The Commission published a Consultation document  to prepare the review of the Transparency Directive. There are three main topics up for comment: a simplification regime for smaller listed companies, disclosure of holdings of voting rights and the extent to which the provisions should be at maximum harmonisation level so that the Member States cannot add additional requirements. Responses are due by 23 August. You can contact us for details of our response at info@europeanissuers.eu

After releasing the document, the Commission held a conference on this subject on 11 June. Participants at the conference seemed to support the UK model of disclosure of voting rights and there was a good discussion on the subject. On the question of smaller issuers, the discussion was somewhat more disjointed, despite some good speakers, and seemed to get lost in the technical points rather than conveying a sense of how this was really relevant to companies. More interesting issues such as how to increase analyst coverage were raised but not discussed, leaving one with the feeling of a missed opportunity.

Besides the Consultation document the Commission released a staff working document that suggests the inclusion of financial and corporate governance related disclosures in the scope of the Transparency Directive. Some of these are currently in national codes not binding legislation and so this would represent a radical change. This would also enable CESR to produce guidance and interpretation on corporate governance!

The Commission’s Report states that there is a demand also from issuers and users for more rules on interim management reports - we are not aware of any such demand but please let us know if you disagree.

EuropeanIssuers’ Secretariat met with the Commission officials in charge of the Securities Law Directive. The discussion was focussed on the general principles of the Directive. Everyone seems to agree on the principles but not on the details. A possible solution is to draft explanatory recitals in order to clarify what the Commission wants to achieve in this piece of legislation. On the question of transparency of costs of securities accounts, one idea is to have a study after one year. The proposal for a Directive should be published by mid-September for a 8 week consultation period.

The meeting was triggered by EuropeanIssuers’ recent comments on the future Securities Law Directive, which can be summarised as follows:

• It potentially undermines existing rights under Corporate law
• It elevates the role of intermediaries above that of investors
• It should focus on the core duties for account providers, not only on core rights to be conferred upon the account holders
• It should preserve the integrity of the issue, to ensure that only those holding securities have the right to exercise them
• It should facilitate the exercise of a wider range of rights flowing from the securities, without creating confusion as to who has the right to vote on company resolutions
• It represents a missed opportunity to deal with one of the main challenges for companies in cross-border securities holding systems, namely shareholder identification
• It would make conflict of law rules more confusing

For the position paper click here. If you would like to know more information and get involved, please contact us at info@europeanissuers.eu

I would like EuropeanIssuers to be better able to articulate the needs of companies as users of financial markets and to develop a pan-EU vision of what financial market services to companies should look like. To this end, I am consulting our members on what we think the purpose of financial markets should be. Arguably markets should facilitate the efficient allocation of assets around the economy and provide capital to those enterprises which are able to make best use of it. They should also facilitate communication between companies and their shareholders. Trading as an end in itself probably has only limited value added to the economy as a whole, with policymakers placing too much emphasis on the importance of permanently liquid markets as an end in themselves rather than reflecting on why those markets exist in the first place.

I would be interested to hear from others with views on the subject.

Have a splendid summer,

Susannah Haan
Secretary General
susannah.haan@europeanissuers.eu
+32 (0)2 289 25 71

Latest Positions
Corporate Governance
Transparency Directive
Securities Law Directive
Investor Relations



Latest Positions

Commission's Consultation on the Revision of MAD

EuropeanIssuers’ Response of 27 July to the Revision of the Market Abuse Directive (MAD) dated 25 June 2010.

EuropeanIssuers welcomes the revision and proposes the following improvements:

- the MAD regime should be simplified for all companies in the EU before extending it to MTFs
- the obligation of keeping insider lists should be deleted
- information sharing between authorities should be useful
- there should be harmonisation of the activity of liquidity providers across the EU
- the threshold for the notification of transaction by managers should be higher and restart from zero everytime it is reached
- it would be helpful to extend the MAD provisions to secondary markets for emissions trading
- there should be a definition of market operator

http://www.europeanissuers.eu/en/?inc=page&pageid=positions&id=211

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EuropeanIssuers' Response of 9 July to the Commission's Consultation on Short Selling dated 14 June

EuropeanIssuers is in favour of European legislation on short selling and stresses that:

- legislation on short selling should also serve as a means to assist issuers to understand investors’ views of their company’s performance
- the scope of disclosure should be based on the two-tier model, covering all shares admitted in an EEA regulated market and also positions obtained through the use of derivatives
- disclosure of EU shares should be made to the regulator at a lower level and to the market at a higher level.
- There is support for strengthening the buy-in procedures applying to shares and bonds and requiring compulsory borrowing agreements for short-sales
- there should be a common understanding of market making across the EU
- an internationally consistent approach whereby ESMA or the national regulators co-operate with international regulators would be desirable
- ESMA should seek to ensure the consistency of measures taken across the EU

http://www.europeanissuers.eu/en/?inc=page&pageid=positions&id=209

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Commission’s Consultation on OTC Derivatives

EuropeanIssuers' Response of 9 July on the Commission's Consultation on OTC Derivatives of 14 June

EuropeanIssuers has the following concerns: 

- Non-financial companies use the OTC derivative markets to manage risks. The current proposals for a clearing obligation or a requirement to post collateral do not take this sufficiently into account.
- EU non-financial companies should not be placed at a disadvantage to their competitors elsewhere. Thus a requirement for EU companies to tie up large amounts of cash which did not apply to similar companies elsewhere would be extremely unhelpful.
- Non-financial companies do not themselves constitute a systemic risk to the financial markets in the way that financial institutions may. They should not therefore be subject to the same regulatory requirements.

http://www.europeanissuers.eu/en/?inc=page&pageid=positions&id=210

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Investor Relations

General Meetings

On 9 July 2010, the European Credit Sector Associations (ECSAs) has endorsed the General Meeting Market Standards  which are now supported by all industry groups represented, although the European Central Securities Depositories Association (ECSDA) is still formally to endorse. Before implementation it is intended that a gap analysis take place including a fact finding exercise which is to clarify whether the existence of requirements at national level to participate and vote at general meetings act as a barrier from a processing point of view. The Working Group is chaired by EuropeanIssuers representative Mr Markus Kaum, a Member of our Legal Committee and Head of Capital Markets at Munich Re.

SEC concept release on the US proxy system

On 14 July, Washington DC, the Securities and Exchange Commission (SEC) voted to issue a concept release seeking public comment on the U.S. proxy system and asking whether rule revisions should be considered to promote greater efficiency and transparency.

EuropeanIssuers is particularly interested in the outcome of this consultation as it can influence the current discussion at European level on topics of paramount importance such as shareholder identification and empty voting.

The U.S proxy system governs how investors vote their shares. Most of them vote their share by proxy. Many investors are "record owners" (their names are listed in the company's shareholder records) and they can vote their share directly by granting a proxy. However, the vast majority of investors in U.S. companies hold their shares in "street name" (in customs accounts with a securities intermediary, usually a broker or a bank) and they give voting instructions to their securities intermediary or to a third party.

Issues that are discussed in the concept release include:

- Over voting and under voting of shares,
- Proxy voting by institutional secutities lenders,
- Proxy distribution fees,
- Issuers' ability to communicate with beneficial owners of securities,
- Potential means to facilitate retail investor voting participation,
- Data-tagging proxy-related materials,
- Role of proxy advisory firms,
- Dual record dates,
- Empty voting.

EuropeanIssuers is interested in hearing from companies with dual listings on any problems experienced in the US at info@europeanissuers.eu

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