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What are Sensitive Sectors?

“Sensitive Sectors” are sectors within a particular jurisdiction which have special significance and are considered strategically important.

Each jurisdiction considers different sectors to be “sensitive”.

Sensitive Sectors include:

  • Banking and Finance
  • Media
  • Gas/Electricity Utilities
  • Air Freight & Logistics
  • Airlines
  • Telecommunications
  • Insurance
Sensitive Sectors – Country Examples

Australia

Sensitive sectors include: Media, telecommunications, transport, defence, land, military-related industries, nuclear-related activities

China

Military; defence; security; key technologies; major equipment manufacturing; agriculture; energy; transportation; important cultural and important IT products.

France

Defence, energy, water, transport, space, electronic communications, police, health, agricultural products that contribute to national food safety objectives, print and online press services for political and general information, quantum technologies and energy storage.

Russia

Over 60 different industries are regarded of “strategic significance”, as well as traditionally sensitive industries such as media, insurance, banking, air & space, etc.

Sensitive Sectors Rules

Sensitive Sectors Rules are a type of shareholder rule which impose specific rules on a particular sector.

These include:

  • Pre-trade Approval – before you invest in a company or breach a particular threshold, you must notify the relevant authority and receive approval.
  • Post Trade Reporting – once an investor in a company holds a position above a specific threshold, they must notify the relevant authority; and
  • Hard limits – ownership limits which must not breached in the particular company or sector.
Key Considerations
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    Which industries and securities are in scope?
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    Do the sensitive sector rules apply to foreign investors or everyone?
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    Are the rules sector specific, company specific (Qantas) or is there a blanket restriction (Saudi Arabia)?
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    Are restrictions at an individual level or aggregated across investors?
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    Calculation – scope of numerator and denominator
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    Pre trade approval, post trade reporting or hard limit
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    Exemptions
Potential Sanctions

France

The maximum penalty is the highest of the following amounts:

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    Twice the amount of the defaulting investment,
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    10% of the annual turnover (excluding tax) of the target company,
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    EUR1 million for individuals or
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    EUR5 million for corporate entities.

Australia

Maximum criminal penalty of:

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    Individual – 750 penalty units ($135,000) or 3 years imprisonment.
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    Company – 3,750 penalty units ($675,000).
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    Civil penalty

Maximum civil penalty of:

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    Individual – 250 penalty units ($45,000).
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    Company – 1,250 penalty units ($225,000).