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EFAMA Summary of Comments on the Consultation Paper on Joint Guidelines for Prudential Assessment of Acquisitions and Increase of Holdings in the Financial Sector

Core Content

EFAMA has provided detailed comments on the Consultation Paper on the Joint Guidelines for the Prudential Assessment of Acquisitions and Increase of Holdings in the Financial Sector, as required by Directive 1007/44/EC. The comments focus on the impact of these guidelines on the investment management industry and propose several clarifications and modifications to ensure proportionality, efficiency, and legal certainty.

Main Views and Key Points

1. Proportionality Principle

• EFAMA emphasizes the importance of applying the proportionality principle broadly to avoid excessive delays and burdens on investment managers who do not seek control of the target company.
• They suggest using lower standards of evidence for such investors and propose that competent authorities should communicate their decisions quickly, ideally within a week, especially for investments between 10% and 20% of a target financial institution.

2. Disaggregation Relief

• EFAMA highlights the inconsistency in the current Directive regarding disaggregation relief, which is only available for EU-regulated entities.
• They recommend extending this relief to investment managers with parent companies or subsidiaries in third countries, provided the investment is not for control purposes.
• Alternatively, they suggest allowing local regulators to apply disaggregation principles to non-EU investment managers in accordance with proportionality.

3. Investment in Listed Groups with Financial Subsidiaries

• EFAMA points out that many large listed groups include non-listed financial subsidiaries, and investments in the parent company should not trigger prudential assessments if they do not affect the financial subsidiary.
• The Guidelines should clarify that such investments do not require assessment, as they do not influence the management of the financial subsidiary.

4. Applicable Law

• EFAMA argues that acquisitions should be governed solely by the laws of the home country of the main issuer, to prevent conflicts and multiple notification regimes.

5. Competent Supervisory Authority (Target Supervisor)

• EFAMA criticizes the current interpretation of the responsibility of the competent authority, which assigns it to all subsidiaries.
• They recommend a clearer definition of the "target supervisor" and more structured cooperation procedures among regulators.
• EFAMA also suggests that the mother company's supervisor should be responsible for notifying relevant authorities in the Member States where subsidiaries are located.

6. Assessment Criteria

1st Assessment Criterion - Reputation

• EFAMA supports the application of the proportionality principle and recommends that the target supervisor rely on the opinion of the acquirer's supervisor regarding reputation.

2nd Assessment Criterion - Reputation and Experience

• EFAMA believes that investment managers, acting on behalf of their clients, fall within the scope of this exception.

3rd Assessment Criterion - Financial Soundness

• EFAMA finds the three-year financial soundness forecast requirement excessive for investment managers with purely financial investment motives.
• They suggest that if an acquisition is purely for investment purposes, the firm should be deemed to meet this criterion if it complies with home state prudential requirements.

4th Assessment Criterion - Compliance

• EFAMA argues that the requirement for the target firm to become part of the acquirer's group should only apply where the acquisition leads to actual group integration.
• They also recommend removing the requirement for a business plan in purely financial acquisitions and limiting the need for long-term planning.

Additional Comments

Appendix I – Glossary

• The definition of "acting in concert" is unclear and not derived from the Directive or related sectoral directives.
• EFAMA recommends using the definition from the Transparency Directive or Takeover Directive.

Crossing a Threshold Involuntarily

• EFAMA suggests a "knowledge test" to determine when notification is required, ensuring that it occurs immediately after the threshold is crossed.

Third Countries Considered as Equivalent

• EFAMA advocates for a publicly available list of third countries considered equivalent and with adequate supervisory information exchange arrangements.

Appendix II – List of Information Required

• EFAMA welcomes the possibility of exemptions where information is already known or can be obtained from other supervisors.
• They criticize the requirement for additional information not listed, which may delay the approval process.
• The list is considered too extensive, especially for investment managers already authorized in their home country.
• EFAMA recommends applying the proportionality principle to reduce the burden and avoid disclosure of sensitive investment intentions.
• Information requirement 2b(20) is seen as overly burdensome for large financial groups and should be restricted to relevant companies.

Conclusion

EFAMA's comments aim to ensure that the Guidelines are practical, proportionate, and aligned with the intent of the Directive to facilitate efficient market operations while maintaining prudential safeguards. They emphasize the need for clarity, cooperation, and flexibility in the application of the rules to the investment management sector.