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DTR 5.3 Notification of voting rights arising from the holding of certain financial instruments

DTR 5.3.1RRP
  1. (1)

    1A person must make a notification in accordance with the applicable thresholds in DTR 5.1.2R in respect of any financial instruments which they hold, directly or indirectly, which:

    1. (a)

      are qualifying financial instruments within DTR 5.3.2R; or

    2. (b)

      unless (2) applies:

      1. (i)

        are referenced to the shares of an issuer, other than a non-UK issuer; and

      2. (ii)

        have similar economic effects to (but which are not) qualifying financial instruments within DTR 5.3.2R.

  2. (2)

    Paragraph (1)(b) does not apply to financial instruments held by a client-serving intermediary:

    1. (a)

      acting in a client-serving capacity; and

    2. (b)

      satisfying the conditions in (3) and the continuing obligations in (4).

  3. (3)

    For the purposes of (2) a client-serving intermediary is a person satisfying the following conditions:

    1. (a)
      1. (i)

        it is authorised by its Home State under MiFID or theBCD, or, subject to (iii), as a third country investment firm, to deal as principal, in a client-serving capacity, in financial instruments falling within (1)(b), and to carry on any relevant business connected to such dealing; or

      2. (ii)
        1. (A)

          it is a person which would be an investment firm or credit institution if it carried on relevant business, and had its head office, in the EEA;

        2. (B)

          it is in the same group as a person in (a)(i); and

        3. (C)

          it has equivalent authorisation from its home state regulator to that set out in (a)(i); and

      3. (iii)

        references to a third country investment firm in (i) are limited to relevant business carried on by such firms which is subject to regulatory supervision under the laws of an EEA State;2

    2. (b)

      it has appropriate systems and controls in order to identify, distinguish between and monitor its client-serving dealings and interests and its proprietary trading dealing and interests;

    3. (c)

      when acting in a client-serving capacity it does not:

      1. (i)

        intervene, nor does it attempt to intervene, in;

      2. (ii)

        exert, nor purport to exert, influence on;

        the management of the issuer concerned;

    4. (d)
      1. (i)

        it has certified in writing to the FSA that it considers itself to qualify for client-serving intermediary status and that it satisfies the conditions in (a) to (c);

      2. (ii)

        for a person falling into (a)(ii)(A) a further certification in writing to the FSA of the matters in (d)(i) must have been made in relation to that person by the person in its group falling into (a)(i), and

      3. (iii)

        the certificates in (i) and (ii) must have been:

        1. (A)

          signed by a relevant person of at least director level; and

        2. (B)

          made and sent to the FSA in the preceding 12 month period.

  4. (4)

    A client-serving intermediary must:

    1. (a)

      inform the FSA as soon as it becomes aware that it no longer satisfies the conditions in (3); and

    2. (b)

      provide the FSA, on request, with information relevant to its status or operation as a client-serving intermediary.

  5. (5)

    For the purposes of (2) and (3), acting in a client-serving capacity means:

    1. (a)

      fulfilling orders received from clients otherwise than on a proprietary basis;

    2. (b)

      responding to a client's requests to trade otherwise than on a proprietary basis; or

    3. (c)

      hedging positions arising out of dealings in (a) or (b).

DTR 5.3.2RRP

For the purposes of DTR 5.3.1 R (1)(a):

  1. (1)

    transferable securities 1and options, futures, swaps, forward rate agreements and any other derivative contracts, as referred to in Section C of Annex 1 of MiFID, shall be considered to be qualifying financial instruments provided that they result in an entitlement to acquire, on the holder's own initiative alone, under a formal agreement, shares to which voting rights are attached, already issued of an issuer whose shares are admitted to trading on a regulated market or a UK prescribed market;1

  2. (2)

    the 1 instrument holder must enjoy, on maturity, either the unconditional right to acquire the underlying shares or the discretion as to his right to acquire such shares or not;1

  3. (3)

    a1 "formal agreement" means an agreement which is binding under applicable law.

[Note: Article 13(1) of the TD and Article 11(1) of the TD implementing Directive]1

DTR 5.3.3GRP
  1. (1)

    For the purposes of DTR 5.3.1R (1)(a) and to give effect to Directive 2004/109/EC (TD), qualifying financial instrumentsshould be taken into account in the context of notifying major holdings, to the extent that such instruments give the holder an unconditional right to acquire the underlying shares or cash on maturity. Consequently, should not be considered to include instruments entitling the holder to receive shares depending on the price of the underlying share reaching a certain level at a certain moment in time. Nor should they be considered to cover those instruments that allow the instrument issuer or a third party to give shares or cash to the instrument holder on maturity.1

[Note: Recital 13 of the TD implementing Directive]

  1. (2)

    1For the purposes of DTR 5.3.1 R (1)(b), in the FSA's view:

    1. (a)

      a financial instrument has a similar economic effect to a qualifying financial instrument in DTR 5.3.1 R (1)(a), if its terms are referenced, in whole or in part, to an issuer's shares and, generally, the holder of the financial instrument has, in effect, a long position on the economic performance of the shares, whether the instrument is settled physically in shares or in cash. This is because such an instrument may give the holder the potential to gain an economic advantage in acquiring, or gaining access to, the underlying shares. For example, that result may occur because of the likelihood that the counterparty will have hedged with the underlying shares or with an instrument which may provide access to such shares. The holder may then be in a more advantageous position, compared to other market users (i.e. other potential purchasers of the shares), to gain access to those shares, either directly from the counterparty, or indirectly, for example in the market following sale by the counterparty;

    2. (b)

      'long' derivative financial instruments not having a linear, symmetric pay-off profile in line with the underlying share (that is, instruments not having a 'delta 1' profile, for example cash-settled options) should be considered to have an economic effect, in relation to the underlying shares represented, similar to that of a qualifying financial instrument, only in the proportion which is equal to the delta of the instrument at any particular point in time. So, for an instrument with a delta of 0.5 on a particular day, the instrument will provide a 'similar economic effect' in half of the underlying shares represented. This will mean that holders may need to monitor delta changes at the end of each trading day in order to determine whether a disclosure is required;

    3. (c)

      a financial instrument referenced to a basket or index of shares will not have similar economic effects to a qualifying financial instrument unless:

      1. (i)

        the shares in the basket represent 1% or more of the class in issue or 20% or more of the value of the securities in the basket or index, or both; or2

      2. (ii)

        use of the financial instrument is connected to the avoidance of notification;

    4. (d)

      a financial instrument held by a person within a group, where the following conditions are satisfied, will not be considered to have economic effects similar to a qualifying financial instrument:

      1. (i)

        it is held by that person solely for tax or accounting reasons relating to the group and not for reasons connected to the avoidance of notification; and

      2. (ii)

        another person in the group has made, or is, and continues to be, exempt from making, a notification under DTR 5.3.1 R in respect of the position represented by that financial instrument.

DTR 5.3.4RRP

The holder of qualifying financial instruments, and, to the extent relevant, financial instruments with similar economic effects, 1is required to aggregate and, if necessary, notify all such instruments as relate to the same underlying issuer.

[Note: article 11(2) of the TD implementing Directive in respect of qualifying financial instruments]1