WWD.com/business-news/financial/french-regulator-changes-derivatives-rule-6283666/
government-trade
government-trade

French Regulator Changes Derivatives Rule

Holders of the financial instruments will be required to declare the shares they detain.

PARIS — In a step designed to prevent a repeat of LVMH’s surprise entry into the capital of Hermès International, France’s stock market regulator is introducing a change in rules governing the declaration of financial derivatives.

 

The AMF said that the new law, which will force holders of equity swaps and contracts-for-difference to declare ownerships of the shares and voting rights they effectively detain through those instruments, will come into effect on Oct. 1.

 

The reform follows LVMH Moët Hennessy Louis Vuitton’s surprise announcement in October 2010 that it had amassed a 17.1 percent stake in Hermès via cash-settled equity swaps that allowed it to circumvent the usual market rules requiring firms to declare share purchases. It has since raised its stake to 22.3 percent.

 

The AMF in November 2010 launched an investigation to determine if LVMH respected market rules, but has given no indication of when it expects to conclude the probe.

 

The regulator said the implementation of the new derivatives law, which was approved in March, would likely force some firms holding long positions to declare that they have crossed regulatory thresholds.

 

Hermès and LVMH, meanwhile, are taking their battle over the contested move to court.

 

Hermès confirmed earlier this month it has lodged a complaint against LVMH, which according to a source familiar with the issue accuses the world’s largest luxury conglomerate insider trading, collusion and manipulating stock prices.

 

LVMH in turn has filed a suit against Hermès for “slander, blackmail and unfair competition.”