Blocker Provisions

Overview

In certain scenarios, it may be necessary to place a “blocker provision” for a given security. Here are some common questions and their answers for managing this in FundApps. 

FAQ

Q. What are blocker provisions?
A.
Rights, convertibles, warrants and convertible preference shares can have so-called "blocker provisions," which means that there are material contingencies whereby the right to acquire the securities remains outside the investor's control. Please see the SEC Q&A, questions 105.02, and the aosphere memorandum section 4.1(h) for reference.

Q. What impact do blocker provisions have on regulatory reporting?
A
. If an investor does not have control to acquire the securities, they are not deemed a beneficial owner. As such, they are not required to aggregate these holdings as part of their beneficial ownership exposure.

Q. How does FundApps solve for this?
A. For threshold-based blockers that prevent exercise if it would cause beneficial ownership to exceed a certain threshold, you can populate the property BlockerValueUS (more on how to do so below). For blockers that have general application, you can use the property InControlOfConversion and set it to "false" if a blocker provision applies (please note that each blocker provision must be individually reviewed to ensure it meets the right criteria, including the timing of its effect; consultation with legal counsel may be required).

Q. How should BlockerValueUS be populated?
A. BlockerValueUS can be set in your file as a decimal, which represents the blocker provision in place. For example, an instrument with a 4.99% blocker provision would have a value set as "4.99" on the instrument.

Q. What jurisdictions does BlockerValueUS impact?
A. BlockerValueUS is relevant for compliance with US Section 13 and Section 16A concerning beneficial ownership.

Q. What asset classes does BlockerValueUS apply to?
A. BlockerValueUS is valid for the following asset classes: Convertible, PreferredEquity, Rights, & Warrants. Please note we only currently support blockers on uncovered warrants and convertibles.

Q. How is BlockerValueUS applied?
A. FundApps will take the value supplied under BlockerValueUS and calculate the largest whole number of convertibles that can be exercised without exceeding the blocker value. Because of this, the result value will be slightly below the blocker value, as that value cannot be exceeded.

Q. How does the final result value display in FundApps?
A. Within FundApps, we truncate to 5 decimal places in the UI when displaying result values. This may result in cases where a value will display slightly lower than the actual blocker value. For example, when BlockerValueUS is uploaded as "4.99," this will lead to displayed values of 4.98999 due to truncation and the result value being slightly less than the supplied value under BlockerValueUS.

Q. Is it required to populate BlockerValueUS for a positions file to validate?
A. Checking the properties information page at this link shows that BlockerValueUS is not required to pass validation.

Q. What will result from not providing BlockerValueUS in our positions file?
A. Since BlockerValueUS is not required for a positions file to validate, the positions will not be affected if BlockerValuesUS is not provided. Additionally, no Missing Data alert will trigger if a value is not supplied.

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