By Joshua Kirby

France's market regulator is failing to enforce its own rules, a shareholder group has alleged, as a legal tussle continues over the ownership of fashion group SMCP SAS.

In a letter sent this week to the country's capital-markets authority, the AMF, SMCP minority shareholders, represented by a group called Gouvernance en Action, said that no declaration had been made by SMCP's former parent, European TopSoho, of a sale of around 12 million shares in the company to an unidentified third party. European TopSoho is a Luxembourg-based holding of Chinese apparel conglomerate Shandong Ruyi Technology Group, which bought a majority stake in SMCP in 2016.

Fabrice Remon of GEA denounced the "confusing and often contradictory statements" put out by ETS, adding that they were to the detriment of SMCP's minority shareholders. "The situation cannot continue. It is affecting the image of Paris as a financial hub," he said in the letter, calling for transparency. "How can it be that no threshold-crossing declaration has been made?" he asked.

ETS and Shandong Ruyi didn't respond to requests for comment.

According to the AMF's regulations, whenever a shareholder reaches or falls below a certain percentage threshold of a company's equity, it must make a declaration to that effect to the company and to the regulator. No such declaration is listed on the AMF website by European TopSoho or by a third party in relation to SMCP. The regulator said it doesn't comment on individual cases, noting that it is subject to professional confidentiality.

In a release dated Nov. 13, ETS said the disposal of the shares, equal to around 16% of SMCP's total equity, were made pursuant to its obligations under a financial arrangement with the undisclosed third party. The company added that it doesn't intend for the time being to file the relevant declaration to the AMF so as to avoid harming its legal position with regard to lawsuits filed in various jurisdictions against bond trustee Glas, among other defendants. The legal actions mean Glas's position as trustee is in dispute, ETS said. Glas declined to comment.

The trustee, representing bondholders including BlackRock Inc., last month took an stake in SMCP of around 29% from ETS after the latter failed to redeem bonds worth 250 million euros ($283 million) at the end of September. The trustee, which has appointed a receiver to sell the shares to a third party, has itself filed a bankruptcy petition against ETS in a Luxembourg court, and says the stake sale may have been illegal.

Glas has also requested that SMCP convene a shareholders' meeting including on the agenda the dismissal of all ETS and Shandong Ruyi representatives from SMCP's board. SMCP said late Wednesday that the board had decided, as things stand, not to examine this request. The company declined to comment on the letter sent by GEA to the AMF.

Write to Joshua Kirby at joshua.kirby@wsj.com; @joshualeokirby

(END) Dow Jones Newswires

11-18-21 0609ET