Long Term Investment

A recent survey revealed that long-term institutional investors in Europe hold on average only 25 per cent of their portfolios in equities, compared with 45 per cent before the financial crisis. This is an alarming trend: the problem really lies in the ever growing alienation between a) the companies and their shareholders: who are they? and b) the market value of securities and the instrinsic value of the underlying enterprise: more and more the market price is only the reflection of interaction between market players. Thus, the market is becoming less attractive for both companies and (long term) investors, the companies’ shareholder base is becoming less stable and long term corporate strategy for sustainable value is in serious danger. Companies should be enabled to restore the relationship with their owners and encourage and engage them to act as responsible stewards. To achieve that goal, action is required from the companies, their investors, financial intermediaries and the regulatory and legislative authorities. Those actions should aim at measures to:
- allow the companies to know their investors
- provide them with simple, efficient and EU wide systems to communicate on general shareholder meetings with easy voting mechanisms
- encourage investors to assume their responsibility as owners and strive for sustainable value
- avoid market distortions and narrow the gap between the market value and intrinsic value of securities.

Our standardisation work on general meetings will surely contribute. Additionally, we suggest rewarding long term share ownership. Granting long term shareholders multiple voting rights or a loyalty dividend would also serve our cause. We equally continue our lobbying with the European legislator to establish a European framework for the identification of the shareholder.

EuropeanIssuers recently issued a press release entitled “Growing Alienation between Companies and their Investors must be stopped”. Our Chairman, Jacques Schraven, and Secretary General, Dorien Fransens, gave an interview on the topic to the Financial Times which led to an article in the edition of 17 September.

For the press release, click here.
For the IPE study on European Institutional Asset Management – Survey 2009, click here.

Clearing and Settlement

Harmonisation of Securities Law: Duties of Intermediaries
The representatives of the Working Group on General Meetings (JWGGM), the European Corporate Governance Forum (ECGF), the Legal Certainty Group (LCG) and the European Commission (COM) had a second tripartite meeting on 24 September. This meeting focused on the future legal instrument for the harmonisation of securities law (presumably a Directive), in particular on the duties of intermediaries.

General Meetings Market Standards
The Working Group on General Meetings (JWGGM) continued its frequent meetings during July, September and October. The group was delayed in its progress as new divergent views popped up again on some key issues including the communication with the retail investors and the upstream communication flow of the votes. Most divergences have now been ironed out to the satisfaction of all stakeholders. One of the major achievements is the agreement on the dissemination of key elements of the meeting convocation according to a uniform and simplified format.
At the last meeting on 16/10 the JWGGM agreed on the objective to submit the standards for endorsement to the relevant EU associations by the end of October. The endorsement period will run 6 weeks. During that period, probably in the second half of November, an open workshop will be organised in Brussels for all interested parties. More information on this event will be available shortly. The endorsement will be followed by a gap analysis in every local market and eventually the implementation.

Target2Securities
Following a conference organised by the Eurosystem on 11 March regarding the impact of T2S on issuers and their agents, EuropeanIssuers pleaded with the ECB to set up a working group “issuers” that should look at the issue of shareholder visibility. In response to our request and as a first step, the T2S team organised a workshop on “Shareholder Visibility” for issuers, issuers’ agents, CSD’s and financial intermediaries on 14 October in Frankfurt. Our Secretary General attended the workshop. The meeting took place in a very open and constructive atmosphere. There was again a strong request to enable issuers to identify their shareholders. The lack of a EU wide harmonised framework in this respect remains a barrier thereto even for those markets which have a disclosure mechanism in place. There was consensus among participants that actions are needed at the legislative level. The COM representatives stated that the issue would be looked into in the context of the review of the Transparency Directive, early next year. In the meantime, so participants believed, it is worthwhile to study how the T2S system could contribute to shareholder identification. The T2S team agreed to submit this request to the T2S Advisory Group which will meet in December.

For the invitation, click here. For the supporting documentation, click here (participants list), here (agenda) and here (discussion note). For EuropeanIssuers letter to T2S team, click here. For the T2S team Response letter, click here.

UNIDROIT
On 9 October, negotiators from 44 States and the European Community approved the final draft of the “Unidroit Convention on Substantive Rules Regarding Intermediated Securities”.
The Convention aims at harmonising rules for intermediated book entry securities, which cover almost all securities traded at exchanges and entered into a central securities depositary system. As previously mentioned in this Newsletter, EuropeanIssuers commented on the draft Convention and actively participated in the negotiation sessions. We were concerned about possible conflicts between the draft provisions and company law, in particular regarding the question how the rights which are inherent to securities can be exercised. The draft seemed to indicate that the rules for intermediated securities would overrule national corporate law in case of conflict.
An important achievement for us is the decision of the conference to clarify that corporate law provisions as to acquisition and disposal of shares and recognition of a shareholder by the company are unaffected by the Convention. Furthermore, a list of core duties of intermediaries has been added.
The Convention has not been signed by any State yet. We do not expect such to happen before the finalisation of the official commentary within 14 months from now.

Alternative Investment Funds

EuropeanIssuers sent its position paper dated 5 October 2008 on the Proposal for a Directive on Alternative Investment Fund Managers to the European Parliament (EP), Council and COM. The Economic and Monetary Affairs Committee (ECON) of the EP had its second discussion on the Proposal on 6 October. Mr Gauzès, Rapporteur for this Proposal, prepared a working document that served as basis for the latest discussion.

Financial Supervision

In September COM published a much awaited package of draft legislation for the reform of financial supervision in Europe. (The Proposals create a European Systemic Risk Board (ESRB) for macro-prudential supervision and a European System of Financial Supervisors (ESFS) for micro-prudential supervision. They also create three new authorities: EBA – European Banking Authority; EIOPA – European Insurance and Occupational Funds Authority and ESMA – European Securities and Markets Authority) The Proposals are now in the ECON Committee for consideration.  Please see also the newsflash.

For the Proposals, click here. For the press release, click here. For EuropeanIssuers previous positions on Financial Supervision, click here and here.

Prospectus

The Proposal for an amending Directive to the Prospectus Directive was published by COM on 23 September. Some of the proposed changes are in line with EuropeanIssuers previous position paper: less comprehensive disclosure requirements for issues of securities for smaller companies and for rights issues; clarification of exemptions for the retail cascade and for employee share schemes; repeal of the disclosure requirements overlapping with the Transparency Directive; etc. The Proposal is now in the ECON Committee for consideration. Please see also the newsflash.

For the Proposal, click here. For EuropeanIssuers previous position, click here.

Lately we have been drawing attention again to the importance of stable share ownership. Companies should be enabled to restore the relationship with their long term owners and engage them to act as responsible stewards. The Financial Times put it like this: “Companies urged to court long term investors”.

As you may have noticed from our newsflashes, here in Brussels we are closely looking at a number of legislative proposals: there is the proposal for a Directive on alternative investment fund managers, a proposed Directive to reform the prospectus regime and last but not least, a whole package of legislative instruments to redesign financial supervision. Even more important still, are the preparations for the future legal instrument for the harmonisation of securities law.

Of course there is also always the standardisation work on general meetings and corporate actions. The market standards on general meetings are now really in the final fine-tuning stage. The corporate actions market standards entered the phase of implementation by practitioners in the local markets. We are looking into the benefits companies could reap from them in terms of cost saving.

Thank you for your support and interest!
Enjoy your reading,

Dorien Fransens
Secretary General

Latest News
Latest Positions
Works in progress
Presentations & Speeches
Calendar



Latest News

20/10/09 – COM to regulate Derivatives

The European Commission (COM) has adopted a Communication on future policy actions for derivatives markets. The Communication marks a “paradigm shift away from the traditional view that derivatives are financial instruments for professional use and thus require only light-handed regulation”. There will be measures to increase transparency, reduce both counterparty and operational risks and enhance market integrity and oversight of the derivatives markets.

http://www.europeanissuers.eu/en/?inc=page&pageid=news,newsflash&id=159

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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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Presentations & Speeches

12th Annual Clearing & Settlement conference on 1 and 2 October – London

The 12th Annual Clearing and Settlement conference organised by MarcusEvans was held on 1 and 2 October in London. EuropeanIssuers' Secretary General gave a presentation on the General Meetings Market Standards.
For the presentation, click here.

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Calendar

27/10/2009
SYDEK Conference "Global Economic Crisis" - Cyprus
Our member, the Cyprus Association of Public Listed Companies (SYDEK), organises a conference on "The Global Economic Crisis: challenges, effect and prospects for public listed companies and investors", in co-operation with the Cyprus Securities and Exchange Commission and the Cyprus Stock Exchange. The conference will be held at the Cyprus Hilton Hotel from 11:00 to 13:30 in Nicosia. Several speakers including Professor von Rosen (Managing Director of Deutsches Aktieninstitut) and Mr Theodorou (Chairman of SYDEK) will tackle the following topics: the effects of the crisis on markets and economies; investor financial education; the need for strategic investors and many others.
For the program, click here.

29/10/2009
Meeting of MOG - Clearing & Settlement – Brussels
The next meeting of the Monitoring Group of the Code of Conduct on Clearing and Settlement (MOG) will take place on Thursday 29 October at DG Markt's premises. The meeting will start at 9.45 am and is scheduled to finish at 1 pm. For the agenda, click here.

17/11/2009
Santander International Banking Conference –Madrid
The 2nd Santander International Banking Conference will be held in the Financial City of Madrid. The topic this year will be the financial crisis.
For the program, click here.

01/12/2009
1 & 2/12 FESE Convention 2009 – Brussels
FESE organises its yearly Convention on 1 and 2 December. The FESE Convention covers a wide range of policy developments affecting the most important issues impacting the European Capital Markets.
For the draft program, click here.

02/12/2009
2 & 3/12: European Corporate Governance Conference
The Swedish Corporate Governance Board and the European Corporate Governance Institute in conjunction with the Swedish EU Presidency, organise the 8th European Corporate Governance Conference in Stockholm, Sweden. The title of the conference is "Beyond the Crisis - New Challenges for Corporate Governance". It will take place on 3 December, with a reception in the evening of 2 December.
For the program, click here.

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