AMF report on shareholder activism in France

The Autorité des marchés financiers (AMF), the French securities regulator, has today (28 April 2020) published its long awaited view on shareholder activism in France.

Whilst the AMF’s recommendations will not have a major impact on activist investors (for fear of deterring investment in French issuers), the proposed changes will have impact on all investors investing in French securities.

The proposed changes will not be effective immediately, so at this stage we have thought it sensible simply to highlight the key changes that have been suggested.

National measures

Note that the majority of these measures can be put in force very soon, as they require no involvement at pan-European level:

1. The French initial notification threshold would be reduced from 5%
   to 3% (possibly for larger issuers only). Such disclosures may also
   need to include details of the hedging instruments acquired by the
   investor (i.e. put exposure).

2. Where French issuers impose additional disclosure obligations in
   their articles (which is very common) the AMF has suggested that
   synthetic economic exposure must always be taken into consideration.

   This would allow investors to take a more homogeneous approach with
   their French disclosures - as currently the articles of a number of
   French issuers only look to physical holdings when determining if a
   disclosure obligation has arisen.

3. The AMF is also considering forcing issuers listed on a regulated
   market to publish notifications received from investors (rather than
   just disclosing them in the annual reports).

4. The AMF is also looking at clarifying the regime applicable to
   breaches of the disclosure obligations imposed by the articles of
   French issuers.

5. The AMF will update its doctrine on shareholder dialogue, notably
   allowing issuers targeted by activist campaigns to publish responses
   during quiet periods. It will also require activists to provide
   issuers with copies of all correspondence communicated to
   shareholders.

6. The AMF also intends to restate via a recommendation that all stock
   lenders must recall lent-out stock prior to general meetings of
   shareholders.

7. The AMF will seek additional powers to intervene in activist
   situations, including requiring investors to clarify or amend
   publications subject to a penalty payment.

Measures at European level

The AMF has also proposed a couple of measures that will need to be enacted at European level:

8. The AMF has indicated that it will push for additional disclosure by short sellers of their holdings in an issuer’s debt instruments (notably bonds and CDS); and

9. The AMF has indicated that it will ask ESMA to clarify:

   • its view on the applicability of the rules relating to investment
     recommendations (to activist investors);
   • the information on conflicts of interest that have to be published
     when writing an investment recommendation; and
   • behaviour that would not be considered as acting as a concert party.

We intend to update this note once we have more information on the effective implementation of these measures.