AFM's spotlight on substantial holding notifications

In its recently published market watch, the AFM focuses on notifications of substantial holdings and gross short positions. The AFM expands on its supervision and discusses certain examples, shedding light on its scrutiny of recent substantial holding notifications against the backdrop of the relevant public discourse. These developments show the increased need to exercise caution in reporting on substantial holding positions to the AFM.

A holder of a substantial position in a Dutch issuer listed on a regulated market or a foreign issuer listed on a Dutch regulated market is obligated to notify the AFM. This notification obligation is aimed at enhancing market transparency, offering insight into the tradability of shares, revealing concentrations in shareholding or voting, and pinpointing potential conflicts of interest. In its market watch, the AFM highlights the central role of the notification obligation as an essential source of information on the ownership of Dutch listed issuers. 

Currently, the AFM's scrutiny of substantial holding notifications is limited to verifying timely submission, i.e. 'without delay', coupled with a 'marginal' assessment of the accuracy and completeness of the notification. The AFM tests the notification against other information to which it has access, such as the issuers' annual reports, transaction reporting following MiFIR, securities financing information from SFTR, and derivative transactions from EMIR. In the future, the AFM envisages leveraging these datasets to automatically detect any substantial holding positions that have incorrectly not been notified to the AFM. In such cases, or in inaccurate or delayed notifications, the AFM may take enforcement actions, such as imposing an administrative fine of up to 10% of the net revenue of the party violating the notification obligation. Last year in particular, the AFM used its enforcement powers by imposing two fines for violation of the substantial holding notification obligation. This marked a step-up in enforcement actions, as the preceding instance dated back to 2017.

One of the other examples of scrutiny highlighted by the AFM in its market watch relates to the recent acquisition by Exor of a substantial holding position in Philips. In this case, Exor instructed Goldman Sachs to build a stake in Philips on its behalf. The notification submitted by Goldman Sachs in connection with these transactions was insufficient from the AFM's perspective. Consequently, the AFM urged Goldman Sachs to update its notification, which it did. 

The developments and examples addressed in its market watch suggest an increased focus by the AFM on substantial holding reporting. The AFM also stresses the responsibility of market participants to correctly report on their acquisition or disposal of substantial holding positions. A violation of the notification obligation could result in enforcement actions by the AFM, including the imposition of administrative fines. Market participants should therefore be mindful of these unfolding developments and exercise increased care in reporting their substantial holding positions to the AFM.