The information contained in this Newsletter is of a general nature and does not constitute legal advice


June 2010

CAPITAL MARKETS

MEMORANDUM ON THE RESOLUTION OF THE EXECUTIVE COMMITTEE OF THE SPANISH NATIONAL SECURITIES MARKET COMMISSION OF 27 MAY 2010 ON DISCLOSURE OF SHORT SELLING

1. INTRODUCTION

In accordance with its Activities Schedule 2010, on 27 May 2010, the Executive Committee of the Spanish National Securities Market Commission (Comisión Nacional del Mercado de Valores, “CNMV”), approved a review of the measures taken by the Committee in its resolution of 22 September 2008 (the “2008 Resolution”), concerning the short selling of shares and other equity securities admitted to trading on the Spanish Stock Exchanges. The 2008 Resolution is the subject matter of the newsletter that can be found at the following link: here. We refer to the resolution of the Executive Committee of the CNMV of 27 May 2010 as the “2010 Resolution.

The 2010 Resolution implements the disclosure and publication regime for short positions in Spain, as proposed by the Committee of European Securities Regulators (“CESR”). This was set out in its report to the European Commission on 2 March 2010, named “Model for a Pan-European Short Selling Disclosure Regime”, where it advised the creation of a general mandatory regime to disclose short positions under the common regulation, with the aim of enhancing transparency in the markets.

The above-referred CESR report was complemented by another report issued by CESR on 26 May 2010, named “Technical Details of the Pan-European Short Selling Disclosure Regime”. The aim of this report was (i) to clarify some technical aspects of the new disclosure regime outlined in the report referred to in the preceding paragraph and (ii) to inform European regulators on measures needed for the implementation of the new disclosure regime in their respective jurisdictions.

The main amendments to the 2008 Resolution introduced by the 2010 Resolution are as follows:

2. NEW REGIME TO DISCLOSE Short POSITIONS

The two main changes included in the 2010 Resolution are the subject matter of the disclosure, and the thresholds required. The other provisions included in the 2008 Resolution remain in force.

As stated in our previous newsletter, the 2008 Resolution imposed the obligation to disclose all short positions on shares or cuotas participativas of certain financial sector issuers, provided that it exceeded 0.25% of the share capital of the relevant issuer. The 2008 Resolution defined “short position” as the net result of all positions in different financial instruments, including shares or cuotas participativas, and any derivatives which underlying assets are shares or cuotas participativas, that imply a positive (profit) effect for the holder against downward movements in the price of the relevant securities).

By virtue of the 2010 Resolution the object of disclosure is extended to those short positions on any share or cuota participativa admitted to trading in Spanish official regulated markets (regardless of whether or not that issuer is part of the financial sector). However, this obligation may not be extended to short positions on shares admitted to trade on the Alternative Stock Market nor on the Latibex.

The 2010 Resolution sets out new thresholds for disclosure following the two tier model included in the CESR reports referred to in paragraph 1. In this regard:

(i) The obligation to disclose all individual short positions to the CNMV which exceed 0.2% of the share capital (or cuotas) admitted to trading, and to also disclose the reduction below that threshold once the position is disclosed. Moreover, new disclosures must be made when the short position previously disclosed is increased or decreased by up to 0.1% of the share capital.

(ii) The CNMV will publish on its web page, on an individual basis, all the notifications received of short positions which exceed 0.5% of the issuer’s share capital admitted to trading, and will include the identity of the holder.

(iii) The CNMV will publish an aggregate of the short positions disclosed but not yet published for each issuer (namely, short positions held between 0.2% and 0.5% of the share capital), updated at least every two weeks.

The CNMV has stated that it intends to publish a revised version of the Q&A document on the 2008 Resolution that is currently available on its web page. The CNMV has also pointed out that, in the interim, the interpretative criteria included in CESR reports should be deemed applicable.

Finally, it should be stated that the notification obligations provided by the 2008 Resolution, as amended by the 2010 Resolution, are independent from the ones that may apply by virtue of the significant shareholding regulations.

3. DATE THE PROVISIONS COME INTO FORCE

The 2010 Resolution states that the amendments referred to in paragraph 2 will come into effect on 10 June 2010. Persons or entities holding short positions subject to the disclosure requirement must comply with this obligation by submitting the relevant communication not later than 11 June 2010.

The information contained in this Newsletter is of a general nature and does not constitute legal advice