Questions & Answers
1. What does EuropeanIssuers stand for?
2. Why did EALIC and UNIQUE decide to come together?
3. Who can become a member of EuropeanIssuers?
4. The member base of EuropeanIssuers consists of some 70 listed companies and 15 national associations representing listed companies. How many listed companies do you then actually represent and what is their market value?
5. What do listed companies have in common that they need to be represented by a specific association?
6. What are exactly the issues that are of concern to listed companies?
7. Why is shareholder transparency so important for issuers?
8. What other issues have you been following up on?
9. Can a trade association really make a difference and what are the specific benefits of being a European association?
10. What is your way of working?
11. What should listed companies watch out for in the short term and where will lie the priorities in terms of regulatory developments?
1. What does EuropeanIssuers stand for?
EuropeanIssuers promotes the interests of listed companies against the regulatory backdrop of the European Union. It was formed when EALIC and UNIQUE combined their organisations early 2008. The legal statute of EuropeanIssuers is that of an International Non Profit Association under Belgian law with registered seat in Brussels. EuropeanIssuers has its permanent secretariat in Brussels.
EALIC was created in 2002 as a non-profit association by three national associations representing listed companies, namely VEUO from the Netherlands and AFEP and ANSA from France. After two years, In January 2005, EALIC decided to set up a permanent office in Brussels with a full time experienced Secretary General and other staff. End December 2007, EALIC’s member-base counted six national associations of listed companies, namely VEUO (Netherlands), ANSA and AFEP (France), ABSC-BVBV (Belgium), ASSONIME (Italy) and SEG (Poland) and some seventy leading publicly traded companies from these countries as well as from Portugal and Spain.
UNIQUE on the other hand was founded early 2003 as a network of national associations of listed companies. End December 2007, it grouped 9 associations from as many different European countries, who together represented the interests of c. 4,000 quoted companies (issuers) with more than 10.7 mill. employees and a capital stock of roughly 1,160 bill. € (Austria: Aktienforum; Bulgaria: Bulgarian Industrial Capital Association; Cyprus: SYDEK; Finland: Suomen Pörssisäätiö (Finnish Foundation for Share Promotion); France: Middlenext; Germany: Deutsches Aktieninstitut e.V.; Greece: The Union of Listed Companies; Switzerland: SwissHoldings; United Kingdom: The Quoted Companies Alliance).
2. Why did EALIC and UNIQUE decide to come together?
For trade associations focusing on the European regulatory framework it is important to have a large European representation. The more member states are represented, the stronger your voice will be with the European institutions. Our organisations worked together on several occasions in an informal manner. By integrating our organisations into one large association, we really stand there as a united entity with a much stronger constituency behind us. The joined membership base strengthens EuropeanIssuers’ clout with the policymakers and makes it more attractive for new members to join.
3. Who can become a member of EuropeanIssuers?
A particular characteristic of EuropeanIssuers is the dual membership of issuing companies and national associations representing the latter. Any company of which the securities are publicly traded in Europe can become a member of EuropeanIssuers independent of the sector to which it belongs. As a consequence, our member base has industrial companies active in the pharmaceuticals sector, chemicals, energy, nutrition and environmental technologies to name but a few. In addition, we have services oriented companies, such as financial institutions and insurance companies, but also ICT firms, publishers, holdings, etc. From a geographical point of view, we welcome any listed company or national association established in Europe.
4. The member base of EuropeanIssuers consists of some 70 listed companies and 15 national associations representing listed companies. How many listed companies do you then actually represent and what is their market value?
There are more than 12.500 listed companies in the European Union plus Switzerland. The total market capitalisation of these companies can be estimated at almost € 12.500 billion (Figures Q4 2007). The markets represented in EuropeanIssuers through the national associations count some 9.200 listed companies for a combined value of about € 8.500 billion or in other words more than two third of the global number and global value. Most of the national associations that are a member of EuropeanIssuers cover 90 % of their national market. Our company members are a diverse group: you will find relatively small companies with a market capitalisation of € 100 million but also leading multinationals with a capitalisation of € 12 billion.
5. What do listed companies have in common that they need to be represented by a specific association?
Most laws and regulations that companies have to comply with in general foresee in specific and stricter regimes for companies of which the securities are offered to and traded on the market. Those special regimes have basically a double purpose: protect investors on the one hand and protect the integrity and well functioning of the financial markets on the other hand. However it is not always easy to fully appreciate the implications of these rules, let alone to apply them, as they are spread out and very complex. Their impact on day-to-day business is however enormous. That’s why it is so important that listed companies can rely on an organisation that monitors and analyses the regulatory developments and where possible, tries to have a say in the legislative process. Our ultimate goal is to achieve fully integrated, well functioning European financial markets.
6. What are exactly the issues that are of concern to listed companies?
In general all rules and regulations that concern the issuing or the trading of securities are of specific concern to listed companies. For instance, in order to offer its securities to the public a company must comply with prospectus obligations. In addition there is the periodic financial reporting that such company must undertake towards the market. These obligations are the subject matter of European legislation, namely the Prospectus Directive and the Transparency Directive. In the area of company law, the topic of shareholders rights is of utmost importance. Shareholders are the owners of our companies and it is crucial that their rights and obligations are clearly spelled out. In today’s cross border environment, where a majority of the shares of our companies is held in foreign hands, it is essential that the shareholders and the companies can still have a dialogue and that the shareholders can express themselves at general meetings. To achieve that goal the issuing companies must know their shareholders. That’s why - for years now - our respective organisations have been advocating more shareholder transparency.
7. Why is shareholder transparency so important for issuers?
For issuers, it is important to reach the shareholder, both the domestic and the foreign one, and to see through the long chain of securities intermediaries that often separate the two. This separation is an unfortunate consequence of intermediation and the holding of securities in securities accounts as opposed to paper securities.
The lack of transparency threatens to jeopardize the meaningfulness of general meetings - the forum per excellence for the shareholder to express his opinion and have real impact! Companies don’t know their shareholders and can therefore not motivate them to attend the general meetings. But issuers would like to encourage shareholders to participate and cast their vote in the best possible knowledge of the company’s specific affairs. We wish to avoid that a general meeting becomes a box ticking exercise or, worse even, that a small percentage of shareholders decide about the future for 100 % of the shareholders. Issuers and shareholders must make their intentions clear to each other: at the end of the day their interests converge, i.e. sustainable value for all.
Issuers are also concerned that in a cross-border environment they cannot always verify whether the real shareholder’s voting entitlement is safeguarded. The position of that shareholder in the cross-border voting process is highly uncertain.
8. What other issues have you been following up on?
Clearing and settlement – We have been closely following the making of the Code of Conduct which should allow for price transparency, unbundling of services and assure free access and interoperability between the various clearing and settlement systems on the market. Another important issue in this area is the Target2Securities (T2S) project of the European Central Bank which is meant to provide efficient settlement services for securities transactions, leading to the processing of both securities and cash settlement on a single platform through common procedures.
Consolidation of stock exchanges - The consolidation wave of stock exchanges resulted at the end of 2006 in the merger of NYSE and EURONEXT. We frequently expressed our members’ concerns and drew the attention of the negotiating parties, the regulators and legislators to the specific issues raised by a transatlantic merger. We made specific recommendations to address the risk of what was soon known as the “regulatory spill-over” or in other words the risk of seeing the Sarbanes-Oxley Act entering Europe via the back door.
Deregistration - The deregistration of foreign private issuers listed on US stock exchanges underwent very important changes in recent years, to which our organisations contributed. The new US SEC deregistration rules basically make it possible for foreign companies to deregister on the condition that the US trading volume is no more than 5% of the primary market trading volume.
In addition to these issues, we also monitored and commented on developments of many other capital markets related topics including corporate governance, the process of convergence of US and EU financial reporting standards, the Lamfalussy process, Market Abuse, MiFID, the Prospectus and Transparency Directive, etc.
9. Can a trade association really make a difference and what are the specific benefits of being a European association?
As a trade association we provide our members with a single and effective voice to represent their concerns with the European and international bodies. We do not defend any individual interests but always speak for a group as a whole focusing at what our members have in common. The successes we have booked so far show that it is important to speak up and to put our views forward in a professional and constructive manner.
All legislation that is relevant for our sector originates at the European level, with numerous players involved in the process, such as the European Commission, the European Parliament, the Council of the European Union and a plethora of trade associations. In order to be part thereof, listed companies must get united in a European group. European regulators are more receptive towards supra-national groups. This is logical because European legislation is always the result of long debates with the various member states, each defending their own national interests. For legislation to be successful in its application, it should always be the result of consensus. In EuropeanIssuers we try to reach a European consensus before presenting our views to the European Institutions. For the latter it is more efficient to have one interlocutor than to deal with 27 different views. Based in Brussels, we are able to conduct a close dialogue with the European Commission, the European Parliament, the Council of the European Union and other stakeholders.
10. What is your way of working?
We monitor all developments of possible concern to our members and consult with the latter to see whether action would be needed. If so, we study and discuss the matter in an in-depth manner in our Legal Committee. This body involves legal and technical experts from the national associations as well as the companies, therefore reflecting strong expertise and first hand practical experience. EuropeanIssuers can count on the support of a group of individuals who are highly qualified, capable and experienced business leaders in their respective fields.
The product resulting from this consultation and analysis are position papers in which we present our views and arguments and propose alternative ways or rules to the regulatory body that is concerned. These position papers are our main tool for presenting our opinions to stakeholders. Very often this happens in the context of stakeholder consultations the European institutions or international regulatory bodies open prior to new regulations. All positions taken by the association since its very creation can be found on the website www.europeanissuers.eu
Other important fore for input are institutional working groups and committees in which we are actively involved and sometimes take the lead of. For instance, we lead a cross industry working group to streamline the organisation of General Shareholders Meetings in a cross-border environment. We also take the floor at international conferences and debates on capital markets and corporate governance.
11. What should listed companies watch out for in the short term and where will lie the priorities in terms of regulatory developments?
EuropeanIssuers calls for a regulatory initiative, as for instance the contemplated Recommendation, to address shareholder disclosure, the duties of intermediaries and stock lending, as these issues were not dealt with in the Shareholder Rights Directive.
We will also continue the work that we are carrying out with other stakeholders of the financial and securities industry, such as banks, stock exchanges and post trading infrastructures, in view of developing voluntary market standards to streamline the organisation of General Meetings and the processing of corporate actions across borders.
We will also closely monitor the implementation of the statutory audit measures that Commissioner McCreevy, who is currently in charge of the Internal Market, has recently presented. We are consulting our members to see whether and how we will contribute to the debate. The questions to be discussed include the limitation of auditor liability, ownership restrictions, audit quality and inspections and International Standards on Auditing. All this will affect listed companies, one way or another.
Other topics are the simplification of company law measures, a debate the Commission launched last year and will take a more concrete form in the course of 2008. It will be interesting to see the approach that the European legislator will eventually be taking with regard to SMEs that are in need of a more flexible regulatory framework.
Finally we are awaiting the concept release that the US Securities Exchange Commission is expected to publish soon to establish mutual recognition for investment firms across the Atlantic. Enlarging the possible markets for trading our companies’ securities might obviously be very beneficial in terms of liquidity, but one must be very cautious as to how to proceed in order to avoid any regulatory spill-over (Sarbanes Oxley) and safeguard the level of integration that Europe’s markets achieved thanks to the Financial Services Action Plan.
