Arrowstreet Capital fined for incorrect notifications of short positions

Systematic underreporting and underdisclosure of short positions

Arrowstreet is an institutional investment firm established in the United States. It held short positions in the companies Just Eat Takeaway.com and Galapagos, which are listed on Euronext Amsterdam. Due to an error in its calculation methodology, Arrowstreet notified incorrect net short positions to the AFM a total of 101 times. The short positions were more substantial than notified, with differences of several tens of millions of euros in many cases. In 85 of those cases, Arrowstreet violated not only its notification obligation to the AFM but also its disclosure obligation to the public. 

Accurate notifications are important for the market

It is essential that net short positions are notified promptly and accurately. The AFM uses the notifications to monitor short positions for abuse, market distortion or systemic risks. Disclosure also gives market participants important information on significant individual short positions, as it reveals negative market expectations with regard to specific companies. This enables investors to take better-informed and more robust investment decisions and prevents information asymmetry.  

Hanzo van Beusekom, Member of the Executive Board of the AFM: “Correct notification and disclosure of net short positions is essential to provide investors with fair and accurate information. The AFM ensures that institutions comply with these legal obligations in order to prevent risks of market abuse and market distortion.” 

Administrative fine with simplified settlement

After discovering the error, Arrowstreet proactively informed the AFM of the incorrect notifications, promptly corrected them, cooperated fully with the AFM’s investigation and took measures to prevent a recurrence. This approach led the AFM to reduce the fine. Arrowstreet accepted the fine and the case was settled through the simplified procedure. The case is therefore closed.

More information

In Dutch: decision Arrowstreet Capital (pdf, 430 kB)