ISLA has urged finance officials in Poland to exempt securities lending and borrowing (SBL) trades from legislation introduced back in 2015.

The securities lending trade body penned a letter to finance minister Mateusz Morawiecki last week, arguing that the Polish Act has “unintended consequences” for the SBL market.

Poland’s government signed the act into law two years ago in response to repeated acquisition attempts of domestic companies which were perceived as contrary to national security.

These included a takeover attempt of Grupa Azoty, a strategic Polish chemicals manufacturer by Acron, a Russian firm.

Purchasing or acquiring shares in certain 'protected companies' above a 20% threshold, for example, triggers certain notification obligations.

However, loan return transactions (of a previously lent Polish equity in a protected company) are also considered an acquisition of shares.

As such, currently, the loan return will be subject to pre-approval if the client’s ownership is above 20%.

Those who do not comply with the rules face hefty fines.

ISLA pointed out that the legislation is at odds with most other markets. 

Typically SBL activity is exempted from such requirements and loan return transactions are agreed at very short notice.

“For investors with significant ownership in Polish protected companies, that are also active lender of equity securities, the requirement to apply for approval and wait for the approval to be granted is challenging,” ISLA executives wrote. 

“We ask that an exemption SBL transactions be considered."