FEDERATION OF EUROPEAN SECURITIES EXCHANGES (FESE)
Rue du Lombard, 41
B-1000 Bruxelles
T (0032 2) 551.01.80
F
512.49.05
www.fese.org
P615/6(final) – 29 Oct 03
Brussels, 29th October 2003
Comments by the Federation of European Securities Exchanges (FESE) on the
Commission Proposals for a Transparency Directive (COM(2003)138),
including first comments on the provisional version of the Draft Report by Mr. Peter Skinner MEP
The Federation and its Members welcome the initiative by the European Commission to address
the important issue of dissemination of information by issuers to investors, potential investors and
market participants. The codification of respective Directives in 2001 had left the substance of
earlier relevant legislation unchanged. Some of this legislation dates back to the late seventies.
Market structures as well as the behaviour and the expectations of investors, all have changed
drastically over the decades. The development of information technology has opened totally new
possibilities for distributing information to a large number of targets speedily, efficiently and at
ever-falling cost. The Commission’s draft addresses these changes and responds to them to a fair
extent. Nevertheless, FESE and its Members find it necessary to make the following constructive
comments:
We also refer to any comments and suggestions that individual FESE Members may have already
submitted or will submit. Such additional comments should in many cases be seen as a reflection
of the need for flexible arrangements.
Dissemination of information (Art. 17)
Without establishing at this point any precedence for ad-hoc information over regular information
or vice versa, FESE Members fully agree on the paramount importance of efficient rules and
mechanisms for the distribution of price-sensitive news from issuers to the general public. It is
indispensable for the trust in European securities markets that a regime is established (and
implemented and monitored) that allows all EU investors and potential investors (hence, the
general interested public) to receive relevant information as speedily as possible and on a level
footing among them.
The targets for any regulation on this issue therefore have to be promptness, reliability,
distribution on the widest feasible scale, and easy accessibility.
1
FESE Comments on the Draft Transparency Directive
FESE shares the opinion of the Commission that the benefits of modern information and
communication technology should be reaped but strongly recommends extending this approach
considerably beyond the Commission’s proposals.
The use of IT facilities (not necessarily in all stages restricted to the Internet) should become the
standard for all issuers that have to disseminate regulated information, not only for those that have
an international tangent (cross-border offer or admission to trading). One of the successes of ISD1
has been the dramatic increase in remote membership at Europe’s Exchanges. Moreover, it is one
of the targets of the FSAP to further encourage and facilitate more cross-border investment (and
cross-border capital raising) in Europe. As a consequence, the circle of (potential) investors in any
security, interested in information about the issuer, should also be drawn as wide as possible,
namely pan-European. To establish and enshrine this principle in the EU regulatory approach, it is
necessary to foresee the use of electronic means of communication for all issuers as an overall
principle.
FESE and its Members are convinced that only the electronic dissemination of regulated
information (and in particular of price-sensitive news) can effectively contribute to a reduction of
the current worrying gap in the accessibility of company information between professional and
retail investors in many European countries. We are aware that the forthcoming enlargement of
the EU poses a challenge to the Europe-wide introduction of IT-based solutions. Particular
problems in this field should, however, be addressed in detailed discussion between Member
States (in Council and the ESC) or their regulators (in CESR) to avoid unnecessary hardship. Any
transition and/or review periods should however be kept short.
FESE propagates therefore the mandatory use of IT-based channels and systems for the
distribution of company information to the public. To achieve the objective of levelling the
information field between professionals and retail investors, issuers should be subjected to the
obligation to push their information into foreseen (“appointed”) channels from where they may be
more readily and more reliably obtained (for direct use, for re-packaging and processing, and/or
for further distribution) than through search mechanisms browsing through issuers’ websites. Predefining distribution channels and systems furthermore allows regulators to exert a certain control
over quality and reliability of such systems and channels.
FESE and its Members agree that the details of regulation should differ between the various
categories of regulatory information that issuers will have to disseminate under the new Directive.
While it is important that ad-hoc information with price-sensitive contents reaches the target in
full and without editorial intervention, the use of a full-text dissemination service could be less
necessary and useful for long pieces of regular information.1
We welcome the approach by the Commission, even extended by the EMAC Rapporteur, to leave
many of the technical and technological details to level II. In the consultation process that CESR
1
We make this comment notwithstanding the possibility that e.g. an Annual Report may also contain pricesensitive information. The question how to deal with price-sensitive information that is part of a longer
piece of regular information should certainly be addressed by regulators.
2
FESE Comments on the Draft Transparency Directive
is obliged to initiate, due regard can be given to the interests of all parties involved in the issue. In
addition, it is comitology that can deliver at least some of the flexibility that is needed in today’s
environment of constant fast change in markets and even more in technology.
At this juncture, we would like to add that Art. 17 in its present form may not sufficiently
differentiate between the question of immediate dissemination of information on one hand and
availability (later and over a longer period of time) of regulatory information. FESE may come
back at a later point of time with contributions to this discussion (both on levels I and II).
Quarterly reports (Art. 6)
As indicated above, the Federation and its Members have no intention to let regular reporting, at
whatever intervals, get in the way of responsible ad-hoc disclosure. In any case, regular reporting
has to be seen as complementary to high-quality ad-hoc disclosure.
We acknowledge the political dimension that this question has assumed and hope for a fruitful
discussion.
Several
factors
determine
the
views
among
FESE
Members
necessity/suitability/desirability of quarterly reporting for equity issuers.




about
the
Exchanges where the requirement already exists see little reason to fear any increase in price
volatility through the introduction of mandatory quarterly reports.
Issuers that are used to producing quarterly reports fear much less any increase in their
reporting and/or shareholder relations costs if quarterly reporting is introduced across the EU.
This assessment changes fundamentally, of course, when a need to have quarterly report
audited/reviewed is perceived or given in any national context.
Other issuers will indeed face additional expenses for quarterly reports, both at the change of
their reporting obligations, and later on an ongoing basis. We refer expressly to the problems
that could be faced by SMEs (see below).
FESE Members acknowledge the potential legal consequences of any introduction of
mandatory quarterly reports with respect to liability and accountability of managers. Liability
laws, rules, and jurisprudence differ widely across the EU, and so do rules and practices in the
field of auditing. Due regard must be given to these differences and to the serious concerns
raised.
Some but not all FESE Members share the fear that existing or future requirements to produce
quarterly reports lead or will lead to a “warehousing” or saving up of information that would
otherwise have to be disseminated as price-sensitive on an ongoing basis. All FESE Members
underline the importance of price-sensitive information. They call for the tight supervision of
the respective obligations by regulators and Exchanges, and they are decided to make every
effort within their own remit to improve the quality of ad-hoc disclosure in their markets.
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FESE Comments on the Draft Transparency Directive
The majority of FESE Members support a flexible approach to quarterly reporting and hope that a
workable solution will be found that addresses the concerns of all involved. It is important to take
account of the particular concerns of SMEs regarding the costs of reporting.
Several compromises could be envisaged and are currently discussed among FESE Members:
 Some form of exemption for SMEs may be considered.
 Quarterly reporting could be made optional, allowing individual Member States the option to
introduce/maintain respective provisions. This could be linked to a review clause on the
question of introducing mandatory quarterly reports after a period of time for certain or all
equity issuers.
 Alternatively, the power to demand additional reporting could be allocated to Exchanges
(Regulated Markets) in the framework of their admission rules (for certain or all market
segments).
 One FESE Member proposes to make the auditor’s review of the half-yearly report mandatory
if no quarterly reports are required. (The majority of FESE Members, however, hesitate to
mandate audited half-yearly reports.)
In addition to our comments above on the two main political areas of discussion, we would like to
offer our comments on a number of further issues, following generally the structure of the Draft
Directive.
Article 2 – Definitions
Particular attention has to be given to the definition of “securities holder” (letter e), especially in
the context of clearing, settlement, and custody service providers. A clarification in the respective
recital, as proposed by the EP Rapporteur may not suffice to provide the necessary level of legal
certainty. Fine-tuning may be necessary also in Articles 9 and/or 10 (esp. Art. 10(h) – see footnote
in section on Art. 9 and 10, below).
We trust that the definitions of certain types of bonds or other securities (letters b and e(iv)) will
be brought fully in line with respective definitions in the Prospectus Directive. On a more general
note, we iterate our request that the text of this Directive be meticulously scrutinised as to blend in
smoothly with other FSAP Directives.
This necessity of coherence between the new Directives applies equally to the definition of home
and host Members State for issuers, with due regard to the special case of bond issuers as
addressed by the Commission. We feel, however that the wording of def. h(i)(ii) is still very
difficult to understand (the three-year reference) and appeal to the Commission to come forward
with more feasible text proposals for use in the further discussion.2
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FESE Comments on the Draft Transparency Directive
In definition k, we find that the wording chosen by the Commission is too wide since it seems to
encompass all information that issuer have to furnish under any laws or provisions of a member
State. This definition should be restricted to financial information.
Article 3 – Minimum harmonisation
This article will most certainly be heavily discussed among member States in the Council. For the
time being, FESE is not convinced of the necessity of an explicit opting-in by issuers under the
regulation of a host country regulator as proposed by the EMAC Rapporteur in his first Draft
Report. As on all other issues, we refer in this context particularly to any additional comments that
individual FESE Member may have and submit, particularly those acting in a cross-border
context, such as Euronext, HEX Integrated Markets, the London Stock Exchange, and
SWX/virtX.
In the wider context of the discussion about the “minimum harmonisation” character of this
Directive and the possibility for super-equivalent regulation (in the wider sense), we urge the
legislator to include wording in the Directive that Regulated Markets have the unrestricted right to
apply stricter disclosure requirements within the framework of their admission rules.
Articles 4 and 5 – Annual and half-yearly reports
Discussion among FESE Members shows that the publication periods chosen for annual and halfyearly reports3 are probably a fair compromise between somewhat diverging views:
some Members would not want to see any longer period,
one Member advocates an extension of the deadline for annual reports to four months,
others speak against any further shortening of the periods.
FESE suggests considering whether a differentiation should be made between audited and
unaudited half-yearly reports (allowing more time for an audit to be completed).
We think that the test in Art. 4(3) and (5) as well as Art. 5(3) should probably not be whether they
have any subsidiaries or not, but whether they have to apply Regulation 1606/2002 and/or
Directive 83/349.
As far as we are aware, the respective IAS 34 (to be applied for half-yearly reports) requires
comparative figures for the previous year’s corresponding period. No such requirement seems to
Moreover, we note that reference is made in def. h(i)(ii) to “Member States which have admitted
securities” and remind legislators that it is Regulated Markets that admit securities, not Member States or
competent authorities.
3
This applies also to the reporting period for quarterly reports, if a mandatory requirement for the latter is at
all accepted.
2
5
FESE Comments on the Draft Transparency Directive
be explicitly foreseen for quarterly reports (if they should be come mandatory for some or all
issuers).
We do support comitology on a broad base as a useful and necessary tool to speed up and
flexibilise European legislation. In the context of Art. 5, however, we share the view of the EMAC
Rapporteur that the introduction of a mandatory audit review for half-yearly reports is a matter
that should not be addressed via implementing measures, but (if at all) on level I, after a review
period. Implementing measures for the Transparency Directive are in our view also not the place
to “clarify the nature of the auditor’s review”.
Article 8 – Exemptions
Some FESE Members find the exemptions in Art. 8 somewhat general and, for the time being,
unrefined. They agree that such exemptions, where they relate to the international, mostly interprofessional bond markets, should take good account of the concern that third country issuers
would withdraw from the European primary and secondary markets if they were under an
obligation to publish half-yearly reports.
Here again, we would like to emphasise that exemptions in the Transparency Directive must,
wherever feasible, be compatible with those in the Prospectus Directive.
We wonder about the justification of the general exemption for national central banks (including
those from third countries), even from the production and dissemination of annual accounts. A
compromise could be that Central Banks that have to produce annual (half-yearly etc.) reports
under other (national or EU) obligations) should be brought under the dissemination regime of the
Transparency Directive.
Article 9 & 10 – Major Holdings
The special provision for “professional dealers” in Art. 94(1) of Directive 2001/34 has been
abolished. FESE Members urge the European legislators to come up with practicable solutions for
those who in their capacity as professional dealers constantly hold, acquire and dispose of
securities without any intention to intervene in the management of the issuer.
We refer in this context also to our comments made above about appropriate
provisions/exemptions for clearing/settlement/custody institutions.
Art. 9(2) refers to multiple voting rights and seems therefore to be too narrowly phrased. The
reference should include the case of non-voting shares.
6
FESE Comments on the Draft Transparency Directive
As already mentioned in our comments on Art. 2, we see a need for clarification of the provisions
relating to clearing, settlement, and custody service providers.4
Article 11 – Notification and disclosure
The Federation and its members recall the prolonged and repeated discussions among its member
Exchanges about streamlining Exchange Trading Days across Europe. What we have seen is that
market forces have driven many Exchanges towards an alignment of their trading days with the
TARGET calendar, complemented by fewer or more (or actually no) additional national holidays.
In the light of this experience, we would advise against efforts to establish a “calendar of business
days” for all Member States through comitology. A clarification as to counting methods (whether
and to what extent to disregard public holidays, non-trading days, banking holidays, etc.) could be
considered. If necessary, the comitology clause of Art. 11(5) could be split into a “shall” part on a
standard form and a “may” part on business days. The introduction of a respective review clause
should also be considered.
Articles 13 and 14 – Information for shareholders and bondholders
Without having gone deeply into the issue, we wonder whether it is necessary to restrict the
function of the agent (Art. 13(2)c and 14(2)(c)) to “financial institutions”. Furthermore, we
question whether the term” financial institutions” provides the intended clarity and are not certain
about the role of comitology in this respect.
Article 15
We welcome the obligation for issuers to send proposed statute changes to all Regulated Markets
(plural would be advisable in Directive text) that have admitted its securities to trading5 (wording
to be improved). On behalf of several of our Members, we strongly suggest extending this
obligation (to send regulated information also to the Regulated Market) to all types of regulated
information or at least to price-sensitive information.
Some Member States could find it desirable to be able to legislate that Regulated Markets
established in their jurisdiction should receive more or all regulated information from issuers that
they have admitted (with consent) to trading. Such empowerment (“Member States may …”)
could be included in Article 15. Alternatively, it could be clarified that the super-equivalence
4
A recital, as proposed by the EMAC Rapporteur, would help to bring some clarity into the issue, but is
seen by some FESE Members as insufficient. Art. 10(h) as drafted may fail to achieve the objective of
making ownership patterns more transparent. Further discussion on a technical level will be necessary on
the usefulness of Art. 10(h) – deleting it completely should be among the options to be discussed.
5
To be consistent, this needs to be restricted to those markets where the issuer’s securities have been
admitted with his consent.
7
FESE Comments on the Draft Transparency Directive
rights in Art. 3(1) are not narrowly restricted to “disclosure of information to the public or to
security holders”, if operators of Regulated Markets would not be subsumed under “the public”.
Our Member Exchanges are aware it is within their range to include additional reporting
requirements to themselves in their private admission rules. This principle should be explicitly
included in (at least) a recital of the Transparency Directive (see EP amendment to the final text of
the Prospectus Directive).
Article 16 – Languages
FESE acknowledges the difficulty of all discussions about the use of languages in cross-border
business in Europe. We take it that the final provisions of the Transparency Directive will, mutatis
mutandis, reflect the compromises found in the negotiations on the Prospectus Directive.
Some of our Members are very concerned about Art. 16(4) that transfers translation obligations
for information from issuers whose securities are admitted to trading without their consent, to
those who have requested such admission. The pattern and character of such requests varies
between Member States and Art. 16(4) may in some jurisdictions be applicable to the Regulated
Market and its operator. FESE Members are currently sounding out possible consequences of this
provision in co-operation with their regulators. At this moment, one of FESE Members is
particularly concerned that a requirement to translate the announcements of third country issuers
would significantly reduce the business case for providing trading in these securities. The
Federation may come back at a later point of time with proposals for an adaptation of this
paragraph and article.
Article 19 – Third-country issuers
The Federation agrees with the EMAC Rapporteur that the wording in Art. 19 should be
flexibilised from “equivalent” to “comparable” requirements. Beyond the justifications by
Mr. Skinner (higher clarity and consistency with other legislation), we would also like to argue
that any provision aiming at third-country issuers has to be proportionate and flexible in order to
minimise the risk of important volumes of business being driven out of EU markets.
Art. 19 as phrased may threaten to seriously disrupt international business with third country
issuers if it is not guaranteed that a legally reliable and relevant list of countries with comparable
disclosure standards exists when the Directive and its provisions come into force in Member
States. (An implementing measure in the form of a Regulation on level II could be foreseen for
this purpose.) Several FESE Members report that there is already now considerable confusion in
the markets and that drainage of admissions away from markets within the EU to other markets is
imminent if clarity is not provided soon.
The Federation therefore urges the Commission – notwithstanding CESR’s level II work to
establish/identify “equivalent” accounting standards (for the purpose of both, the Transparency
8
FESE Comments on the Draft Transparency Directive
and the Prospectus Directives) – to make a statement as soon as possible clarifying that the
Commission fully expects e. g. US GAAP (but probably also others) to be considered as an
acceptable and recognisable reporting standard.
Art. 20 - Delegation
The supervision of ongoing transparency obligations is, in its objectives and in its methods, much
more similar to the supervision under the Market Abuse Directive than to that under the
Prospectus Directive. While prospectus scrutiny deals with the quality of an issuer and its
securities, and the related disclosure before entering a market, the scrutiny of ad-hoc and other
ongoing disclosure has an immediate bearing on the quality of the market in that particular
issuer’s securities as it happens.
Moreover, the possible conflict of interest that some see when an Exchange approves a prospectus
and may later decide on the admission of that issuer’s securities to trading, appears to be less
manifest between the supervision of ongoing disclosure requirements and maintaining an existing
admission.
The Federation and its Members therefore argue that the issue of competent authority should be
dealt in the same manner as in the Market Abuse Directive, cf. Art. 12(1) and Recital 37 of that
Directive.
Art. 26 – Grandfathering
We note the difference in the approach to grandfathering between the Commission draft and the
draft report by the EMAC Rapporteur. All grandfathering provisions will have to strike an
appropriate compromise between the information interests of investors and the cause for a level
playing field for all comparable issuers on one hand, and the interests of the markets in a
minimum of disruption in issuing and investment practices on the other. The concerns expressed
by the Rapporteur that any unbalanced introduction of disclosure obligations could lead to delistings from Regulated Markets in Europe and as a consequence to disinvestments must be taken
serious and are in principle shared by FESE Members.
In a similar context, it is important that exemptions applicable to an issue at the time of issue (or
first admission to a Regulated Market) remain in force throughout the lifetime of the bond6.
Changes in the status of the issuer as such (a bonds-only issuer later also has its shares admitted to
trading on a Regulated Market) may again have to be treated in a differentiated way.
-x-
9
FESE Comments on the Draft Transparency Directive
The Federation and its Members are convinced that following the above recommendations would
be essential for the creation of an appropriate legal and regulatory framework for the transparency
regime prevalent on Europe’s financial markets. The Federation and Europe’s Exchanges will
continue to take up these issues in public discussion over the weeks and months to come. We
invite comments and would be happy to discuss the issues raised with all sides interested.
Yours sincerely,
Gregor Pozniak
Deputy Secretary General
6
For example, any threshold expressed in Euro may be passed in either direction by an issue denominated
in another currency, simply as the consequence of changes in the exchange rate.
10