Alternative Investment funds

On 29 April 2009 the European Commission (COM) proposed 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 proposal should allow AIFM to market funds to professional investors in compliance with regulatory standards throughout Europe. Finally it gives 3rd country funds access to the European market after a transitional period of 3 years if they are subject to equivalent regulatory and supervisory standards.
EuropeanIssuers takes the view that hedge funds differ from traditional investors in that they are not interested in the company itself as an economic undertaking but merely wish to exploit market price movements. Hedge funds must act in a responsible manner with respect to their investment target. A European approach to hedge funds will be effective but international co-ordination or convergence should be striven for. Transparency should give market participants relevant information for their investments thus leading to an efficient and truthful pricing.

For the Commission’s Proposal for a Directive, click here. For EuropeanIssuers’ previous position paper, click here.
 
Short Selling

On 8 July 2009, the Committee of European Securities Regulators (CESR) launched a Consultation on its Proposal for a pan-European short selling disclosure regime. CESR proposes a legislative regime for enhanced transparency of short selling to be implemented on a permanent and harmonised basis across the European Economic Area (EEA).
The proposed regime is based on a two-tier system for disclosure of significant net short positions held in shares admitted to trading on an EEA regulated market or on a Multilateral Trade Facility (MTF). It proposes among others a threshold set at 0.1% of the company’s issued share capital for a private disclosure to the regulator. When the short position reaches a threshold of 0.5% the short seller would be required to publicly disclose its position to the whole market. This regime is to cover also exchange-traded and OTC derivatives. The private disclosure is to allow the regulators to pursue enquiries to detect abusive short selling, while the public disclosure is said to provide a constraint on aggressive large scale short selling and assist with price discovery. In addition to the proposed disclosure regime, CESR continues to consider the relevance of further harmonised regulation for short selling. CESR will provide the European Commission with a final proposal by the end of 2009.

For the Proposal/Consultation Document, click here. For EuropeanIssuers’ former position paper, click here.

Clearing and Settlement

General Meetings Market Standards
A Tripartite meeting between representatives of the Joint Working Group on General Meetings (JWGGM), the European Corporate Governance Forum (ECGF), the Legal Certainty Group (LCG) and COM Company Law Unit took place on 6 July. The meeting aimed at creating synergies of the work done by the respective groups and avoiding overlaps. Secretary General Dorien Fransens gave a presentation on the state of play of the works of the JWGGM. On the basis of this report and subsequent discussions, the group agreed to tackle some issues in the future, namely: a rule that intermediaries are not allowed to vote without (specific or general) instructions could potentially be dealt with in the context of the draft Directive on Securities Law (DSL); a uniform, unequivocal and exclusive certificate to give proof of evidence of one’s entitlement to shares should be created by the DSL, i.e. a cross-border proof of entitlement of the rights of the shareholder vis-à-vis the issuer; daily reconciliation would avoid conflicting entitlements and having to go through the chain upstream to verify the entitlement again at every level. It was agreed that the issues should be further discussed at two more meetings between representatives of the three groups, at the end of September and early November.

The JWGGM is holding another two days meeting on 28 & 29 July in Brussels. The group wishes to do some last fine tuning of the standards and to finalise the background document.

UNIDROIT
The final session of the diplomatic Conference to adopt a Convention on Substantive Rules regarding Intermediated Securities will take place in Geneva from 5 to 7 October 2009. The conference will be held under the auspices of the International Institute for the Unification of Private Law (UNIDROIT), with a view to finalising the work and adopting the Convention. EuropeanIssuers has been invited to participate as an observer without vote. EuropeanIssuers feels that it is of high importance that the issuer law remains the only source when it comes to granting corporate law rights to shareholders. Additionally, EuropeanIssuers will strive for the rights of bearer shares, including voting rights, to be received and exercised by the end investor only.

For the page of the conference on UNIDROIT website, click here. For EuropeanIssuers former position on the draft Convention, click here.

Accounting, auditing and financial reporting

Commission Consultation on the adoption of ISAs in the EU
On 22 June 2009, COM launched a Consultation to determine whether International Standards on Auditing (ISAs) should be adopted in the EU. COM, following article 26 of Directive 2006/43/EC on statutory audits, is to examine whether the adoption of ISAs at EU level would be beneficial to the EU. COM would adopt the ISAs in order to enhance confidence in financial statements of limited companies in the EU. A study undertaken by the University of Duisburg-Essen indicates that the adoption of ISAs in the EU would result in quantitative and qualitative benefits for all stakeholders deriving from high quality and harmonised audits in the EU. Additionally the High Level Group of Mr Stoiber calls for audits that are proportionate to the size of the audited entities so as to reduce the burden on smaller entities. The Consultation Document considers these aspects as well as whether ISAs have sufficient international acceptance.

For the Consultation webpage, click here. For the study on the adoption of ISAs by the EU, click here.

Brussels is slowing down its busy rhythm during August and so will we. Before we do, we would like to report about the latest developments and give you a preview of what lies ahead after the summer break!

EuropeanIssuers recently endorsed the Market Standards on Corporate Actions with the request that a monitoring tool be set up to create price transparency. We are now also at the final stage of the standard setting for general meetings.

Hot topics for the autumn will be the future legislation on Alternative Investment Funds and the Consultation on Short Selling. We are currently preparing our position and will make sure to defend the interests of share issuing companies which aspect is often neglected in the debate.

We also expect more legislative proposals from the Commission: the proposal to revise the Prospectus Directive will likely be presented before the summer is over. By the year end we could be facing a draft Directive on the Harmonisation of Securities Law. These and other topics will surely be the centre of our attention in the very near future.

Enjoy your reading and your summer,

Dorien Fransens
Secretary General

P.S. Our offices will be closed from 10-26 August.

Latest News
Latest Positions
Works in progress
Calendar
Presentations and Speeches
We recommend....



Latest News

16/07/09 – COM publishes results of study on trading and post-trading prices, costs and volumes

The European Commission has published a first study on the prices, costs and volumes for trading and post-trading securities in the EU, carried out by Oxera.

http://www.europeanissuers.eu/en/?inc=page&pageid=news,newsflash&id=146

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Letter dated 17 July 2009 to DG Markt on the Final Market Standards for Corporate Actions Processing of 8 May 2009.

The Commission should set up a monitoring tool to a) create transparency in pricing and payment structures for corporate actions, b) show cost savings made by the application of the market standards and c) show how these will be reflected in fee reductions for issuers who comply with the market standards as well as for investors.

http://www.europeanissuers.eu/en/?inc=page&pageid=positions&id=190

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Corporate Actions Market Standards - Endorsement

Letter dated 17 July 2009 endorsing the Final Market Standards for Corporate Actions Processing of 8 May 2009.

EuropeanIssuers endorses the market standards on corporate actions emphasising that their implementation will depend on the goodwill of the concerned parties. Companies need good and tangible arguments to justify the new obligations. They wish to see the benefits their efforts will help to produce. They need to be assured the market standards for GMs will be a reality too in the near future, both on paper as in the field. Legal certainty is to be given to the parties who will apply the MSCAs. A monitoring tool should be set up to a) create transparency in pricing and payment structures, b) show cost savings and c) show how these will be reflected in fee reductions for issuers who comply as well as for investors. Infrastructures and intermediaries should commit to the application of the MSCAs in the SLAs they enter into. Finally the bodies looking after the implementation of the MSCAs at national level should be representative, well functioning and well balanced in their composition.

http://www.europeanissuers.eu/en/?inc=page&pageid=positions&id=189

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COM Communication on Financial Supervision

EuropeanIssuers Comments dated 15 July 2009 on the Commission Consultation of 27 May 2009 on European Financial Supervision.

EuropeanIssuers generally agrees with the Communication’s proposals and makes the following remarks:

- the ESRC should monitor and report on compliance with its warnings / recommendations;
- the notion of “financial sector” should be defined;
- the supervisory authorities that now are sectoral should possibly be re-structured in the future as recommended by the de Larosière Report;
- general day to day supervision should be left to the national supervisors;
- EU regulation should enshrine maximum harmonisation and elimination of national exceptions;
- cooperation between ESFS and ESRC should include transfer of data on financial institutions and markets.

http://www.europeanissuers.eu/en/?inc=page&pageid=positions&id=188

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Audit Inspections by US oversight bodies

Position paper of 29 June 2009 on oversight of statutory auditors by third countries oversight bodies addressed to the European Commission.

In the context of article 47 of Directive 2006/43/EC, EuropeanIssuers asks the European Commission:

- to bring forward a Decision that would allow EU Oversight Bodies to enter into cooperation agreements with their US counterparts;
- to protect the confidentiality of documents and information communicated by EU audited companies.

For the European Commission webpage on auditing and relations with third countries, click here. 

http://www.europeanissuers.eu/en/?inc=page&pageid=positions&id=187

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Calendar

01/09/2009
CAJWG meeting – London
Meeting of the Corporate Actions Joint Working Group, working on the Giovannini private sector barrier 3.

25/09/2009
Derivatives in crisis conference – Brussels
The Derivatives in crisis conference is organised by the European Commission on 25 September in Brussels.
For the agenda, click here.

29/09/2009
29/9 - 1/10 The Eurofi Financial Forum – Göteburg
The Eurofi Financial Forum is an initiative of Eurofi in association with the Swedish EU Presidency. The forum will focus on the priorities for the incoming European authorities in the light of the financial crisis. Speakers will be both from the industry and from regulatory authorities.
For more information about the conference, click here.

01/10/2009
1 & 2/10 Clearing & Settlement conference – London
The 12th Annual Clearing and Settlement conference reviews the latest European initiatives in the area of clearing and settlement, the functional progress of central counterparties and explores the imminent strategic evolution of market infrastructures. Our Secretary General, Dorien Fransens, will deliver a speech on the Market Standards for General Meetings.
For the program, click here.

05/10/2009
5/10 to 7/10 UNIDROIT Diplomatic Session – Geneva
The final session of the diplomatic Conference to adopt a Convention on Substantive Rules regarding Intermediated Securities will take place in Geneva. The conference is organised by the International Institute for the Unification of Private Law (UNIDROIT).

07/10/2009
T2S Info Session – Luxembourg
For further details and registration, contact the T2S team at t2-s@ecb.europa.eu

08/10/2009
8 & 9/10 Workshop on Corporate Actions - Brussels
Our Secretary General, Dorien Fransens, will speak about the Market Standards on General Meetings at the 3rd ECSA Workshop on Corporate Actions / Giovannini Barrier 3 on 8 and 9 October in Brussels.

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Presentations and Speeches

European Clearing & Settlement Conference - 07/07/09 - London

The 16th European Clearing and Settlement conference took place in London. EuropeanIssuers' Secretary General gave a speech on the possible implications of Target2-Securities for issuers .

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We recommend....

“The Political Economy of Cross-Border Voting in Europe” is an article by Michael Schouten, a Dutch lawyer and Visiting Research Fellow, Columbia Law School, New York. The article states that an efficient cross-border voting system should be put in place to ensure good corporate governance in public companies. Although policy-makers have acknowledged this, there hasn’t been a reform at European level and the status quo prevails. Mr. Schouten sees political reasons for this together with the strong influence exercised by some lobby groups, namely financial intermediaries.

The article is to be published in the Columbia Journal of European Law. For the article, click here.

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