Speedread: Japan and Australia are making changes to their statutory large holdings reporting regimes, in particular the treatment of economic interests in cash-settled securities. Here we look at the different approaches taken by both countries and the implications for major shareholders.
What’s the current status?
In both Japan and Australia, cash-settled equity derivatives are not generally caught by their statutory large holdings reporting regimes in circumstances where the holder does not acquire rights, other than purely economic rights, relating to the securities.
In Australia, however, there is a non-statutory overlay to the statutory large holdings regime. This Takeover Panel regime, as set out in Guidance Note 201, states that non-disclosure of long cash-settled derivative positions which cross the relevant
thresholds may constitute unacceptable circumstances. As such, market participants will need to consider any long or short equity derivative positions if they wish to avoid the prospect of intervention from the Takeovers Panel. If the Panel declares that unacceptable circumstances exist, it is empowered to make a wide range of orders in response. The Takeovers Panel's declaration of unacceptable circumstances in the matter of Pacific Smiles Group Limited in 20242 is a recent example which emphasises the importance of full and transparent disclosure by parties acquiring equity derivatives through compliance with the Panel regime.
1 Guidance Note 20: Equity Derivatives | Takeovers Panel
2 Pacific Smiles Group
Japan - What’s changing?
In December 2023, the Financial Services Agency (FSA) in Japan established a working group to review the long-standing large holdings reporting system. It highlighted various concerns with the current system and suggested amendments to improve it.
The amending rules have now been published3 and for large shareholdings one of the significant changes is that cash-settled derivatives now come within scope of disclosure. However, this is not a broad-brush approach to inclusion. Instead, whether a party needs to disclose its interests in target securities represented by the derivative transaction depends on intent and purpose. A holder who holds a long position of cash-settled equity derivatives with any of the three purposes defined in the rules will be obliged to include them in their disclosable holdings.
In brief, the three purposes are:
- eventually acquiring the underlying shares from the counterparty;
- influencing the exercise of voting rights attached to the shares held by the counterparty; or
- intending to engage with the issuer on, for example, material proposals by indicating that it has rights related to the shares in the derivative transaction.
These purposes are discussed in more detail in aosphere’s Shareholding Disclosure practical analysis of Japanese large holdings rules.
Timing: These changes are due to take effect on 1 May 2026. This is part of a package of changes. Other amendments involve, for example, clarifications relating to what constitutes material proposals and refining the definition of joint holders in respect of shareholder collaboration.
Australia - What's changing?
Japan’s intention and purpose-based inclusion contrasts with the proposed Australian reforms.
Currently, the disclosure regime is limited: only certain derivative-based interests are captured, and for physically settleable equity derivatives. The statutory regime does not apply to non-physically settleable derivatives (e.g. cash-settled derivatives), although as noted above, the Takeovers Panel overlay covers some of the disclosure gap.
However, recent reform proposals go further. Following a consultation in 2024, on 4 September 2025 Treasury proposed the Treasury Laws Amendment (Strengthening Financial Systems and Other Measures) Bill 2025, to amend substantial holdings rules, amongst other things4. These reforms are designed to close gaps in the statutory substantial holding and tracing notice regimes by requiring disclosure of a broader range of derivative interests including “deemed economic interests” held through non-physically settled instruments, including cash-settled5. The reforms will also change the disclosure requirements for physically-settled securities, including the treatment of a counterparty’s ‘relevant interest’ in securities for the buyer’s disclosure position.
The proposed package of reforms is wide-ranging and includes other changes. For example, the reforms anticipate that foreign
incorporated entities listed in Australia will be subject to the substantial holding and tracing regimes. ASIC’s statutory tracing and enforcement powers will widen. Penalties will significantly increase - including double penalties for certain existing fault-based and strict liability offences under Chapter 6C, including for fault-based failure to give substantial holdings notice up to 4 years’ imprisonment (previously 2 years).
Timing: Exact implementation date unknown. The Bill is progressing through the legislative process and the Bill anticipates amendments will commence 12 months after Schedule 1 to the Bill receives Royal assent.
4 Treasury Laws Amendment (Strengthening Financial Systems and Other Measures) Bill 2025 – Parliament of Australia
5 Deemed economic interest will be calculated by reference to a legislative instrument made by ASIC (which is not available at the date of this article)
aosphere view: Implications for major shareholders
Shareholders will need to take action to adapt current rulesets to these reforms. In Japan, where the rules are published and have an implementation date of 1 May 2026, shareholders can begin to accommodate the rules already. In Australia, where the rules are still passing through the legislature and the ASIC calculation rules are outstanding, shareholders will need to monitor for changes and be ready to analyse the impacts as the rules are finalised.
Our top 5 tips for preparations are:
- Monitor for further updates and be ready to take action.
- Consider cash-settled derivatives exposures and activities in these jurisdictions. Will your firm be impacted by the new cash-settled rules?
- Be prepared to update monitoring systems and processes as required - add and adjust rules/data that can track in-scope positions. The changes will affect various parts of a shareholding threshold calculation and need to be carefully mapped. Remember these rules have tight filings deadlines once a threshold is crossed.
- Internal training. Communicate to relevant teams and promote understanding of the implications of the rules changes on trading and compliance activities.
- Consider other policy impacts. Review policies, such those relating to voting, client facilitation and participation in material proposals.
How can aosphere help?
Rulefinder Shareholding Disclosure is tracking the implementation of these rules. Our regulatory reports provide detailed analysis on large shareholding reporting rules, short selling position reporting, sensitive industries, takeover equity disclosures and issuer requests for shareholding information. We publish user-friendly impact-analysis prepared by our network of expert local counsel.
