midnight vis-à-vis the previous notification an update must be filed within four weeks from 31 December.