Clearing and Settlement
Corporate Actions Market Standards
The Market Standards on Corporate Actions have been finalised and are now up for endorsement by the relevant associations. The scope covers Distributions and Reorganisations as well as related Transaction Management (Market Claims, Transformations and Buyer Protection). The standards prescribe best practices for issuers, infrastructures and custodians in terms of processing. Standardising the processing across all European markets aims at achieving a significant reduction of respective costs and operational risks. Best practices for issuers include i.a. the use of formatted standardised e-messages, the respect of a defined sequence of key dates and of minimum and maximum timelines, the issuing of interim securities for elective corporate actions.
EuropeanIssuers Legal Committee is in favour of the standards but we believe that an observatory should be put in place to monitor the pricing process and make it more transparent. This should ensure that cost savings flow back to those who pay the corporate actions processing services: issuers and investors. We would also expect all market players to co-operate in developing satisfactory market standards for general meetings and implementing them successfully.
For the Market Standards on Corporate Actions click here.
General Meetings Market Standards
The Joint Working Group on General Meetings (JWGGM) has increased the frequency of its meetings. It is continuing its works until the end of July with the objective to finalise the proposed standards by the summer break. The revision of the standards as based on the market feedback turns out to be a challenging process. The views of all different stakeholders have to be reconciled without prejudicing the ultimate goal of the standards. While agreement was reached on some highly “contentious” issues, discussions are still going on regarding a) the form and contents of the dissemination of the meeting notice to retail shareholders, b) the communication of the entitlements to the issuers, c) the principle of a unique proof of entitlement and d) the flow of the notification of attendance and the votes, if any. The Commission is now attending the meetings of the JWGGM as an observer. The chair of the JWGGM, our Secretary General, has recently reported to the CESAME II group. A meeting has also been scheduled with the representatives of the JWGGM, the European Corporate Governance Forum, the Legal Certainty Group and the Commission Company Law Unit to place the standards in the broader legal and regulatory framework.
For the slides of the presentation to CESAME II, click here.
Financial Supervision
Commission’s Communication on Financial Supervision
The European Commission has adopted a Communication on Financial Supervision in Europe. The Commission is currently consulting interested stakeholders on the Communication’s proposals in order to prepare legislative proposals for the autumn of 2009. The deadline for responses is 15 July 2009.
The new supervisory framework should be composed of two pillars: a European Systemic Risk Council (ESRC) for macro-prudential supervision and a European System of Financial Supervisors (ESFS) for micro-prudential supervision. The Communication proposes to upgrade the three existing Committees of Supervisors to three Supervisory Authorities that would retain their current sectoral structure. These Authorities should work in co-operation with a network of national financial supervisors. The Communication proposes the role, responsibilities, composition, functioning and legal basis for these new bodies. It also suggests that specific indicators should be developed to evaluate the performance of the ESRC and the ESFS.
For the Communication, click here. For the Consultation webpage, click here. For EuropeanIssuers position paper dated 15 April 2009, on the Commission’s previous Consultation on Financial Supervision, click here.
Accounting, Auditing and Financial Reporting
Audit Inspections by US oversight bodies
The 8th Directive (Auditing Directive) introduces a system of independent public oversight and a model of cooperation with third countries. EU Member States can enter into cooperation agreements with third countries oversight bodies provided the latter are considered equivalent by a Commission Decision. In January 2009 the Commission published a draft Decision for discussion with Member States listing the third countries public oversight bodies that would be considered equivalent to the EU counterparties. However the draft Decision was put on hold for the following reason: statutory auditors of European companies listed in the US are subject to registration and inspections by US authorities – PCAOB and SEC. However the PCAOB does not grant reciprocity to EU oversight bodies nor does it foresee confidentiality.
EuropeanIssuers is working on a position paper asking for a Commission Decision that would protect the issuers’ interests and ensure reciprocity, confidentiality and mutual recognition.
For COM’s webpage on relations with third countries concerning auditing, click here.
Alternative Investment Funds
Commission’s Proposal for a Directive on hedge funds/private equity
On 29 April 2009 the European Commission presented its proposal for a Directive on Alternative Investment Fund Managers (AIFM). AIFM include managers of hedge funds and private equity funds. The proposed Directive will require all AIFM within scope to be authorised and to be subject to harmonised regulatory standards on an ongoing basis. It will only apply to those AIFM managing a portfolio of more than 100 million €. For AIFM not using leverage and having a five years lock-in period for their investors, a higher threshold of 500 million € applies. The Commission intends to enhance transparency of AIFM and of the funds they manage as well as ensure appropriate governance standards, robust systems for risk management, liquidity and avoid conflict of interests. The proposal should allow AIFM to market funds to professional investors in compliance with regulatory standards throughout Europe. Finally it gives access to the European market to 3rd country funds after a transitional period of 3 years if there is an equivalence of regulatory and supervisory standards.
The Party of European Socialists has written a letter to the Commission’s President Barroso pointing out several loopholes in the text, namely the exclusion of the funds themselves from the scope of the proposal.
For the Commission’s proposal for a Directive, click here. For the European Socialists letter to Barroso, click here. For EuropeanIssuers’ position paper dated 12 February on the Commission’s Consultation on hedge funds, click here.
Nineteen new position papers were issued by EuropeanIssuers since the beginning of this year, five of which were produced since our newsletter of end April! Most of them are, as expected, reacting to new regulatory proposals aiming at combating the financial crisis.
Here in Brussels, the pressure is building up and we are all working very hard to contribute to better and more efficient regulation. Thanks to the continued and active support of our members, we are still able to deliver high quality papers in spite of the serious time constraints. Our interlocutors, the EU institutions, appreciate the professional input we provide them with (albeit not only in line with their own ideas and proposals).
We promoted the interests of listed companies in various areas of direct impact to them: the (in the meantime adopted) regulation on credit rating agencies, the proposed harmonisation of securities law, executive directors’ remuneration, financial markets supervision, the market abuse regime, short selling etc.
The section “Works in progress” will show you that we are not yet about to sail off to more relaxing destinations: in particular the standardisation work around general meetings promises to continue to keep us busy for another while. But there is also the Commission’s Consultation on its detailed proposals for a revised supervision of financial markets, its proposal for a Directive on AIFMs, its expected proposals for a review of the Prospectus regime, etc. I invite you to discover all about it in this newsletter.
Enjoy your reading,
Dorien Fransens
Secretary General
Latest News Latest Positions Works in progress Calendar Tips for Surfers
Latest News
23/06/09 - IOSCO publishes Principles on Hedge Funds Regulation
The International Organisation of Securities Commission (IOSCO) published its Final Report on hedge funds oversight containing six high level principles. These principles are meant to enable securities regulators to address the risks posed by hedge funds in their own jurisdiction while supporting a globally consistent view.
http://www.europeanissuers.eu/en/?inc=page&pageid=news,newsflash&id=141
top22/06/09 - COM Consultation on adoption of ISAs
The European Commission (COM) has launched a Consultation to determine whether International Standards on Auditing (ISAs) should be adopted in the EU.
http://www.europeanissuers.eu/en/?inc=page&pageid=news,newsflash&id=140
19/06/09 - IOSCO publishes Principles for Regulation of Short Selling
The International Organization of Securities Commissions (IOSCO) Technical Committee has published a final report entitled “Regulation of Short Selling” which contains high level principles for the effective regulation of short selling.
http://www.europeanissuers.eu/en/?inc=page&pageid=news,newsflash&id=139
15/06/09 – First fully Electronic General Meeting held in Copenhagen
VP Securities, the Danish CSD, and Sparindex, a Danish company, organised the world’s first electronic general meeting, in Copenhagen on 16 April. All the participants (investors, management and board) participated in an electronic forum with all processes performed exclusively via the internet.
http://www.europeanissuers.eu/en/?inc=page&pageid=news,newsflash&id=137
10/06/09 – Settlement Finality Directive and Financial Collateral Directive amended
Directive 98/26/EC on settlement finality in payment and securities settlement systems (SFD) and Directive 2002/47/EC on financial collateral arrangements (FCD) have been amended by Directive 2009/44/EC.
http://www.europeanissuers.eu/en/?inc=page&pageid=news,newsflash&id=136
08/06/09 – IASCF Monitoring Board supports IFRS review
The Monitoring Board for the International Accounting Standards Committee Foundation (IASCF) supports the review intended by the International Accounting Standards Board (IASB) of International Financial Reporting Standards (IFRS) relating to financial instruments.
http://www.europeanissuers.eu/en/?inc=page&pageid=news,newsflash&id=135
29/04/09 – COM sets guidance on directors' remuneration
The European Commission (COM) has adopted a Recommendation on the regime for the remuneration of directors of listed companies, complementing previous Recommendations 2004/913/EC and 2005/162/EC.
http://www.europeanissuers.eu/en/?inc=page&pageid=news,newsflash&id=129
23/04/09 – New Regulation on CRAs adopted
The European Parliament and the Council approved the Regulation on Credit Rating Agencies (CRAs) proposed by the European Commission.
http://www.europeanissuers.eu/en/?inc=page&pageid=news,newsflash&id=128
Latest Positions
Study - Review Transparency Directive
Response dated 16 June 2009 to the Questionnaire on the application of the EU Transparency Directive.
EuropeanIssuers is
- in favour of clarifying a few loopholes of the Transparency Directive, namely through more guidance;
- against the use of XBRL language at European level;
- in favour of quarterly financial information excluding earning figures in order to avoid short-termism;
- for harmonisation of thresholds and timeframes for disclosure;
- concerned about stock lending: there should be no stock lending without the shareholder’s explicit consent and there should be complete transparency towards all concerned parties, including the issuer;
- in favour of reducing national differences regarding the notification of major holdings, lowering the thresholds and extending the scope of the notification obligation.
http://www.europeanissuers.eu/en/?inc=page&pageid=positions&id=185
COM call for evidence - Review MAD
Response dated 15 June 2009 to the Commission’s Call for Evidence of April 2009 on the Review of the Market Abuse Directive.
EuropeanIssuers considers that:
- a possible extension of the MAD to non regulated markets should be left to member states with a voluntary application by MTFs;
- a legal framework to regulate commodity derivatives markets should be introduced;
- in view of delaying the disclosure on inside information:
• issuers should only be required not to give signals contradicting that information;
• issuers should be deemed to have respected the confidentiality obligation if they undertook organisational measures to prevent information from leaking;
• CESR should clarify what exemptions issuers benefit from other than those meant to avoid prejudicing their legitimate interest;
- the duty to draw up insiders lists should be more cost-effective, clarified and simplified;
- the threshold for notification of transactions made by managers should be raised and the deadline extended;
- short sellers should report their positions that exceed certain thresholds to issuers and the market;
- naked short selling should be prohibited.
http://www.europeanissuers.eu/en/?inc=page&pageid=positions&id=186
Harmonisation of Securities Law
Response dated 10 June 2009 to the Commission Consultation of 16 April 2009 on Legislation on Legal Certainty of Securities Holdings and Dispositions EuropeanIssuers:
- strongly questions the appropriateness and effectiveness of the functional approach, which is built on a separation between a) the security as subject matter of the account relationship and source of rights and obligations between the account provider and account holder and b) the security as a title creating rights for the shareholder against the issuer.
- replies from the perspective of the 3 goals it pursues:
a) a harmonised efficient cross-border voting architecture
b) the protection of the rights of the end investor
c) an EU wide legal and practical framework for shareholder transparency to allow for direct communication between the issuer and the investor.
- believes it is crucial that future legislation supports and enables the effective application of the private market standards on corporate actions and general meetings and that it provides for a positive legal obligation where the standards would fail.
http://www.europeanissuers.eu/en/?inc=page&pageid=positions&id=184
T2S - Issuers Subgroup
Letter to the ECB T2S team to follow up on the Issuers Conference on Shareholder Visibility of 11/03/09. EuropeanIssuers asks to set up a sub-group Issuers to look at shareholder visibility and cross-border voting and how it could be accommodated for in T2S. The sub group should study
1. the role of T2S for the identification of holders of a) bearer shares, b) shares registered in the shareholder’s name or c) registered in a nominee’s name.
2. how T2S could facilitate the implementation of the market standards on general meetings that propose an efficient communication model for information about general meetings between the issuer and the shareholder via the chain of intermediaries.
EuropeanIssuers offers to be in the sub-group Corporate Actions.
http://www.europeanissuers.eu/en/?inc=page&pageid=positions&id=183
IOSCO's Consultation on Short Selling
Response dated 12 May 2009 to IOSCO’s Consultation Report of March 2009 on the Regulation of Short Selling.
EuropeanIssuers makes the following observations:
- Short selling should be subject to controls to reduce potential risks affecting the functioning and stability of financial markets
- It should also be subject to the market abuse regime
- Stock lending should also be regulated
- A reporting regime that provides information to the market and authorities would be welcome. Measures for regulation are proposed
- An effective compliance and enforcement regime should be put in place
- Caution should be taken with respect to possible exemptions.
http://www.europeanissuers.eu/en/?inc=page&pageid=positions&id=182
Calendar
25/06/2009
T2S Info Session – Milan
The next T2S info session will take place in the premises of Banca d'Italia.
To see the agenda click here.
26/06/2009
Conference Pre and Post Trade Cost – London
Marcus Evans organises a conference on "Pre and Post Trade Cost and Volume Evolution" to be held at the Cumberland Hotel in London. The discussions will focus on how the costs of trading and post trade services are distributed across the value chain and the cost evolution of domestic and cross border transactions.
29/06/2009
Hedge Funds Conference – Brussels
The European Commission organises the conference " Looking into "Chinese boxes": Hedge Funds and the EU's Draft Directive" which will deal with the main aspects of the new draft Directive on Alternative Investment Funds Managers. The event will take place at the CEPS Conference Room, 1, Place du Congrès, Brussels.
For more information, click here.
01/07/2009
JWGGM Meetings - 1 & 2 July – Paris
Meeting of the Joint Working Group on General Meetings, working on the standardisation of General Meetings Market Standards.
07/07/2009
European Clearing & Settlement conference – London
The 16th European Clearing and Settlement conference will take place in London. EuropeanIssuers Secretary General has been invited to join the strategy roundtable: "Implications for all market participants of Target2 Securities: operation, governance and regulation: risk vs rewards".
See the draft programme here.
07/07/2009
Conference Corporate Social Responsability – Sofia
Our member the Bulgarian Industrial Capital Association (BICA) in association with The European Centre of Employers and Enterprises providing Public Services (CEEP) organizes a high level international conference on “Corporate Social Responsibility Future Challenges” in Sofia.
The event is aimed at promoting the EU achievements in the field, as well as brainstorming on the future challenges for how Corporate Social Responsability could be used as effective tool to limit the negative effects of the global financial crisis.
28/07/2009
JWGGM Meeting - 28 & 29 July – Brussels
Meeting of the Joint Working Group on General Meetings, working on the standardisation of General Meetings Market Standards.
Tips for Surfers
• You wish to have the full details of the final Market Standards on Corporate Actions? You can easily access them under “Topical Library > Clearing and Settlement”. There you will also find the draft Market Standards on General Meetings and the Responses to the Consultation that took place early this year.
