French markets regulator calls for tightening of short-selling regime
AMF wants to lower disclosure threshold and include wider range of instruments
France’s markets regulator is pushing to improve disclosure around short-sellers and activists targeting French companies, as the country grapples with a growing number of activist campaigns at some of its best-known businesses.
In a report published on Tuesday, the Autorité des Marchés Financiers urged European regulators to lower the level at which shareholders must declare their short positions. It argued that disclosures should capture all securities used to bet against a company — including derivatives and bonds — rather than just a short position in the equity.
In recent weeks several national regulators including those in France, Spain, Italy, Greece, Austria and Belgium have responded to the wild swings in global markets by imposing temporary bans on the short-selling of shares.
AMF chairman Robert Ophele told the Financial Times earlier this month that in current markets the value of short-selling was “low and even negative”.
Hedge funds have opposed the temporary bans, with one lobby group describing them as “bad for investors, bad for markets, and bad for the economy”.
In the past, US short seller Muddy Waters came under fire from the French establishment when it targeted supermarket group Casino.
The AMF’s proposals on Tuesday also included measures designed to counter the march of activist investors, which have been ramping up their presence in the French market.
The regulator said that it would amend its policy to make it clear that companies can respond to activist attacks in so-called quiet periods before results are published. It recommended that “any shareholder who initiates a public campaign to immediately disclose to the issuer in question the material information . . . that it is sending to the other shareholders.”
The AMF also outlined plans to beef up its capacity to enforce its rulings and to lobby French policymakers to make it more efficient to settle cases, a faster process than a full disciplinary proceeding. The agency has on average about fifty investigations and fifty inspections in progress at any time, it said.
Last week the AMF levied one of the largest fines in its history against US activist hedge fund Elliott, imposing a €20m penalty for obstructing an investigation into a takeover bid for Norbert Dentressangle, a French logistics group, and for not adequately disclosing its positions.
Elliott is currently involved in a campaign at French spirits group Pernod Ricard, while another US hedge fund, Dan Loeb’s Third Point, has taken a stake in eyewear group EssilorLuxottica. Amber Capital, a London-based activist, is pushing for changes at media group Lagardère and at Suez, the waste and water utility.
The AMF proposals follow numerous other reports to tackle both shareholder activism and short selling including last year from a cross-party committee of French parliamentarians, headed by Eric Woerth, a centre-right opposition politician.