October 2, 2019 / 3:44 PM / 2 months ago

French lawmakers urge tougher disclosure on activist investors

PARIS, Oct 2 (Reuters) - France should step up disclosure requirements when activist investors and short-sellers take big positions in French companies, lawmakers said on Wednesday.

France has not been spared growing interest in Europe from activist funds, which generally build stakes in companies they feel are underperforming and then push to force change.

Finance Minister Bruno Le Maire told Reuters in April he was preparing measures to prevent activist funds from destabilising French companies after several high-profile campaigns.

“Excesses must be fought and a good financial market is a transparent one where good information circulates,” said conservative member of parliament Eric Woerth, presenting a report on shareholder activism.

“It’s not a place for squabbles and catfights where nothing makes any sense to anybody,” he said in the lower house’s finance commission.

The report said in particular that the threshold at which a shareholder is required to disclose a stake should be lowered to 3% - as in Britain - from 5% currently.

It also called for disclosure not only when a fund’s stake exceeded the threshold but also when it went under the limit in order to give a clear picture of shareholders’ positions.

It said there should be disclosure not only for long positions but also short positions, or when a fund bets that a security is going to fall in value. Failure to disclose should be subject to a fine and possibly the loss of voting rights.

Disclosure of bets against a company, known as short-selling, should cover all securities, including short positions through the debt and derivatives market rather than only shares, the report said.

“This is not something that is going to hurt business and the attractiveness of our financial centre. But it’s clearly going to make sometimes very powerful funds react,” Woerth said.

Though non-binding, the government is likely to take the report into account as it prepares measures to rein in activist funds.

Such funds have been active in the U.S. for many years, and in Europe they have become increasingly unperturbed by traditional deterrents like big stakes held by founding families or even the state.

In France, New York hedge fund Elliott Management has piled pressure on drinks giant Pernod Ricard, CIAM has tussled with reinsurer Scor, and Amber Capital has acquired a stake in Lagardere. (Reporting by Leigh Thomas; Editing by Christian Lowe)

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