Disclosure threshold for funds to be raised

THE THRESHOLD for disclosure of share stakes is to rise from 3 to 10 per cent for fund managers under regulations proposed by the Government.

Firms managing portfolios for pension funds and other large investors will no longer have to comply with the normal requirement to disclose share stakes of 3 per cent and more.

The 10 per cent trigger for disclosure is likely to give rise to complaints from companies which fear that fund managers could use the exemption to build up large stakes in secrecy. These holdings could be used as platforms for a bid.

The proposal is set out in the third consultative document on disclosure of share stakes, which is circulating in the City.

In the previous version, released in February last year, investment managers were to have been allowed to use the 10 per cent threshold only if they did not have the right to vote on company resolutions in respect of shares they managed.

Only those with voting rights were deemed to be able to influence a company's affairs.

But the new document makes it clear that all investment managers will be able to use the 10 per cent threshold whether or not they have the right to vote the shares.

It says: 'Investment managers should have to disclose whatever the nature of their interest, but only from a threshold of 10 per cent instead of 3 per cent.'

Some pension fund trustees retain the right to vote, leaving only the buying and selling to investment managers.

The 10 per cent threshold would bring investment managers into line with unit trust managers.

There are to be no immediate changes to the rules covering disclosure by individuals. There had been concern that someone who is trustee of more than one pension fund has to aggregate the holdings to meet legislative requirements.

It is sometimes difficult for trustees to keep track of shares owned by funds managed by independent firms.

The Government has decided to leave the regulations as they are pending the outcome of the review of pension law to be undertaken by Professor Roy Goode in the wake of the Maxwell fiasco.

Custodian trustees will continue to have to disclose share stakes of 3 per cent or more. But banks which hold shares as security for loans will be exempt from the 3 per cent threshold if they have voting rights.

The first consultative document on share stake disclosure was issued in the summer of 1988.