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Portugal, Disclosure of Long Financial Exposures for CFDs

The Portuguese financial authorities and the CMVM have brought into force new rules regarding disclosure duties to the market with regards to cash-settled derivative contracts like CFDs and other financial instruments.

Regulation 5/2010 of Comissão do Mercado de Valores Mobiliários CMVM (“Regulation’) has been brought into force on October 12th, imposing a disclosure duty on long financial positions related to Portuguese issuers with shares admitted to trading on a regulated market.

Cash-settled derivative contracts and financial instruments are now included by new regulations on disclosure duties to the market. Under the new rules, the following are considered as long financial exposures: (i) stocks which voting rights are attributable / aggregated according to article 20 of the Portuguese Securities Code, as well as (ii) the contracts or financial instruments with a financial effect similar to the holding of shares that do not autonomously give rise to the aggregation of voting rights, held directly or by a third party in any of the situations set out in article 20 (1) of the Portuguese Securities Code, such as CFDs (contracts for differences) and cash-settled swaps, options, futures and forwards.

The disclosure duty to CMVM and to the target company (which subsequently shall release it to the market) is triggered whenever a long financial exposure reaches or exceeds a threshold of 2%, 5%,10%, 15%, 20%, 25%, one third, 40%, 45%, one half, 55%, 60%, two thirds, 70%, 75%, 80%, 85% and 90% of the share capital and also when such exposure is reduced below any of these thresholds.

The disclosure of long financial exposures must include, inter alia, information regarding its main characteristics, the number of stocks, percentage of share capital and voting rights attached, as well as its termination or maturity date.

This new regulations allow for an exemption for agreements or financial instruments held (i) by credit institutions and investment first (authorized to provide investment services in Portugal) acting as counterparties by solicitation of an investor who acquires the corresponding short position; or (ii) by financial intermediaries which perform the role of market makers satisfying the requirements set out in article 16 – A of the Portuguese Securities Code.

CMVM is preparing a frequently asked questions manual on the practical applications and implications of this regulation, which shall be made available in its website in due course.

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