Bafin, the financial regulator responsible for ensuring the stability and integrity of the German financial system, announced on November 22 that it had imposed an administrative fine amounting to 290,000 euros on The Vanguard Group, Inc, a major US investment management company. The fine against the investment firm relates to delayed voting rights notifications. The Vanguard Group failed to submit voting rights notifications within the prescribed period, and therefore, breached section 130(1) of the German Act on breaches of administrative regulations in conjunction with section 33(1) sentence 1 of the German Securities Trading Act.
Bafin requires firms to disclose voting rights changes within 4 days of learning about them. Most of these actions are then reported publicly on Bafin’s database. Recently, the disclosure issues have come into focus because many firms are reported to have failed the disclosure of their public records with regards to shareholding voting rights.
In the case of The Vanguard Group, the regulator stated that the reporting issues associated were with the firm’s failure to do further due diligence or notify compliance .
Shareholding Headache
The fine imposed against the Vanguard Group sends a vital message to companies about the need to be diligent about voting rights notifications.
Major shareholders are obligated to submit major shareholding notifications concerning changes to their holdings in companies whose shares are admitted to trading on a regulated market (such as Stockholm Nasdaq, NGM Main Regulated, among others). The obligations to submit a major shareholding notification arise when a change results in the proportion of all shares or voting rights in a company that has reached or passed, whether upwards, or downwards, certain set thresholds.
The purpose of such regulations aims to provide a good level of transparency concerning the ownership structure of listed companies, thus, increasing public confidence in the securities market. The thresholds are 5, 10, 15, 20, 25, 30, 50, 66 (2/3) and 90 percent of the voting rights or the number of shares in a company. When such thresholds have been reached or passed, the natural or legal person whose holding has changed must inform the company and the regulator.
Knowledge concerning changes about major holdings voting rights, with regards to companies with shares admitted to trading on an organized market, increases the transparency of the capital market and assists investors in making their investment decisions. Therefore, natural and legal persons are obligated to notify BAFin as well as the listed company in question about the percentage of their holdings of voting rights as soon as these increase above, fall below or reach certain thresholds in the company because of disposal or acquisitions of shares or financial instruments or because of other reasons. Any listed company, such as Vanguard, is obligated to publish its notifications relating to total voting rights.
