Harmonisation of Securities Law

The European Commission is preparing a proposal for a legal instrument (presumably a Directive) on Harmonisation of Securities Law. The future legislation concerns securities held by book entry and addresses the acquisition and disposal of securities, the integrity of the system, the duties of intermediaries, a free choice in the EU for the issuer of the issuer CSD, etc. The text has been sent to the Member States for consultation. The proposal should be adopted by the College of Commissioners by mid 2010 and a broad consultation of stakeholders should follow. In parallel there will be a consultation on the proposal for a legal instrument on Market Infrastructures (see below), since the two pieces of future legislation are closely connected.

European Market Infrastructures

The European Commission is currently drafting a legal instrument on European Market Infrastructures in particular to regulate central counterparties (CCPs) and central security depositories (CSDs) licensing and counterparty risks issues. The proposal is to include a register for over the counter (OTC) contracts, provisions on authorisation and supervision, conduct of business rules, etc. This proposal is closely connected with the future legal instrument on harmonisation of securities law.

Market Standards on General Meetings

The Joint Working Group on General Meetings (JWGGM) finalised its standards on 30 October 2009. The standards are the product of 4 years work by companies, investors, banks and infrastructures with a view to facilitating foreign investors to participate to shareholder meetings. The standards are built on three pillars: a system to bring the key elements of the meeting convocation in a quick and uniform manner to the end investor, a practical solution to define who is entitled to vote and a mechanism for casting votes ahead of the meeting.
This initiative was sponsored by the European Commission who hosted a workshop of the JWGGM to present the standards to the Market on 4 December. At this event the European Commission said "this is not the end, it is the end of the beginning". Indeed, the standards are now up for endorsement by the involved European Associations. Afterwards, local markets will have to undertake a gap analysis to check the standards against national law, after which implementation can follow.

The JWGGM will meet again in January in order to plan and steer the next steps for the successful implementation of these standards in Europe.

For more information on the new Market Standards on General Meetings, including the presentations given by the JWGGM at the workshop, click here.

Corporate Actions and General Meetings related Costs

EuropeanIssuers wrote to DG Markt and DG Sanco respectively asking for more transparency on price and payment structures of securities accounts. We also pleaded for a monitoring tool to track cost savings by intermediaries due to the implementation of the Corporate Actions Market Standards. In addition, we pointed out that basic custody services should include communication of information regarding general meetings and other corporate actions. Our letters were answered in November. DG Markt indicated that this problem should be tackled within the CESAME2 group. DG Sanco referred to the future legal instrument for harmonisation of securities law as a possible solution.

For the letter from DG Markt, click here.
For the letter from DG Sanco, click here.

EU Securities Small Business Act

The French Government is planning to propose measures to the European Commission to alleviate listing obligations for smaller issuers. A study is currently being conducted to assess what are the measures that should be included in a proposal for a EU Small Business Act. The idea is to define what is a smaller issuer based on market capitalisation related criteria instead of the criteria to define a SME. EuropeanIssuers contributed its views suggesting various measures to make obligations for smaller issuers legislation under the Prospectus Directive, the Transparency Directive, the Market Abuse Directive, etc. There should also be a program to motivate retail investors to invest in smallcaps portfolios; the pros and cons of XBRL for smaller issuers should be examined, etc. The results of the study are due by Christmas.

Internal Control and Risk Management Systems

EuropeanIssuers is finalising a proposal for common principles of internal control & risk management at European listed companies. The paper focuses on the role of the audit committee in the light of the 8th Company Law Directive (Audit Directive), but also looks at the role of the other players as there are the board of directors, senior and middle management, the internal audit department and the statutory auditor. The paper’s release is scheduled for January 2010.

MiFID Review

In the context of the upcoming review of the Market for Financial Instruments Directive (MiFID), EuropeanIssuers is currently preparing a position paper. Our main concerns: the use of client assets for intermediaries’ own accounts, the absence of a daily reconciliation of securities accounts balances, transparency waivers, data consolidation, re-introduction of the priority rule, etc. EuropeanIssuers is attending several meetings with the European Commission and other stakeholders on MiFID topics: transparency for non equity markets, including derivatives, bonds and asset backed securities; waivers and dark pools and crossing networks.

For EuropeanIssuers previous position papers on MiFID, click here.

Target2Securities AG meeting - 9 & 10/12 - Frankfurt

The Target2Securities Advisory Group (T2S AG) had a 2 day meeting on 9 and 10 December in Frankfurt. Our Secretary General defended the case for a T2S functionality that would allow to identify shareholders. See also our newsflash.

For the presentation, click here.

Meeting French Issuers at Ansa - 25/11 - Paris

Ansa kindly hosted a meeting for the French members of EuropeanIssuers on 25 November in Paris. It was an opportunity for our Secretary General to update Ansa members about current European Affairs.
For the presentation, click here.

SYDEK Conference on the Global Economic Crisis – 27/10 – Nicosia

Our member SYDEK, the Cypriot association of listed companies held a conference on “The Global Economic Crisis: Challenges, Effects and Prospects for Public Listed Companies and Investors” in Nicosia on 27 October. Mr. Theodorou, SYDEK’s chairman gave a speech on “A Pan-European and Cyprus perspective” and Mr von Rosen, Managing Director of our member DAI, the German association of listed companies, gave a presentation on “The need for Strategic Investors: the German view.”

For Mr Theodorou’s speech, click here.
For Mr von Rosen’s presentation, click here.

As the year end approaches, we take a moment to consider the topics we dealt with on behalf of listed companies in the past 12 months. Not less than 30 position papers left our desks on such important topics as shareholder visibility, corporate governance, auditing, short-selling, hedge funds, credit rating agencies, financial markets supervision, the prospectus regime and many others. Many of them are still works in progress at the level of the European legislator: the proposals to reshape the supervision of financial markets or the Prospectus Directive are still being debated and the outcome will only be known to us several months from now.

2009 was also the year in which both the market standards for general meetings and those for corporate actions were finalised. After four years of intensive work and dedication, the standard setting at the EU level is accomplished. It is now time to bring the standards to the local markets in view of implementing and incorporating them into daily procedures and practices.

Both our website and our newsletter proved efficient communication tools to share knowledge with our members as well as the public. We shall further improve them to serve you even better in 2010.

Last but not least, a new Commission will take office in February 2010. EuropeanIssuers will be ready with its wish-list: cross-border voting, identification of shareholders, long term investors, a lighter regime for smaller issuers and the MiFID review will be topping our agenda.

Enjoy your reading!
Wishing you a wonderful Christmas and a healthy and peaceful New Year,

Dorien Fransens
Secretary General

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Latest News

21 Dec.09 – U.S. Supreme Court Decision to Determine Future Class Actions Against Non-U.S. Issuers

The National Australia Bank (NAB) is currently plaintiff in a case before the U.S. Supreme Court that may have major implications for non-U.S. issuers. It is a typical “foreign cubed” lawsuit: it involves foreign investors suing foreign issuers for losses suffered on foreign stock exchanges in American courts. The Supreme Court is to consider the question of whether and to what extent U.S. securities laws can be applied outside the U.S. Non-U.S. companies would largely benefit from a Court decision - in favour of NAB – that national securities law cannot be applied outside the U.S. Indeed, non-U.S. investors who suffer losses on non-U.S. exchanges will then not be included in U.S. class action lawsuits such as this, which would substantially reduce the scope of potential class action lawsuits against non-U.S. companies.

http://www.europeanissuers.eu/en/?inc=page&pageid=news,newsflash&id=171

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