Respondent
...
(e)MUFG MUFG Corporate Markets
A division of MUFG Pension & Market Services
Level 12, 680 George Street
Sydney NSW 2000
Tel: +61 2 8280 6000
mpms.mufg.com
13 December 2024
Beneficial Ownership and Transparency Unit
Market Conduct and Digital Division
Treasury
Langton Crescent
Parkes ACT 2600
By email: beneficialownership@treasury.gov.au
Dear Treasury
Exposure Draft Legislation: Treasury Laws Amendment (Enhanced Disclosure of Ownership of Listed
Entities) Bill 2024 (the Exposure Draft)
1. INTRODUCTION - MUFG CORPORATE MARKETS
MUFG Corporate Markets is a division of MUFG Pension & Market Services. It is currently known as Link Market
Services, noting that the brand is under transition and will be re-branded by January 2025. MUFG Corporate
Markets provides clients with a comprehensive offering that connects issuers to their stakeholders including members, investors and employees. Our uniquely integrated range of corporate markets capabilities includes shareholder management and analytics, stakeholder engagement, share and unit registry (transfer agency), custody, fund administration, and employee share plans. We also offer company secretarial support, as well as various specialist offerings such as all types of insolvency solutions and class action services.
We operate in twelve countries throughout Australasia, Asia, Africa, the Middle East, United Kingdom and Europe, with market-leading positions in the geographies in which we operate and over 6,500 employees across the globe.
Investor Relations
MUFG Corporate Markets' investor relations business (currently known as Orient Capital Pty Ltd, noting the brand transition mentioned above) is a global leader in shareholder analysis and identification, equity market intelligence, proxy solicitation, webcasting, investor communication and shareholder management technology, operating in
Sydney, Hong Kong and London. We service the complete breadth of investment products across listed, unlisted, superannuation, LICs/LITs and multi-distributed ETFs (quoted investment funds), providing comprehensive investor relations support around analysis, CRM and investor targeting to listed companies and their advisors for over 25 years. Globally, we work with over 1,700 issuers, delivering approximately 1,200 shareholder analyses every month.
In Australia, we undertake shareholder analytics for over 65% (by market capitalisation) of issuers contained within the S&P/ASX 300. Shareholder analytics are a critical activity relied on by issuers to obtain greater transparency and a better understanding of their shareholders and underpins most investor relations programs.
Accordingly, MUFG Corporate Markets has an in-depth understanding of the changes proposed in the Exposure
Draft, their operational impacts and whether this will appropriately facilitate market transparency in line with the
Government's policy intent.
(e) MUFG MUFG Corporate Markets
A division of MUFG Pension & Market Services
2. EXECUTIVE SUMMARY
MUFG Corporate Markets supports overall the policy intent behind this legislative proposal, being to increase transparency of beneficial ownership and to strengthen the ability of ASIC to enforce its substantial holding notice and tracing notice regime under the Corporations Act 2001 (Cth) (the Act). However, to ensure that this policy intent is operationalised effectively, our view, in summary, is that:
1. A standardised format of the Register of Relevant Interests (RORI) has the potential to be administratively
burdensome for issuers (or their agents) to maintain, which, in turn, will be cost-prohibitive for issuers to
perform shareholder analytics, having the unintentional consequence of reducing market transparency. Our
view is that the current format commonly used by the industry for the RORI is appropriate. However, if ASIC is
considering changes to a standard format, it should consider other global models to ensure that it is not overly
burdensome and ensure that there is a clear benefit to the changes, given the potential burden and added
costs of compliance for issuers.
We recommend that ASIC consults with industry to ensure that any standardisation of the RORI does not
create an unnecessary administrative burden and that there is a reasonable transition timeline to facilitate
compliance with any new requirements.
2. There is a lack of consistency between the regime regarding providing copies of the Register of Members
(ROM) and the RORI. In particular, there is no requirement for applicants requesting a copy for the RORI to do
so for a proper purpose, as there is for the ROM. There is also an inconsistency in the fee regime for providing
copies. There is no clear rationale for the difference given the information contained in both Registers is
sensitive.
We recommend that Treasury makes the application processes and prescribed fee regimes consistent to
ensure copies are obtained for a proper purpose, remove unnecessary complexity and ensure that fees are fair
and reflective of the costs required to undertake the activity.
3. While we welcome the expansion of the concept of "relevant interest" in securities to include derivatives, we
recommend that Treasury also considers including disclosure of short positions within the relevant interest
definition, in line with the Hong Kong disclosure requirements 1 or provide for reporting to ASIC in a similar
manner to the UK requirements for reporting to the Financial Conduct Authority. This will serve to better
promote transparency in the market and protect the market against misinformation and manipulative practices,
in line with the broader stated intent of this reform.
The rationale for each is outlined in detailed below.
3. DETAILED COMMENTS ON THE EXPOSURE DRAFT
3.1. Proposed potential changes to the format of the RORI
Currently, s 672DA(6) outlines the form of the RORI, which either must include the details set out ins 672DA(6)(a)-
(c) or be in other such form as ASIC approves in writing. To date, ASIC has not approved a standard format for the
RORI.
The Bill proposes to repeal s 672DA(6) and replace it with the requirement that the RORI is kept in the form (if any) approved in writing by ASIC. In addition, the RORI must contain the date on which each item of information is entered into the RORI. It is noted that the policy intent for the change is to improve useability and streamline enforcement action taken by ASIC. 2
While MUFG Corporate Markets acknowledges the intent of the change, the standardised format for the RORI to be determined by ASIC will be of critical importance to the market. Currently, when a tracing notice is issued by
1 s 329 of the Securities and Futures Ordinance (Cap. 571 SFO) (HK).
2 Explanatory Memorandum , paragraph 1 .127 -1 .128.
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(e) MUFG MUFG Corporate Markets
A division of MUFG Pension & Market Services
MUFG Corporate Markets on behalf of an issuer, the information received from custodians is not provided in a standardised format. This means that if ASIC decides to require information which is not easily transferable from the responses received, the onus will be on the issuer (and in practice, the agent on the issuer's behalf) to ingest and transform the data received into the format required by ASIC.
Depending on the administrative effort required, implementation of the format may significantly increase costs
(possibly up to quadruple the current costs), which will ultimately be borne by issuers. This will likely result in the unintended consequence of shareholder analytics activity becoming cost prohibitive for issuers. A reduction in such activity would have the impact of reducing overall transparency in the market, which is contrary to the Bill's intent.
While not all jurisdictions require issuers to maintain a RORI (for example, New Zealand, Singapore and the USA), a number of jurisdictions that do ensure that the administrative burden to maintain them is minimal. For example:
• in the UK, there is no additional requirement to translate custodial information into a standard format.
• in Hong Kong, issuers (or its agents) are required to upload relevant information in the tracing notices received
onto a publicly accessible website.
In our view, such approaches are practical and are not overly burdensome to implement for market participants.
We therefore recommend that when ASIC considers prescribing the RORI format, it:
• undertakes appropriate consultation with investor relations providers, custodians and issuers with a view to
ensure that its requirements are not overly burdensome or operationally cost-prohibitive; and
• provides a reasonable transition period, determined in consultation with the relevant market participants, for
entities to comply with any new requirements.
We would appreciate the opportunity to be involved in any industry consultation conducted by ASIC.
3.2. Alignment of the regime applying to obtaining copies to the RORI and ROM
MUFG Corporate Markets supports the proposal in the current Exposure Draft to retain the existing ability for entities to charge fees for copies of the RORI. However, there are two key inconsistencies between the requirements in the Act and the Corporations Regulations 2001 (Cth) (the Regulations) for obtaining copies of the
RORI and the ROM. Given that both Registers contain sensitive company information and personal information of shareholders, there is no clear policy rationale for this. In addition, the inconsistency creates unnecessary complexity and confusion in practice.
2.2.1 Requiring applicants to have a proper purpose for seeking a copy of the RORI
The Act requires a person to apply for a copy of the ROM in accordance with the relevant section of the Act.3 The
Act provides that the application must state each purpose for which the person is accessing the copy and that:
• none of the purposes is a "prescribed purpose"; and
• the application is in the prescribed form. 4
The Regulations outline the prescribed form, as well as what constitutes a "prescribed purpose" - that is, an improper purpose for obtaining a copy of the ROM. 5 This includes, for example, soliciting a donation from a member of a company or gathering information about the personal wealth of a member of the company.
The current regime for application requirements for copies of the RORI is not aligned with those of the ROM. The
Exposure Draft does not include amendments to harmonise the regimes. It is unclear why there is a difference given that the information contained in the RORI could be used for similar improper purposes as the ROM. Further, without any restrictions on the purpose of requesting copies of the RORI, there is no protection against any
3 Section 173(3) of the Act.
4 Section 173(3A) of the Act.
5 Clause 2C.1.03 of the Regulations.
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(e) MUFG MUFG Corporate Markets
A division of MUFG Pension & Market Services commercial use of the RORI information. The RORI contains personal information so this lack of protection is not in line with the increases in privacy protection of personal information which the Government has recently legislated.
In practice, the misalignment between the two regimes also requires issuers to establish different processes for each, creating unnecessary complexity.
2.2.2 Aligning fee requirements in the Regulations for the ROM and RORI
While the Regulations prescribe the same amounts for the inspection of the ROM and RORI ,6 there are different prescribed amounts for the supply of copies of both Registers, being that there is:
• a specific amount prescribed for the supply of copies of the ROM, with additional amounts where the
information is provided about 5,000 or more members; 7 contrasted with
• in respect of the RORI:
o a specific amount for each page if the RORI is not kept on a computer; and
o a "reasonable amount that does not exceed the marginal cost to the company of providing a copy"
if the RORI is kept on a computer. 8
Again, it is unclear why a different approach is taken for the ROM as for the RORI. It would be preferable to prescribe a fee so that there is consistency and clarity for issuers and their providers.
If a fee is to be prescribed, we recommend that industry is consulted on the current marginal cost to the company of providing a copy and that any fee included is indexed annually (which is not currently the case for the fee for supplying a copy of the ROM). Issuers should not have to bear the marginal costs of compliance with these provisions. We would like to be included in any consultation process.
Alternatively, both fees should be a "reasonable amount that does not exceed the marginal cost to the company of providing a copy" so that issuers can align the fees for RORI and ROM.
3.3. Inclusion of Short-Selling as a Relevant Interest
MUFG Corporate Markets supports the inclusion of derivatives as a relevant interest in securities to promote greater transparency of beneficial ownership of securities.
However, Treasury should consider extending this to include the disclosure of short positions in line with other global markets. This would enable market participants to be aware of substantial short positions, which can influence market dynamics and may be linked to misinformation in the market or manipulative market practices.
In Hong Kong, Part XV, Division 5 of the Securities and Futures Ordinance (Cap. 571 SFO) gives listed corporations the ability to investigate any interest or short position in voting shares and any interest in equity derivatives of which such shares are the underlying shares. This is done by serving a notice to a person or entity believed to be currently interested or to have held such interest during the three preceding years before the notice is given. 9 Section 329(2) requires the person on whom a notice is served to disclose particulars of their past and present short positions, as well as that of any other person, as far as they are aware. This appropriately recognises the importance of short position disclosure, in addition to those for interests in shares and equity derivatives, in ensuring market transparency.
In the UK, the Financial Conduct Authority (FCA) requires the disclosure of current net short positions, imposing a notification threshold of 0.2% of the total issued share capital of an issuer. The FCA publishes this information on a daily basis to provide transparency to the market.
6 Item 1 of Schedule 4 of the Regulations.
7 Item 1AA of Schedule 4 of the Regulations.
8 Item 3 of Schedule 4 of the Regulations.
9 Section 329 of Cap. 571 SFO.
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(e) MUFG MUFG Corporate Markets
A division of MUFG Pension & Market Services
We recommend that Treasury considers including the disclosure of short positions to enhance market transparency and stability, which could be modelled either on the Hong Kong or UK regimes. Given we operate in the UK and
Hong Kong, we can provide valuable input into how this might be appropriately incorporated into the legislation.
4. CONCLUSION
MUFG Corporate Markets appreciates the opportunity to contribute to this consultation and welcomes continued engagement with Treasury regarding the Exposure Draft, as well as in future with ASIC in relation to the proposed form of the RORI as foreshadowed in the Draft. We would further welcome the opportunity to meet with Treasury to discuss the detail of this submission or any other relevant matters.
To arrange a meeting, please contact Chris Foye, Director - Operations, Orient Capital at foye@orientcap.com.
Yours sincerely
David Farr
Managing Director, MUFG Corporate Markets ANZ
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