EN    EN  
 EUROPEAN COMMISSION 
Brussels, 3.2.2012 
SEC(2011) 1279 final/2 
  
REPORT FROM THE COMMISSION COMMISSION STAFF WORKING PAPER 
IMPACT ASSESMENT 
{COM(2011) 683 final} 
{SEC(2011) 1280 final}  
 
   2TABLE OF CONTENTS 
1. INTRODUCTION .......................................................................................................3 
2. PROCEDURAL ISSUES AND CONSULTATION OF INTERESTED 
PARTIES .....................................................................................................................3 
3. POLICY CONTEXT AND PROBLEM DEFINITION ..............................................6 
4. BASELINE SCENARIO, SUBSIDIARITY AND PROPORTIONALITY..............22 5. OBJECTIVES............................................................................................................26 6. POLICY OPTIONS, ANALYSIS OF IMPACTS AND COMPARISON ................27 7. TRANSPOSITION AND COMPLIANCE ASPECTS AND 
ADMINISTRATIVE BURDEN................................................................................41 
8. MONITORING AND EVALUATION .....................................................................43 
REFERENCES ..................................................................................................................45 ANNEX 1........................................................................................................................ ...49 
ANNEX 2........................................................................................................................ ...78 
ANNEX 3........................................................................................................................ ...82 
ANNEX 4........................................................................................................................ ...86 
ANNEX 5........................................................................................................................ ...88 
ANNEX 6........................................................................................................................ ...91 
ANNEX 7........................................................................................................................ ...93 
ANNEX 8........................................................................................................................ ...93 
ANNEX 9........................................................................................................................ ...93 
ANNEX 10....................................................................................................................... ..93 
ANNEX 11....................................................................................................................... ..93 
 
 
   31.  INTRODUCTION  
The Transparency Directive1 requires issuers of securities traded on regulated markets 
within the EU to ensure appropriate transp arency through a regular flow of regulated 
information to the markets. Regulated information consists of: yearly, half-yearly and quarterly financial information
2; on-going information on major holdings of voting 
rights; and ad hoc information disclosed pursuant to the Market Abuse Directive3.  
Article 33 of the Transparency Directiv e requested the Commission to review the 
operation of this Directive within four a nd half years of its adoption. The Commission 
report on the operation of the Directive of May 20104 shows that, overall, issuers 
generally comply with financial reporting obligations and that the transparency requirements of the Directive are considered to be useful for the proper and efficient 
functioning of the market. 
Nevertheless, the review of the operation of  the Transparency Directive showed that 
there are areas where the regime created by this Directive could be improved. In 
particular, evidence that has been gathered demonstrates the need to provide for the 
simplification of certain issuers' obligations with a view to making regulated markets more attractive to small and medium-sized issuers raising capital in Europe. Furthermore, the effectiveness of the existing transparency  regime needs to be improved, notably with 
respect to the disclosure of corporate ownership. 
2.  P
ROCEDURAL ISSUES AND CONSULTATION OF INTERESTED PARTIES  
The impact assessment is the result of an extensive dialogue and consultation with all 
major stakeholders, including securities regulators, market participants (issuers, intermediaries and investors), and consum ers. It is built upon the observations and 
analysis contained in the Commission report  on the operation of the Transparency 
Directive (see Annex 11) and the more detailed Commission staff working document 
which accompanied it. This report describes th e impact of the Transparency Directive 
and how it has been applied; and presents th e main issues emerging from the application 
of the Directive. It draws on the fi ndings of a study conducted in 2009 by Mazars
5 for the 
                                                 
1 Directive 2004/109/EC of the European Parliame nt and of the Council of 15 December 2004 on the 
harmonisation of transparency requi rements in relation to informati on about issuers whose securities 
are admitted to trading on a regulated market  and amending Directiv e 2001/34/EC, OJ L 390 of 
31.12.2004, p.38.  
2 Either quarterly financial reports or interim management statements as referred to in Article 6 of the 
Transparency Directive: also  referred generally as quarter ly financial information.  
3 Directive 2003/6/EC of the European Parliament and of the Council of 28 January 2003, on insider 
dealing and market manipulation. OJ L, 12 April 2003, p 16. 
4 COM (2010) 243 final of 27 May 2010. This repor t is accompanied by a more detailed Commission 
staff working document (SEC(2010)61).  
 See: www.ec.europa.eu/internal_market/secu rities/transparency/index_en.htm  
5 Mazars (2009). 
 
   4Commission on the application of selected oblig ations of this Directive, which includes 
evidence gathered from market participants  through a survey. The report also draws on 
reports published by the Committee of Europ ean Securities Regulators (CESR) (now 
ESMA)6 and by the European Securitie s Markets Expert Group (ESME)7 in this area. 
CESR (ESMA) and ESME reports have been par ticularly valuable to identify areas of the 
Transparency Directive with unclear pr ovisions and/or which could be improved. 
Comments received from stakeholders participating in the public consultation  launched 
from 28 May 2010 to 23 August 2010 were al so taken into account. The Commission 
services issued a public consultation document explaining the problems found and 
suggesting options for the way forward. The Commission services received 111 replies to the consultation. The non-confidential contribu tions can be consulted in the Commission 
website
8. The feedback statement is included in Annex 10. 
Three main issues were submitted for comme nts by stakeholders: the attractiveness of 
regulated capital markets for  small and medium-sized issuers ; ways to improve the 
transparency regime for holdings of voting rights  and the problems encountered with the 
application of the Directive because of diverging national measures  and/or unclear 
obligations  in the Directive.  
About half of the respondents to the public consultation believe that the margin of 
manoeuvre for reducing the requirements wit hout lowering transparency standards was 
limited and, consequently, changes to the Tran sparency Directive could not significantly 
reduce costs for small and medium-sized issuer s. The other half believed that some cost 
reductions could be achieved without necessarily affecting the level of transparency necessary to protect investors. The fo llowing ideas were for example advanced: 
streamline disclosures; allow for more flexible deadlines for publication of financial reports; abolish the obligation to produce quarterly financial information either definitively or during the first three years of listing. 
The majority of respondents to the consultati on would be in favour of increasing the level 
of harmonisation concerning the notification by the investors of the holdings of voting 
                                                
 
6 CESR was an independent advisory group to the European Commission composed by the national 
supervisors of the EU securities markets. See the European Commission's Decision of 23 January 2009 
establishing the Committee of Eu ropean Securities Regulators 2009/ 77/CE. OJ L25, 23.10.2009, p. 
18). The role of CESR was to improve co-ordinati on among securities regulators,  act as an advisory 
group to assist the EU Commission and to ensure more consistent and timely day-to-day implementation of community legislation in the Me mber States. It has been replaced by European 
Securities and Markets Authority: ESMA as from 1 January 2011: see Regul ation No 1095/2010 of the 
European Parliament and of the Council of 24 November 2010: OJ L 331/84 of 15 December 2010. 
7 ESME was an advisory body to the Commission, composed of securities markets practitioners and 
experts. It was established by the Commission in April 2006 and operated on the basis of the Commission Decision 2006/288/ EC of 30 March 2006 setting up a European Securities Markets 
Expert Group to provide legal and economic advice on the application of  the EU securities Directives 
(OJ L 106, 19.4.2006, p. 14–17). 
8 http://ec.europa.eu/internal_market/securities/transparency/index_en.htm  
 
   5rights and including the disclosure of cash- settled derivatives into the notification 
requirements. In addition, some technical adju stments and clarifications were welcomed 
by the respondents in order to create a better implementation framework for the Directive. These possible adjustments are presented in the Annex 3.  
As part of the consultation process, th e Commission services organised on 11 June 2010 
a public conference  with the participation of several stakeholders. Discussion focused on 
the attractiveness of regulated markets to  small and medium-sized issuers and the 
possible enhancement of the transparency obligations regarding corporate ownership 
disclosures. The outcome of this conference has also been considered in this impact 
assessment
9. 
In March 2010, a Steering Group  was set up by Directorate General Internal Market and 
Services to monitor the progress of the impact assessment report. The Steering Group 
comprised representatives of a number of se rvices of the European Commission, namely 
the Directorate General Internal Market  and Services, the Directorate General 
Competition, the Directorate General Economic and Financial Affairs, the Directorate 
General Enterprise, the Directorate General for Health and Consumers, the Directorate 
General for Information and Society and Medi a, the Directorate General for Trade, the 
Legal Service and the Secretariat General.  The Steering Group met 3 times (23 March 
2010, 17 March 2011 and 7 April 2011). In accordan ce with the rules for the elaboration 
of impact assessments, the minutes of the fi nal meeting of the steering group have been 
submitted to the Impact Assessment Board together with this impact assessment. 
The Impact Assessment Board  delivered its opinion on 10 June 2011. Following the 
Board's opinion, several changes were made to this IA, in particular the following:  
– the report better explains the context and the scope of the initiative, in particular the 
link with the overall Commission polices to  simplify legislation, improve capital 
market access for small and medium companies and make financial market more stable; 
– the analysis of problems arising from quart erly information has been strengthen and 
now includes experience of third countries, provides greater evidence of excessive 
administrative burden, short-timer pressure , overlaps with other EU legislative 
requirements and nuances the stakeholders' views on this issue;  
– the justification of some of the policy op tions has been improved, namely the shift 
from minimum to maximum harmonisati on and the changes in the sanctioning 
regime; 
– the report provides a more comprehensive an alysis of cost changes implied by all 
policy options, explains why the standard s cost model has not been used and 
                                                
 
9 See http://ec.europa.eu/internal_market/securities/transparency/index_en.htm  
 
   6discusses to greater extend the efficiency and effectiveness of the preferred options 
and their impact on the international attractiveness of EU markets; 
– the presentation of the problem definition and policy options with regard to major 
holdings of voting rights is improved, the ex emptions envisaged  to the requirement 
to notify major holdings of voting rights are discussed in greater depth;  
– an annex including the Commission report on the operation of the Transparency 
Directive has been added; 
– other technical comments transmitted by th e Impact Assessment Board have been 
incorporated in the report.  
Agenda planning or WP reference: initiativ e listed in the Commission Work Programme 
for 2011 - Annex III (initiative number 28). 
This report does not prejudge the final form  of any decision to be taken by the 
Commission. 
3.  POLICY CONTEXT AND PROBLEM DEFINITION  
3.1. Overview of legislative framework 
The following legislative texts provide the fr amework for transparency rules regarding 
securities traded on regulated markets: 
The Transparency Directive contains rules on disclosure of periodic financial information 
and ongoing information on major holdings of vo ting rights (such as deadlines, content, 
formats, language etc); dissemination of information to the public and the competent authorities; storage of disclosed information; liability of issuers regarding disclosed information; supervision by competent authorities and penalties for lack of compliance. The Transparency Directive was co mpleted by Commission Directive 2007/14/EC
10 
which contains implementing measures. The Transparency Directive is further supplemented by soft-law. This notably in cludes: (i) the Commission recommendation on 
storage of regulated information
11; (ii) the standard form developed by the Commission 
services for the notification of major hol dings; and (iii) the interpretative work 
undertaken by CESR (ESMA) to align the exer cise of supervisory powers by the national 
competent authorities. 
                                                 
10 Commission Directive of 8 March 2007 laying down detailed rules for the implementation of certain 
provisions of Directive 2004/109/EC on the harmonisation of transparency requirements in relation to information about issuers whose securities are adm itted to trading on a regulated market; OJ L 69, 
9.3.2007, p. 27. 
11 Commission Recommendation of 11 October 2007 on the electronic network of officially appointed 
mechanisms for the central storage of regulated information referred to in Directive 2004/109/EC of the European Parliament and of the Council, OJ L267, 12.10.2007, p.16. 
 
   7The Transparency Directive obligations are often closely connected to requirements set 
out in other Community texts, either in the corporate governance/company law field or in 
the financial markets/securities field. In particular, the Prospectus Directive12 includes 
disclosure requirements that are very close to  the core area of the Transparency Directive 
obligations. The Prospectus Directive requires companies offering shares to the public in 
the EU to issue a prospectus that complies w ith the detailed rules under the Directive. It 
also allows companies to issue a prospect us in one EU country that would cover 
subsequent offers of securities to the pub lic or admission to trading throughout Europe, 
with minimal translation obligations. 
In addition, the Transparency Directive is the instrument for implementing disclosure 
obligations under other directives, such as the Market Abuse Directive , which prohibits 
abusive behaviour on regulated markets (e.g. insider dealing and market manipulation) 
and requires issuers to disclose inside information. 
Finally, on 22 September 2010, the Commission agreed with the European Parliament, to 
evaluate the feasibility of requesting certain companies to disclose key financial 
information regarding their activities in third countries13. A separate impact 
assessment on this issue was drafted and subm itted to the Impact Assessment Board. This 
impact assessment concluded that the Tr ansparency Directive and the Accounting 
Directives should include a new requirement in this respect.  
3.2. Problem definition 
The problems and their drivers are illustra ted by the following problem tree and are 
discussed in detail below. They can be gr ouped in two main categories: (i) problems 
identified in relation to small and medium-si zed issuers and (ii) problems identified in 
relation to notification of major holdings of voting rights. 
 
Figure 1: Problem tree
                                                 
12 Directive 2003/71/EC of the European Parliament and of the Council of 4 November 2003 on the 
prospectus to be published when securities are o ffered to the public or admitted to trading and 
amending Directive 2001/34/EC, OJ L 345, 31.12.2003, p. 64. 
13 http://register.consilium.europa.e u/pdf/en/10/st15/st 15650-ad01.en10.pdf 
 
   8

 
 
. 93.2.1.  Problems identified in relation to small and medium-sized issuers  
Following the Commission report and the results of the public consultation, the problems 
indentified in relation to small and medium-sized issuers linked to the requirements of the Transparency Directive are: (1) high co sts of compliance; (2) focus on short-term 
results; and (3) lack of visibility of small and medium-sized issuers towards analysts and investors, especially cross-border.  
3.2.1.1.  Background and context 
(1) Political background 
The improvement of the regulatory environm ent for small and medium-sized issuers
14 
and their access to capital, as well as reduction of administrative burden and simplification
15, are high political priorities for the Commission. The Transparency 
Directive requirements should therefore be analysed in this more general context. 
The Commission presented end October 2010 a policy Communication on the relaunch 
of the Single Market16. In this Communication, the Commission stated that "Poor access 
to capital is one of the main problems whic h SMEs face in expanding their business. […] 
The reasons for this are manifold: often SM Es are not sufficiently visible to potential 
investors, or may find the listing require ments on capital markets disproportionately 
complex. Improving SME access to finance is a key political priority and rendering the SME segment of capital markets more dynamic is a central part of this."
17  
 Against this background, the Commission committed to adopt an action plan for improving SME access to capital markets in 2011 (proposal No 12). Small Business Act 
for Europe
18 also pledged to evaluate the imp act on SMEs of all proposals for the 
regulation of financial services and to calibra te them appropriately. As a consequence, in 
the Communication of April 2011, entitled "Working together to create new growth"19, 
the Commission stated "The Transparency Directive, the Regulation implementing the Prospectus Directive and the Market Abuse Di rective should also be revised in order to 
make the obligations applicable to liste d SMEs more proportionate, whilst guaranteeing 
the same level of investor protection"
20. This communication also mentions a future 
action plan on SME financing.  
In this context, certain requirements of the Transparency Directive deserve to be 
analysed as regards their proportionality in terms of costs and benefits for small and 
medium-sized issuers and their investors. Th e impact assessment will therefore consider 
this question specifically from the perspectiv e of the Transparency Directive, even if 
poor access to capital of small and medium-sized issuers is due to many different factors. 
                                                 
14 See below for definition of small and medium size issuer. 
15  See Commission Communication of 8 October 2010 on smart regulation in the European Union, 
COM(2010)543 and Commission Communication on a simplified business environment for companies in the areas of company law, accounting and auditing, COM(2007) 394 final. 
16 COM(2010) 608 final.  
17  Idem, p. 15. 
18 COM (2011)78 . 
19 COM(2011) 206 final. 
20  Idem, p. 21. 
 
10 (2) Difficulties to define small and medium-sized issuers 
There is no definition of a small a nd medium-sized issuer in the EU21. In the impact 
assessment accompanying the modification of the Prospectus Directive which allows for a simplified prospectus for small companies, a small quoted company is defined as a company with a market capitalisation of less than €500 million
22. In the final text of this 
modification, a "company with reduced market  capitalisation" is defined as a listed 
company with an average market capitalisati on of less than €100 million (on the basis of 
end-year quotes for the previous three calendar years)23. There are two EU definitions of 
the Small and Medium Sized Enterprise en compassing enterprises which are limited in 
size24. However, these latter definitions do not differentiate between listed and non-listed 
companies. 
The results of the public consultation confirm the difficulty to define a small and 
medium-sized issuer at the EU level: what is considered to be a small listed company in one Member State could be considered as a large company in another Member State. Therefore, when the present impact asse ssment refers to "small and medium-sized 
issuers", it refers to the existing national concepts in different Member States.  
3.2.1.2.  High costs of compliance for small a nd medium-sized issuers with the 
requirements of the Transparency Directive 
The objective of the Transparency Directive is to ensure appropriate and adequate 
information of investors. It aims to redu ce information asymmetries between investors 
and issuers, thus providing a more accurate a ssessment of market value of shares. Issuers 
are prepared to incur the costs involved in  providing this information because they 
understand the benefits it will bring them, in pa rticular, access to capital at a fair price. 
Small and medium-sized issuers often argue th at, for them, the costs of compliance with 
transparency requirements are disproportionate
25. They consider this is the case both 
compared to the relative costs borne by larger companies, and in relation to the benefits they obtain from being listed.  
Indeed, the smaller issuers do not benefit from increase in investment volumes. In 
absolute terms, they make up the majority of listed companies on financial markets but 
they represent only a small part of total market capitalisation and of total trading 
                                                
 
21 In the US, for the definition of "small reporting company", the SEC uses a $75 million public equity 
float threshold.  
22 See European Commission (September 2009), Annex VI, p.70. 
23 See Directive 2010/73/EC introducing a new Article 2(1) (t) in the Prospectus Directive. 
24 See Recommendation 2003/361/EC where SME is defined as a company which employs fewer than 
250 persons and which either has an annual turnove r not exceeding 50 million euro or a balance sheet 
not exceeding 43 million euro. See also Articles 11 and 27 of the Direc tive 78/660/EEC on annual 
accounts of certain types of companies where an SME is defined as a company which employs fewer than 250 persons and which either has an annual turnover not exceeding 35 million euro or a balance 
sheet not exceeding 17,5 million euro. 
25 See for instance replies from EuropeanIssuers, QCA and Middlenext to consultation on the 
Modernisation of the Transparency Directive (the question of disproportionate costs was not asked as 
such in this consultation). This  view is also supported by Dema rigny (2010). According to Mazars 
(2009), 34, 6 % of mid-cap companies and 38,1% of small listed companies consider that compliance with the Transparency Directive has been onerous for them: see section 2.3.5, p. 71. 
 
11 volumes. This is particularly the case on Regulated Markets26, as illustrated by the Figure 
2 below. 
Figure 2: Relative importance of listed co mpanies on EU regulated markets by size  
 
13.6%93.3%
85.7%96.0%
19.0%5.2%
9.6%3.4%
15.9%1.0% 2.2% 0.4%
50.7%0.5% 2.6% 0.3%0.8% 0.0% 0.0% 0.0%
0%10%20%30%40%50%60%70%80%90%100%
Number Market Cap Trades TurnoverN/A
XS
S
M
L
  
Source: FESE (2009). (Feder ation of European Securities Excha nges) which establishes four cate gories of companies: micro caps ( XS 
≤ €50M)), small caps (S: between €50M and €150M), mid caps (M: between €150M and €1b) and large cap (L: ≥ €1b). The first 
column presents the relative importance (%) by number of liste d companies (equity issuers); the second column by market 
capitalisation; the third column shows the trades, in numbers , while the fourth column shows the turnover, in volume. 
 
Low trading volumes mean lower market liquidity and more difficulties for small and 
medium-sized companies to raise capital on regulated markets, compared to larger 
companies. However, small and medium-sized listed companies still bear the full costs associated with the listing
27. According to recent research28, the explosion of private 
equity market in the last twen ty-five years suggests that for some firms, especially small 
firms  in R&D intensive sectors, disclosure costs are substantial. 
In this context, calls are made to revi ew legislation and to eliminate unnecessary 
administrative burden for companies by focusing on what is actually essential for investor protection rather than only desirable for some investors.   Whilst there is a consensus that yearly and ha lf-yearly reports are necessary for investor 
protection, this is not the case for quarterly information and a number of voices call to alleviate the requirement to publish it (see point 1 below and Section 3.2.1.3). Annual and half-yearly reports are prepared accordi ng to the accounting standards. Therefore, 
they provide an accounting guidance and assurance for investors, including though 
statutory audit (for the yearly reports and for the half-yearly reports in many Member 
States). In contrast, the Directive does not provide for any quality standards for quarterly reports. Therefore, quarterly information is not  standardised, is not prepared according to 
common standards and is not subject to any audit. As a consequence, it does not provide assurance or allow for comparability of information for investors.  
                                                
 
26 See Glossary Annex 4. 
27 Many aspects of these costs do not directly result from the requirements of th e Transparency Directive 
but are linked to national additional measures or ot her legislative texts (e.g. obligation to publish all 
regulated information in the printed press, accounting rules), which are particularly problematic for smaller companies. However, these costs are out  of the scope of this impact assessment. 
28 Zingales (2009) p.18.  
 
12 In addition, narrative parts of the financial reports29 are considered as complex as regards 
the content and type of information to be disclosed, which result in significant costs/operational complexity for small listed companies.  
Finally, certain costs such as the workload of boards and senior management linked to 
the short publication deadline for half-yearly financial statements are considered as 
problematic. By contrast, the deadline for publication of the annual reports does not seem to create any problems for issuers
30. According to the Mazars study, some issuers even 
argue that the 4 months deadline is in fact too long.  
(1) Requirement to publish quarterly financial information 
The requirement that all issuers of shares must provide quarterly financial information 
was introduced through the revision of the Transparency Directive in 2004 in order to provide for more frequent updates on a company’s progress
31. Article 6 of Transparency 
Directive imposes a minimum requirement to publish Quarterly Interim Management 
Statements32 with limited content. However, in implementing this Article in their 
national legislation, many Member States have  required additional items to be disclosed 
(See Annex 5). 
During the negotiations of the proposal of th e Transparency Directive and before its 
adoption in 2004, the requirement to publish qua rterly financial information was fiercely 
debated. At that time, many voices opposed a ny form of mandatory quarterly financial 
information as leading to short-termism (see Section 3.2.1.3. below). Its relevance was also questioned. It was argued, for instance,  that “quarterly reporting is not a high 
priority. It has not helped to prevent corporate scandals in the US, and there is a risk that mandatory quarterly reports will encourage short-termism as management becomes overly focused on the next reporting deadline
33.”  
In this context, it was agreed that the Eu ropean Commission would evaluate the impact 
of the requirement to publish quarterly information by 20 January 2010 (see Article 6.3 
of the Transparency Directive). It results  from the Commission report on the operation of 
the Transparency Directive that it could contribute to the short termism (concerning 
short-termism see further Section 3.2.1.3).  
Also, quarterly information is not a necessary tool in order to ensure investor protection. 
In fact, all material information that is likel y to have a significant effect on the price of 
financial instruments listed on regulated mark ets has in any case to be disclosed as 
quickly as possible to the market acco rding to the Market Abuse Directive34. One could 
question whether other information, which does not need to be disclosed to the market 
                                                 
29 See Glossary Annex 4. 
30 Mazars (2009) section 2.5.1 p.79 
31 As explained in recital 16 the objective was to provide more timely and more reliable information 
about issuers' performance. See Annex 5 for an overview of some jurisdictions outside the EU. 
32 See Glossary Annex 4 
33 See Financial Times from 27 January 2003 which published a letter from Pierre Bollon, Director 
General AFGASFFI (Association Française de la Gé stion Financière) and Pe ter Montagnon, Head of 
Investment Affairs Association of British Insurers. 
34  See Article 6(1) MAD which requires issuers of financial instruments to inform the public as soon as 
possible of inside information which directly concerns the said issuers. The inside information is defined in the MAD as information is likely to have a significant effect on the prices of financial instruments. 
 
13 immediately, should necessarily be disclosed quarterly. It could as well be disclosed in 
the yearly or the half-yearly financial statem ents, which are prepared in accordance with 
the accounting standards and give high quality and comparable information to investors.  
However, the requirement of the Transparency Directive to publish quarterly financial 
information entails direct and indirect costs for listed companies35. The average direct 
monetary costs to produce quarterly information linked to editing, printing and translating the reports could be estimated as varying from 2 k€ per year/ per issuer to 60 k€ a year/ per issuer for small and medium-sized issuers (see Annex 2).  
Other direct costs are related to the staff involved in the preparation of these reports. 
According to an external study, these costs are much higher than the costs linked to 
editing, printing and translating
36. However, these costs could not be estimated in 
monetary terms for small and medium seize i ssuers: they are varying per issuer from 
eight man-days per year to prepare these reports to 30 man-days per a year37. The costs 
of preparation of full quarterly reports acco rding to the accounting standards would be 
much higher as underlined by the respondents to the public consultation. A report estimated, for example, that the total cost of producing and disclosing periodic financial 
information as well as compliance with othe r rules applied to public companies ranges 
from €150 k€ to €500 k€ a year for small issuers (below €150 million of market 
capitalisation)
38. Recently, the Deputy of the Centra l Chamber of Commerce of Finland 
pointed out that "reporting four times a year is too often for small listed companies and the reporting costs quite much"
39. 
The indirect costs linked to the requirement to publish quarterly reports were also 
identified; they are the so called "opportunity costs", i.e. management spending time to check quarterly reports instead of devoting their time to more useful tasks.  
Therefore, quarterly information is a sour ce of high administrative burden for issuers 
while its relevance can be questioned.  
(2) Complexity of the content and type of information to disclose 
Around half of the respondents to the relevant question in the public consultation 
considered that the various rules requiring th e disclosure by listed companies of narrative 
reports
40 were causing high costs for the small and medium-sized issuers41. The 
opportunity cost related to the time spent by boards and senior management was particularly highlighted, since there was little sc ope to delegate this task to more junior 
                                                
 
35 The issues described in point 1 for the reports of narrative nature also apply to quarterly information. 
36 Europe Economics (2009),  p. 110, table 5.18. See also Annex 2. 
37  The standard cost model was not used to estimat e the total costs because, as explained in Annex 2, 
concerning existing costs, it was decided to ask the issuers themselves to pr ovide an estimate on costs 
of quarterly information. As the issuers were not able to provide such full estimates, it was decided to provide information received rath er than give a theoretical es timate that would result from the 
application of the standard cost model.  
38  Demarigny (2010). 
39  km-DNS-FI Thursday, April 7, 2011. 
40 See Glossary Annex 4. 
41 Such a view is confirmed by a survey done by the UK Association of Chartered Accountants 
"ACCA": 71% of the survey participants consider the main challenges in producing a narrative report to be the number of requirements placed on it and the cost and time involved in preparing it. See 
ACCA (2010) p.8. 
 
14 staff. The bulk of the cost seems to c onsist of understanding what each requirement 
meant, how much text was required, what shoul d be the content and what degree of detail 
was required. Narrative reports need also to be  checked, proofread and compared to other 
narrative reports, which generates a signi ficant amount of work for companies. 
Additionally, it was mentioned during the public  consultation that auditors and lawyers 
were increasingly involved in the preparati on of narrative reports due to their growing 
complexity, which contributed to increase the related costs.  
(3) Short deadline to publish half-yearly financial statements 
The Transparency Directive sets a two-mont h deadline for the publi cation of the half-
yearly financial report. Small and medium-sized issuers have difficulties respecting this deadline
42 since they are less equipped and/or  can devote fewer resources to the 
production of financial information as compared to larger companies43. Meeting this 
requirement is even more difficult and cos tly when half-yearly accounts should also be 
audited by an external auditor, as required by some Member States44.  
3.2.1.3.  Focus on short-term results 
Recent research related to risk-taking and co mpensation schemes in the financial sector 
suggests that short-term investors (includi ng institutional investors) put pressure on 
management using short-term incentives (s uch as compensation schemes) adopt risky 
strategies with a view to meeting, inter alia, quarterly targets45. Whilst remuneration 
structures are out of the scope of this imp act assessment, publication of quarterly results 
exacerbates the run for short-term profit, lead ing to excessively risky business strategies 
and incentivises investors to focus on short-term performance of companies.  
Another recent research shows that issuer s criticize the demand for frequent reporting 
due to the pressure for short-termism that it may create46. Recently, the report of the 
Reflection Group on the Future of EU Comp any Law stated that "transparency and 
reporting rules should be reconsidered and reviewed to see whether and where those 
rules focus too much on a short-term perspective. An example is quarterly reporting, which could be considered to be made subject to an opt-out by listed companies"
47. 
Another example is provided by Paul Polman, Unilever's CEO, stating in 2010 that in an 
ideal world the company would not report quart erly results: ‘a lot of problems the world 
has found itself in are because people were chasing quarterly targets"48.  
                                                 
42 See Mazars (2009), section 2.5 and Annex 5. 
43 This deadline was shorten following the revision of the Directive in 2004, previously the deadline was 
four months. 
44 Additionally, the cost of such audit is presumably higher considering the short deadline. 
45 Cheng, Hong & Scheinkman (2009), section IV.E. 
46 Brunzell, Liljeblom and Vaihekoski (2009). Results of a questionnaire directed to the Chairpersons, 
CEOs, and CFOs of all listed companies on five Nordic stock exchanges indicates that they very strongly believe that quarterly reporting creates more  short time pressure and that it requires too much 
effort compared to the benefits realized. Stock exchanges concerned are: Denmark, Finland, Iceland, 
Norway, and Sweden. The survey was realized in 2007 and early 2008. See also FC expert blog (2010), which states: "Under pressure from the market and from the Board, the quarterly focus devalues the investment in people-based initiatives ". 
47 Reflection Group On the Future of EU Company Law (2011). 
48 Accountancy Magazine 6 August 2010. 
 
15 In the US, there is also a debate on quarterly reporting, even if this debate takes place in 
a different context49: there, investors put pressure on issuers to publish quarterly earning 
guidance  that is used as a reference point by the analysts to build their forecasts.  
Issuers feel themselves under pressure to meet  these quarterly targets. Many stakeholders 
are opposed that companies should provide such guidance as this exacerbates the obsession with the short-term results for both investors and issuers. In this respect, an 
important report by Centre for Financial Mark et Integrity argues that management is 
prevented from focusing on the long-term health of the business for fear of missing quarterly targets
50. This report states that "Short-termism refers to the excessive focus of 
some corporate leaders, investors, and anal ysts on short-term, quarterly earnings and a 
lack of attention to the strategy, fundamental s, and conventional approaches to long-term 
value creation. An excessive short-term focu s combined with insufficient regard for 
long-term strategy can tip the balance in valu e-destructive ways for market participants, 
undermine the market’s credibility, and di scourage long-term value creation and 
investment. Such short-term strategies are often based on accounting-driven metrics that 
are not fully reflective of the complexities of corporate management and investment. 
Warren Buffett, the widely respected and em ulated CEO of Berkshire Hathaway Inc., 
addressed the issue in his letter to shareowners in 2000 by encouraging management teams to place their attention and focus on long-term strategy, not quarterly earnings"
51. 
Consequently, it could be argued that an obligation to issue quarterly reports place 
companies under a perceived obligation to  produce "positive results" each and every 
quarter. Strategies to deliver short term "good results" may imply adoption of riskier 
strategies by issuers which will try to find business strategies with fast returns (and 
follow bubbles, trends), whereas many models would deliver returns not gradually and 
linearly but on the longer term.   
Short-termism is arguably counter-productive even in the case of larger companies, but it 
is clearly totally inappropriate in the cas e of the small and medium-sized companies 
which have a vocation to growth and ther efore need longer-term investment. Short-
termism contributes to difficulties of small and medium-sized issuers to raise capital: dominant business model today mainly focuses on short-term performance and high liquidity. Investors do not have the time to c onsider the promising long-term stories that 
small companies may offer.  
Although interim management statements are perceived as providing less focus on short-
term results than more elaborated quarterly reports containing more quantitative data (in the US full quarterly reports prepared according to the accounting standards are 
published), both forms could be seen as a regulatory incentive contributing to the general culture of short-termism in financial decision-making. In this context, some respondents to the public consultation underlined the links between quarterly information and short-
                                                
 
49 For example, a testimony from a senior scholar before a Senate Committee during a hearing entitled 
"Short-termism in Financial Markets" stated "one cause of short-termism is the federal securities laws, which encourage Wall Street’s quarterly earnings fixation. This is an example of the unintended consequences of regulation, as the quarterly reporting requirements of the Securities laws actually make the problem worse. Analysts predict quarterly  earnings, and companies feel pressure to meet 
those predictions": see J.W. Verret ( 2010). 
50  CFA (2006). 
51  CFA (2006), p.3. 
 
16 termism. However, the Mazars study finds that  "The balance achieved by the Directive to 
avoid the “short-termist” effect of the publi cation of full quarterly reports is supported by 
stakeholders"52. 
3.2.1.4.  Lower visibility of small and medium-s ized issuers towards analysts and 
investors 
Coverage of small and medium-sized issuers does not fit in the business model of most 
equity analysts which tend to be integrated into structures providing broking services and 
are financed by brokerage commissions. A lack  of turnover in small and medium-sized 
companies makes it difficult for analysts to generate such commissions. According to a 
recent report, “analysts get paid on generati ng commissions. If there is no trade, they’re 
not going to write the research note”53. This feature contributes to the vicious circle of 
illiquidity: since the cost of information co llecting and processing on small caps cannot 
be covered by earning commissions54, brokerage research and trading resources are 
dedicated to small and medium-sized issuer s only sporadically or such companies are 
simply neglected55. This further reduces turnover and hence the attractiveness of these 
companies56. 
Some rules of the Transparency Directive appear to also contribute to this low visibility 
problem.  
(1) Bottlenecks of financial information caused by short deadline for the 
publication of the half-yearly financial report 
The Transparency Directive required issuers to publish half-yearly reports at the latest 
two months after the end of the reporting pe riod. This short deadline, in addition to 
causing additional costs to companies, leads to an unintended bottleneck of information at the end of the second month – in par ticular for most European issuers whose 
accounting year corresponds to the calendar y ear (end June + 2 months = late August). 
This bottleneck disrupts the market by overloading the capacity of investors and analysts to digest this information within a short pe riod of time ("the half-yearly release season") 
                                                
 
52  See Mazars (2009), p. 68. 
53  PWC (2010), p.9. 
54  Rasch (1994) explains that this fact is a direct  consequence of the inform ation paradox described by 
Grossman/Stieglitz (1980). If information is costly, an equilibrium evolves in which the cost of 
information will equal the marginal  benefit of that additional piece of information. The additional 
benefit, however, depends on the stock's liquidity: the higher the volume that can be traded without influencing the market price, the higher the potential return on research activities. The extent to which company information is collected and processed and,  therefore the degree of informational efficiency 
depends directly on the marketability and liquidity of a company's share. Thus, event the twentieth or fiftieth research study of a standards stock may be profitable whereas no even the first study of many smaller companies will cover its costs. See Rasch (1994), p. 24. 
 Interestingly, Grant Thornton (2009) also adds that in the US, the best sell-side analysts fled to the 
buy-side in search of better compensation. This would have resulted in lower quality of sell-side analysis. See Grant Thornton (2009), p.22. 
55  The CBI reported that small caps below £100 milli on had on average fewer than 2 analysts covering 
their performance, compared to 12-16 analysts fo r companies between £500 million to £5 billion. See 
CBI (2001), p.16. This trend has not improved. 
56  In the UK, the CBI reported in 2001 that the lack of interest of the fund management industry in the 
small caps “ has made it increasingly uneconomic to stakeholders and banks to produce in-depth 
research on smaller quoted companies, leading to a vicious circle of ‘no research, no liquidity, no investment, no research ’.  See CBI (2001) p. 6, 8 and 16. 
 
17 and the financial media to process the info rmation being produced. This accentuates the 
inherent tendency to focus exclusively on the market-leading large cap companies to 
optimise the time devoted to analyse the inform ation as this first tier concentrates the 
transactions flow. This effect also contribut es to poor cross-border visibility for smaller 
listed companies (sometimes referred to as the “black hole” problem)57. 
(2) Difficult access to financial information  
In addition, access to financial information on listed companies on a pan-European basis 
is burdensome: interested parties need to  go through 27 different national databases in 
order to produce even the most basic intra-sectoral comparisons58. The original objective 
of current European legislation was to ensure easy access for investors/information intermediaries to regulated information that was already disclosed, but the result is far from satisfying this initial objective and th e level of interconnection between the 27 
national storage mechanisms is insufficient. Lack  of a centralised stor age system is thus a 
major barrier to the functional integration of European securities markets, and the 
creation of an effective pan-European marketplace for capital.  
3.2.1.5.  Conclusion 
Small and medium-sized issuers perceive th emselves as paying a high price for a poor 
return: from their perspective, listing on regulated capital markets is increasingly unattractive on a cost-benefit basis and they ar e forced, whether they like it or not, to 
consider other means of financing. In additi on, the requirement for quarterly information 
contributes to the culture of short-termism,  having negative consequences for all issuers 
but in particular for the small caps.  
3.2.2.  Issues linked to notification of major holdings of voting rights 
The Commission report as well as the results of the public consultation have identified 
the following problems linked to notification of major holdings of voting rights: (1) 
possibility of hidden ownership and (2) divergent notification rules across the EU.  
3.2.2.1.  Background and context 
Article 9 of Transparency Directive require s shareholders who acquire or dispose of 
shares admitted to trading on a regulated mark et and to which voting rights are attached, 
to notify the issuer of the proportion of vo ting rights held when that proportion reaches, 
exceeds or falls below the thresholds of 5 %, 10 %, 15 %, 20 %, 25 %, 30 %, 50 % and 
75 %. Article 13 of Transparency Directive re fers to Article 9 and specifies that the 
                                                
 
57 While large investors seem to consider that the Directive has facilitated access to information 
disclosed by smaller listed companies, many smaller listed companies generally complain about the lack of interest by foreign investors. Investors and
 analysts are considered to concentrate on major 
companies. As outlined by the external study, “market players seem  to be in a “catch 22” situation: 
SMEs regret the low level of cross-border interest of analysts and investors and therefore are reluctant to spend money to ensure wider dissemination (transla tion into English in particular). On their side, 
analysts and investors believe that they do not receive suffici ent information from non domestic 
SMEs, and therefore are reluctant to invest in those companies.” See Mazars (2009), section 4.3.2.5. 
58 In the Directive, these databases are referred to as "officially appointed mechanism for the central 
storage of regulated information" (cf. Article  21(2)). Additionally, according to Mazars (2009), 
stakeholders complain about the lack of harmonisa tion on the practical functioning of these databases 
(see section 1.8.1 of that Study). 
 
18 notification requirements also apply to holdings of financial instruments that result in an 
entitlement to acquire, on holder's own in itiative alone, under a formal agreement, 
already issued shares to which voting rights are attached. 
The Commission Report on the operation of the Transparency Directive as well as the 
results of the public consultation show that the rules of the Directive do not, currently, 
guarantee that issuers and investors have  full knowledge of relevant information 
concerning major holdings of voting rights, pr imarily because of financial innovation i.e. 
increased use of cash-settled derivatives59 to acquire economic exposure to shares 
without acquiring voting rights. The figure 3 below shows the considerable growth of the 
market for equity derivatives.  
Figure 3: Equity derivatives trading: trends since 1998, May 2009 
 
Source: International Options Market Association, Derivative trading: trends since 1998, May 2009 
A cash-settled derivative is a contract where a counterparty, often a financial institution, 
sells to the holder of the instrument an ec onomic exposure to changes in price of the 
share without the right for the holder to acquire such share. On the maturity date (the date of expiration of the contract) this counterpa rty will pay the difference in price of the 
share to the holder of the instrument.  
Despite the fact that several recent cases have  demonstrated that these derivatives can be 
used in order to acquire and exercise poten tial influence in a listed company or build a 
secret stake in such a company bypassing the di sclosure requirements, disclosure of cash-
settled financial instruments is not currently required by the Directive
60. These cases 
(described in Annex 8) illustrate the limits of the current disclosure obligations with 
respect to these financial instruments. Su ch cases cause distortion of the European 
                                                 
59 See Glossary Annex 4. 
60 There are views that Article 10 g of Transparency Directive alr eady requires disclosure of such 
instruments. This article provides for disclosure of voting rights attached to shares in which a person or entity has the life interest. However, interpretations of this provision are divergent in the EU: see in particular, Zetzsche (2009). CESR also  considers that if the holder of cash settled instrument is able to 
exercise influence on voting rights and bears the economic risks, it could in some cases fall under Article 10 g. CESR considers however that there s hould be a general requirement to disclose such 
instruments: see CESR (January 2010). In its opinion, ESME states that Article 10 (g) " was not 
introduced for large positions in cash settled derivatives, but for the market practice of custodians or for situations of “at arms length” investment manage ment. The provision is rather narrowly framed to 
support a widening of disclosure rules to cash settled financial instruments ": See ESME (November 
2009). 
 
19 market as they affect investors from all th e Member States. However, it should be noted 
that the majority of cash-settled derivatives are used only to gain an economic exposure to the issuer's shares. Only the small minority is used to acquire or influence the exercise 
of the voting rights. However, if these deri vatives are used for the purpose to acquire 
hidden ownership, the consequences for the European capital markets are very negative as illustrated in Section 3.2.2.2 below.  
3.2.2.2.  Hidden ownership: possibility to built secret in companies due to gaps in 
current notification regime 
Under the current transparency regime, holdi ngs of cash-settled equity derivatives do not 
trigger notification to the extent that they do not entitle the holder of the instrument  to 
acquire the underlying shares. But, in prac tice, the holder will acquire an economic 
exposure to such shares and thus be directly concerned by the changes in their price. This 
leads to the situations of "hidden owne rship": according to Hu and Black, “hidden 
(morphable) ownership” describes the comb ination of undisclosed economic ownership 
plus probable informal voting power
61. This raises some transparency concerns.  
(1) Possibility of market abuse situations: pr ice manipulation to avoid a take-over 
premium 
The counterparty to the derivative contract  which sells the economic exposure to the 
shares and will have to pay the difference in  share price to the holder of the derivative 
instrument, usually will hold throughout the dur ation of the contract a matching number 
of physical shares to hedge62 its position and being able to pay the difference in price of 
the share to the holder if this  price goes up. When the contract expires, these shares need 
to be sold. If the holder of the cash-settled derivative instrument wants to acquire these 
shares, he will be in a privileged position to  do this. Consequently, although there is no 
formal right of the holder to acquire the underlying shares, it can be the case in practice. 
The holder of a cash-settled derivative can thus benefit from the surprise effect of 
acquiring a major holding in a company without  having ever disclosed his intentions. 
This makes it easier for such holder, for inst ance, to succeed in a takeover attempt, and it 
also could make the take-over bid less expens ive. Indeed, as it allows building up hidden 
stakes without other investors becoming awar e, the share price is likely to remain 
stable63, thus eliminating or reducing any take-over premium64. In this way, lack of 
transparency harms the interests of minority shareholders, and prevents competitors from 
making a fair alternative offer65.  
 
(2) Empty voting: de facto control over the voting rights  
The holder of a cash-settled derivative, alt hough not directly holding voting rights, could 
potentially influence the exercise of the vo ting rights attached to the underlying shares. 
                                                 
61 Hu & Black (2006). 
62 See Glossary Annex 4. 
63 Corporate Governance Research (2010). 
64 It will cause a lower mandatory bid pri ce according to the Takeover Bid Directive. 
65 CESR (January 2010). 
 
20 The counterparty that holds the physical shares for hedging purposes does not have a real 
interest in the underlying company and could use such "empty" voting66 rights in a way 
which suits the holder of the economic interest by following the holder's voting instructions. A survey carried out in the UK
67 suggests that holders of contracts for 
difference68 do sometimes approach financial institutions holding shares for hedging 
purposes in order to influence voting strategi es. Even if general policy of investment 
banks is not to vote shares in accordance w ith holders' wishes, it cannot be absolutely 
excluded that such situations do arise in  practice. This potential "empty voting" 
represents a threat to other shareholde rs' rights and their long-term interests. 
Furthermore, lack of transparency makes it difficult for companies to ascertain not only 
who owns them but also who holds potentially significant voting power69.  
(3) Lack of efficient pricing of the underlying shares 
According to the Transparency Directive, di sclosure of major holdings of voting rights 
allows investors "to acquire or dispose of shares in full knowledge of changes in the voting structure"
70.  
Without full ownership disclosure, investors are unable to make an informed assessment 
of how the ownership structure of a particul ar firm may over time come to influence the 
value of the shares. Ownership disclosure also creates transparency of trading interest, 
which in turn means that shares are priced  more efficiently. Without such disclosure, 
shareholders may be unable to analyse shar e price movements correctly, which may lead 
them to make investment decisions that are sub-optimal, or even lead to loss of capital71. 
Without transparency with regard to impor tant capital movements, the market cannot 
estimate the size of the free float, i.e. the proportion of the total outstanding shares that 
are actually available for trading. When real ownership levels are concealed, the market's 
perception of the size of the free float may be distorted. And this in turn, through its impact on liquidity, can lead to shares being mis-priced
72. 
(4) Conclusion 
The transparency is essential for investment  decisions and efficiency of the market. 
Existing gaps in information linked to lack of  disclosure of cash-settled derivatives lead 
to a possible inefficiency of the price fo rmation mechanism, potential market abuse 
situations and empty voting. As a result, the level of investors' confidence is suboptimal 
and investors' intentions and long-term in terests of companies are misaligned. Some 
Member States have already reacted to  the risks described above by introducing 
legislation requiring disclosure for cash-settled derivative instruments and other are in the process of doing so (see Annex 7). Lower leve l of transparency is also due to lack of 
maximum harmonisation of the rules for notif ication of major holdings as explained 
below.  
                                                
 
66 See Commission staff working document (SEC(2010)61) p.83. 
67 See FSA 07/20 (November 2007). 
68 See Glossary Annex 4. 
69 Corporate Governance Research (2010). 
70 See Recital 18 of the Tr ansparency Directive. 
71 Schouten (2010) and Corporate Governance Research (2010). 
72 Schouten (2010); See also the case Porsche versus Volkswagen in Annex 8 . 
 
21 3.2.2.3.  Diverging transposition of the Directive requirements by Member States 
concerning the disclosure of major holdings 
Transparency Directive does not put in  place maximum harmonisation regime for 
notification of major holdings of voting rights. This uneven implementation of 
Transparency Directive requirements results  in compliance difficulties for cross-border 
investors. More stringent and additional rule s at national level as well as provisions in 
the Directive allowing for derogations/discr etion at national level also result in a 
fragmented internal market for financial services. 
(1) Aggregation of holdings of shares with those of financial instruments 
Lack of harmonisation concerning aggregation of major holdings is considered to be the 
most problematic issue according to the percep tion of stakeholders and the legal analysis 
made by Mazars73.  
In fact, Member States have taken different  views on whether investors must aggregate 
their holdings of voting rights (within the m eaning of Articles 9 and 10 TD) with their 
holdings of financial instruments giving access to shares (within the meaning of Article 
13 TD) for the purposes of evaluating whether the relevant thresholds referred to in 
Article 9 of the Transparency Directive are reached or crossed and therefore the 
notification obligation triggered (See Annex 9).  
Parallel compliance with different national re quirements faced by investors seems to be 
an important source of costs and burden74. On this issue, ESME indicated that "a major 
complaint among investors is the cost to i nvestigate and report according to 27 systems 
across Europe (and around 60 systems internationa lly) with different approaches to what 
holdings are required to be reported as well when." 75  
An external study76, looking at costs of complying with  the Transparency Directive for 
the asset managers, showed that the results for cross-border asset managers compared to 
those that largely operate in just one Memb er State are markedly different. The latter 
consistently had a lower cost of complian ce with the Transparency Directive. The 
additional costs for cross-border asset manage rs are mainly due to the fact that the 
notification process can not be fully automatic and that manual entries are necessary due to the existing divergences in national requirements.  
In addition to increased costs for cross-border investors, lack of harmonisation 
concerning aggregation of holdings of financ ial instruments with holdings of shares 
creates an uneven level of transparency acro ss the EU. In the Member States where there 
is no aggregation and the initial threshold of 5% was retained (see Annex 9), an investor holding, for example, 4,5% in voting rights and 4,5% in financial instruments in a 
company can artificially avoid the disclosure , although this investor cumulatively holds 
9% of economic interest in a company. 
(2) Different thresholds for disclosure of major holdings across the EU 
                                                
 
73 See Mazars (2009), section 3.1. 
74 Europe Economics (2009), page 76. 
75 ESME (December 2007) p.5, in fine. 
76 Europe Economics (2009), p. 76. 
 
22 The Transparency Directive allows Member St ates to adopt more stringent requirements 
as regards the thresholds for notification of major holdings. As a consequence, several Member States have adopted lower initial thresholds (and additional thresholds) in addition to the minimum thresholds requi red by the Directive (see Annex 9). Although 
such differences could result in potential difficulties for cross-border investors, the 
question of divergence of thresholds was considered as secondary by many respondents 
to the public consultation, as compared to th e divergence of the method to calculate the 
thresholds. 
(3) Conclusion 
The existing regime lacks consistency re garding the conditions for triggering the 
disclosure obligations. Insufficient harmonisation leads to higher cost and administrative burden for cross-border investors in the EU. Lack of harmonisation increases liability and regulatory risk as it is sometimes difficult for investors to correctly identify the rules 
applicable in each Member State. 
4.  B
ASELINE SCENARIO , SUBSIDIARITY AND PROPORTIONALITY  
4.1. Baseline scenario, expected development if no EU action is taken 
(1) Small and medium-sized issuers 
It is predicted that market developments, on their own, will not be able to improve access 
of the small and medium-sized issuers to regulated markets and make the investment in 
their equity more attractive.  
The trend over recent years is for fewer small and medium-sized companies to access 
regulated markets, as companies prefer to raise funds in other, less demanding ways, or 
are simply unable to proceed with their busin ess development plans for lack of investor 
support. As shown in the table below, small and medium-sized issuers are even delisting 
from Regulated Markets: either comple tely or preferring to list on a MTF (See 
Glossary)77.  
                                                 
77 In France, a new law in 2009 established the rules for the transfer of companies from Euronext to 
Alternext. See Middlenext (2009). Since then, several companies have taken this option. 
 
23  
Figure 4: Number of newly listed and de- listed companies in major EU exchanges 
Stock 
Exchange Newly listed companies (domestic 
companies only) De-listings (domestic companies only) 
 2009 2008 2009 2008 
Borsa Italiana 8 9 11 16 
Deutsche Börse 4 43 53 31 
London SE 47 143 287 318 
Nasdaq OMX 11 31 38 58 
NYSE 
Euronext 9 24 37 55 
Source: data from World Federation of Exchanges:  domestic companies are small and medium-sized 
issuers.  
A realignment of incentives between invest ors and company's management towards long-
term investment strategies is not likely to happen in the absence of a regulatory action to 
deal with the existing potential regulatory bias es in EU legislation encouraging the focus 
on short-term results. If no action is taken c oncerning the lowering of disclosure costs for 
small and medium-sized issuers, costs of compliance for these issuers will remain high and perceived as disproportionate given th e benefits. Investment levels in such 
companies are likely to continue to be low if  nothing is done to improve the visibility of 
small and medium-sized issuers. Such an environment is not favourable for both innovation and competition. Companies with growth potential will not be appropriately funded and therefore will not grow as much as they could potentially do.  
Furthermore, inefficient functioning of cap ital markets for small and medium-sized 
issuers has negative impacts on employment le vels. For instance, research conducted in 
the US
78 points at the fact that 92% of the job growth occurs after a company goes 
public79. In a UK 2002 report, it was estimated th at small listed companies in the UK 
(defined as those quoted in the London Stoc k Exchange but outside the FTSE 350 and 
those quoted on AIM80) accounted for 5% of the total ma rket capitalisation of all quoted 
companies but 13% of their total sales and, importantly, 18% of total employment81 (see 
figure 5). 
                                                 
78 NVCA (2009). 
79 Grant Thornton (November 2009) estimated that a lack of a functional IPO market may have cost the 
US 22 million jobs over the last decade. See Grant Thornton (November 2009), p. 26. 
80 Alternative Investment Market. 
81 Kearns and Young (2002), p.26. 
 
24  
Figure 5: Comparative statistics of large and small caps: UK (2002) 
 
In some Member States national authorities a nd stock exchanges have taken measures to 
lower the compliance costs for the majority of listed companies in Regulated Markets. 
Recent changes in the UK regarding the standard listing and the premium listing segments, ensuring that no gold plating to EU directives is imposed on companies within 
the standard listing
82 is an good example. A proportiona te corporate governance code for 
small caps in France is the other one83. However, these measures remain isolated and a 
number of more stringent national requirement s remain in place in many Member States. 
Additionally, the EU minimum rules constitute a minimum floor for costs of compliance.  
It has to be noted that different actions ar e being undertaken to address these issues: in 
particular, there is a plan to modify the MIFID84 in order to create a Multilateral Trading 
Facility for small and medium-sized issuers, which should increase the attractiveness of small and medium-sized issuers in non-regul ated markets. In addition, the proposed 
review of the accounting directives
85 would allow a significant reduction of financial 
reporting costs and harmonisation of accounti ng rules at the EU level for the SMEs. 
There will be also an action plan in order to promote access to finance for the SMEs. 
These initiatives address different problems encountered by small and medium-sized issuers. Any changes to the Transparency Di rective should therefore be seen in this 
context, as alone these changes would only have a limited impact on the problems faced 
by the small and medium-sized issuers, as these problems have multiple causes and the 
rules of the Transparency Directive are in no case the most important drivers for these 
problems.  However, the problems described in Section 3 linked to the requirements of 
the Transparency Directive would persist if no action were taken at the level of this 
directive.  
                                                
 
82 The distinction between premium and standard listing exist in other Member States too (e.g. DE). 
Premium listing is addressed mainly to the biggest  listed companies which accept to follow stricter 
rules in order to benefit from the "premium" listing label.  
83 Corporate Governance Codes prepared by Mi ddlenext applicable to small and mid caps 
84  Directive 2004/39/EC of the European Parliame nt and of the Council: "Markets in Financial 
Instruments Directive".  
85  The Fourth Council Directive 78/660/EEC on a nnual accounts and the Seventh Council Directive 
83/349/EEC on conso lidated accounts. 
 
25 (2) Notification of major holdings 
Concerning disclosure of cash-settled derivatives , if no action is taken, a significant 
loophole in the notification regime of the Tr ansparency Directive would continue to 
exist. One of the goals of the Directive which is to ensure efficient pricing in capital markets will not be achieved. This is likely to  undermine investor confidence. The issues 
of creeping control and hidden ownership w ill also continue to pose problems. Cases 
such as those described in the Annex 8 (LVMH/Hermes, Porsche/VW, Schaeffler/ 
Continental…..) are likely to happen again. Some Member States have already taken 
actions to address the current gap in the legislation
86. However, given the interrelatedness 
of financial markets, without an EU acti on there would be no common approach at the 
EU level and no harmonised view on this ques tion, which is likely to result in regulatory 
arbitrage and distort competition within the EU.  
If no action is taken to increase the level of harmonisation of the notification 
requirements, the regime of disclosure of major holdings will lack consistency regarding the conditions for triggering the disclosure  obligations. Lack of harmonisation will 
continue to generate higher costs and administrative burden for cross-border investors in the EU, which may deter cross-border investment. 
In the absence of EU action, further convergence might be achieved through cooperation 
by national competent authorities in the new ESMA authority. ESMA could issue 
recommendations, guidelines and adopt comm on standards. However, the problems 
described in Section 3 linked to lack of harm onisation and gaps in the current disclosure 
requirements can only be addressed through the modification of the Transparency 
Directive.  
4.2. Subsidiarity and proportionality 
Subsidiarity : The existing Directive is based on Articles 50 and 114 of the Treaty on the 
Functioning of the European Union which give  the European Commission the right to act 
in this area. The problems detected in S ection 3.2.1 concerning small and medium-sized 
issuers stem both from EU and national le gislation and can only be addressed through 
changes in the EU legislation. In addition, the issue of small and medium-sized issuers concerns the EU capital markets as a whole a nd should therefore be addressed at the EU 
level.  Concerning issues identified in Sec tion 3.2.2, only an action at the EU level would 
ensure that all Member States apply the same regulatory framework based on the same 
principles. Again, the issue of  holding of voting rights is of a cross border nature and 
should therefore be addressed at the EU le vel. The creation of ESMA also opens the 
possibility to deal with the technical aspects of the proposed new provisions by empowering ESMA to develop draft binding technical standards in some areas.  
Proportionality : The principle of proportionality w ill be examined for each proposed 
option. 
 
                                                
 
86 UK and Portugal (see Annex 7). Germany and Italy are planning to introduce a requirement to 
disclose cash settled derivatives. France has introdu ced a limited notification obligation which proved 
to be inefficient (see Annex 7). 
 
26 5. OBJECTIVES  
The objectives of this review are presented in the following table: 
General objectives  Specific Objectives:  Operational 
Objectives:  Drivers:  
Discourage focus on short-
term results and encourage long-term sustainability/performance Requirement for SMIs to 
publish quarterly financial information  
Increase the visibility 
towards investors and analysts of SMIs Short deadline to publish 
half yearly reports leads to increase in costs to a bottleneck of information and to a lack of attention of investors and intermediaries for SMIs Allow for more flexibility regarding the frequency and the timing of publication of periodical financial information for SMIs   
 Increase the  attractiveness of  regulated markets  to small and  medium-sized issuers  (SMIs)  Decrease the compliance 
costs for SMIs with disclosure requirements of Transparency Directive Simplify the narrative 
parts of financial reports for SMIs Complexity of content and 
type of information to disclose 
Gaps in requirements for notification concerning major holdings of voting rights Increase the transparency of corporate ownership Eliminate the gaps in 
requirements for notification concerning major holdings of voting rights 
Divergent rules for 
aggregation of holdings of shares with holdings of financial instruments Increase the legal  
clarity  and effectiveness of the existing transparency regime for disclosure of major holdings of voting rights  Decrease the liability and 
regulatory risk as well as high compliance costs for cross-border investors  Eliminate divergences in 
notification requirements of major holdings Divergent rules for 
notification of majors holdings 
 
The problem concerning difficult access by inve stors to financial information due to 
insufficient interconnection of national storag e mechanisms is identified in the present 
impact assessment but improving the current  storage mechanism is not one of its 
objectives. Indeed, a separate impact assessm ent would be needed in the future, to 
consider possible options to improve the current situation. The European Commission 
has already received in this respect a technical advice from CESR (ESMA)87 and it has 
also commissioned an external study in this field which is currently under preparation. 
                                                 
87 CESR (December 2010). 
 
27 Drafting an impact assessment on this point would need to cover technical aspects, 
different from the ones described in the present impact assessment and it is unclear when an action concerning this point should be taken (depending on the results of the external study it could be concluded that more time is necessary to assess the capacity of the national storage mechanisms to create a wo rking network at the EU level). As a 
consequence, the Transparency Directive s hould be modified to include delegating or 
implementing measures for the European Commi ssion in order to address in the future 
the problem identified.  
6.  P
OLICY OPTIONS , ANALYSIS OF IMPACTS AND COMPARISON  
In this Section, options will be  identified and analysed for policies which could target the 
problems described in Section 3 and could r ealise the objectives set out in Section 5. 
Then the choice of instrument will be discussed. 
For the purposes of the discussion, the op tions will be analysed according to the 
operational objectives. Within each group, the options will be measured against the 
following criteria: 
Impact on effectiveness The options should achieve the operational objectives 
Impact on efficiency The options should be efficient in terms of costs 
Impact on investor protection The options proposed should maintain and, when 
necessary, enhance the level of investor protection achieved by the Directive. The disclosures that are necessary for the investors' decisions should be required. 
Where relevant, other additional criteria will be used:  
• For the policy options aiming to increase th e attractiveness of regulated markets to 
small and medium-sized issuers : impact on reducing disclosure costs for small and 
medium-sized issuers, impact on visibility of small and medium-sized issuers (level of interest of investors) and impact on shor t-termism (excessive focus of issuers, 
investors and analysts on short term results). 
• For the policy options aiming to increase th e legal clarity and effectiveness of the 
existing transparency regime for disclo sure of major holdings of voting rights : impact 
on market liquidity and efficiency, impact  on the market for ownership control, 
impact on costs for cross-border investors and impact on the transparency regarding 
corporate ownership of issuers of shares. 
A detailed description, analysis and comparis on of the options is provided in Annex 1 
together with the reasons why some of the options have been rejected. The costs are 
presented in Annex 2. 
6.1. Comparison of policy options to increa se the attractiveness of regulated 
markets to small and medium-sized issuers  
The following tables show the options aimed to increase the attractiveness of regulated 
markets to small and medium-sized issuers as well as their impacts. These options are classified according to operational objectives they aim to achieve. The preferred options 
are in bold characters. 
 
28 6.1.1.  Options to achieve the first operational  objective: allow for more flexibility 
regarding the frequency and the timi ng of publication of periodical 
financial information for small and medium-sized issuers  
Options Effectiveness 
to achieve 
the 
operational 
objective Impact on 
reducing 
disclosure 
costs for 
small and 
medium-
sized issuers Impact on 
visibility of 
small and 
medium 
sized-
issuers   Impact on 
reducing the 
focus on 
short-term 
results Impact on 
investor 
protection Cost savings 
(global costs 
savings for the 
whole EU 
regulated 
market) Efficiency  
Option 1:  No new action 
 = = = = = = = 
Option 2:  Abolishing 
the obligation to present quarterly financial reports and/ or interim management statements (IMS) for small and medium-sized issuers  
++ ++ =/- + - About 487 M€ per 
year plus staff cost savings which are difficult to estimate but which are relatively higher + 
Option 3:  Abolishing 
the obligation to present quarterly financial reports and/ or IMS for small and medium-sized issuers during an initial period of 3 years after admission to trading 
+ + =/- = - ? Difficult to 
estimate as the number of newly listed companies varies in time. Average cost saving per issuer  should amount to 47 725 € + 
Option 4:  Abolishing 
the obligation to present quarterly financial reports and/ or IMS for all listed companies   
++ ++ = ++ = 573 M€ per year 
for publication, plus staff cost savings which are difficult to estimate but which are relatively higher  ++ 
Option 5:  Extending 
the deadline for publishing half yearly reports to 3 months after the end of the respective reporting period for all listed companies  
++ + + n.a. = ? opportunity cost savings, extra hours cost savings for all listed companies  ++ 
Option 6:  Extending the 
deadline for publishing half yearly reports to 3 months after the end of the respective reporting period for small and medium-sized issuers 
++ + ++ n.a. =/- ? opportunity cost savings, extra hours cost savings only for small issuers + 
Magnitude of impact as compared with  the baseline scenario: ++ strongly positi ve; + positive; – – strongly negative; 
– negative; = marginal/neutral; ? uncertain; n.a. not applicable 
The preferred policy options to achieve this objective are Options 4 and 5 . While the 
main target of the these objective are small and medium-sized issuers, the majority of 
respondents to the public consultation believe that it is not desirable to have differentiated regimes for companies listed on re gulated market according to their size, as 
this could be confusing for the investors. It is therefore preferable to adapt the standard 
regime to make it better suited to the need s of smaller companies, rather than to 
introduce a separate regime based on market capitalisation. That is why Options 2, 3 and 
6 have been rejected.  
(1) Option 4 
 
29 Option 4 would consist in abolishing the requi rement for quarterly information for all 
listed companies. It will effectively achieve  the objective of more flexibility regarding 
the frequency of publication of financial info rmation for small and medium-sized issuers 
without creating double reporting standards on regulated markets which could be 
potentially harmful to these issuers and have  a negative impact their visibility. This 
Option will have a strong positive impact on reducing administrative burden and other costs linked to disclosure of financial info rmation as well as on reducing focus on short-
term results. However, this positive impact could be mitigated by the possibility of "coordination failure", i.e. small and medium -sized issuers may wait for each other to 
modify the frequency of their reporting. Ne vertheless, the proposed Option should send a 
strong signal to the market and stimulate a debate which should encourage behavioural 
changes. Also, Option 4 should not have a negative impact on investor protection.  
It should be noted from the start that although quarterly financial information is 
considered useful by a number of stakeholders , the results of the public consultation are 
non clear-cut on this point. The majority of  respondents to the public consultation find 
quarterly financial information valuable. In  this respect, 59% of respondents to the 
relevant question in the public consultati on believed that waiving the obligation to 
disclose quarterly financial reports or interim management statements for small listed companies would result in a diminution of transparency and would therefore reduce 
investor protection and confidence. However,  100 % of issuers and 50% of investors who 
have responded to this question were of the vi ew that this requirement could be abolished 
for small and medium-sized issuers without negative impact on transparency.  
Those respondents that opposed the abolishmen t of quarterly information for small and 
medium-sized issuers were the stock exch anges (100%), public authorities (90%) and 
auditors and accountants (100%). One important argument of these respondents was that a differentiate transparency regime according to the size of the issuer would confuse the 
investors. As the question on the abolishment of mandatory quarterly reporting for all companies was not asked in the public consu ltation, it is not possible to conclude what 
would have been the reaction of these stakeholders to this option.  
According to Mazars, the majority of stak eholders in the EU (68,8%) consider that 
publication of quarterly information is usef ul for the transparency and the efficient 
functioning of the market. However, a different result comes from three important capital markets in the EU: 66,7% of the stakeholde rs from the UK, 50 % from Luxembourg and 
44% from France consider that this information is not useful
88. 
Nevertheless, the fact that quarterly financia l information is considered as useful by a 
number of investors does not mean that it is necessary for investor protection. In fact, 
Market Abuse Directive already requires issuers to disclose inside information as soon as 
possible to the market. This inside informati on includes all information that is likely to 
have a significant effect on the prices of financial instruments listed on regulated markets. In addition, Prospectus Directive requires issuers of securities admitted to trading on regulated markets to publish a prospectus for each new share issuance which increases issuer's capital, subject to some ex ceptions. This prospectus contains financial 
information, including the management's explan ation of factors that have affected the 
company's financial condition and results of operations for the historical periods covered 
                                                
 
88  See Mazars (2009) section 2.6.3 and Annex 5. 
 
30 by the financial statements, and management's assessment of factors and trends which are 
expected to have a material effect on the company's financial condition and results of 
operations in future periods.  Therefore, investors should be duly informed about important events and facts that could poten tially influence the price of the underlying 
shares independently of the quarterly information currently required by the Transparency Directive.  
In addition, interim management statements are not prepared according to the accounting 
standards and therefore the information they provide might not offer adequate quality nor 
give sufficient assurance to investors. Information disclosed in this kind of reports is also not easily comparable. Therefore, information which does not need to be immediately disclosed to the market could be better disclose d in the yearly or the half-yearly financial 
statements which are prepared under the accoun ting standards, are subject to statutory 
audit and therefore give high quality information to the investors.  
Finally, consequently, it seems possible not to require the mandatory disclosure of 
quarterly information but to leave it to the market. Each issuer then will decide whether there is a market demand for such inform ation and whether the publication of such 
information is cost-efficient compared to derived benefits. In addition, removing the 
requirement for quarterly information would allow companies to redirect their resources to other channels and methods of informing i nvestors and intermediaries of events they 
deem important (press releases, ad hoc reports, meetings with analysts and investors, site 
visits, media coverage,…), and to focus their energy on other means they deem best able to ensure maximum visibility for their operations. 
Option 4 will also eliminate an inappropriate legislative incentive encouraging the focus 
on short-term results. Emphasis on short-term financial performance has multiple causes, 
but the obligation to provide quarterly information is a regulatory incentive exacerbating this culture. By making quarterly reporting voluntary, this option would contribute to 
reducing this pressure even if the issue of short-termism is much larger and cannot be 
solved only by this measure
89.  
(2) Option 5 
Option 5 would consist of extending the dead line for publishing half-yearly reports to 3 
months after the end of the respective reporting period for all listed companies. This Option will effectively achieve the underlyi ng objective of leaving flexibility to the 
issuers to publish their half-yearly reports at  the time that they consider as the most 
suitable, within the limits of the extended deadline. This option would have a positive impact on costs reduction for smaller issuers at  it would give issuers extra time to draft 
their reports which could in turn reduce the bottleneck of financial information, improve 
the quality of the output and reduce costs linked to external advice and the opportunity costs.  Moreover, this Option would avoid that  the publication of the reports falls in the 
month of August where the market activity is  reduced, which is now the case for the 
majority of listed companies, as explained in Section 3. Therefore, it would leave more 
time for analysts and investors to look at and analyse the half-yearly results of issuers, 
                                                
 
89  A wider picture concerning this issue is presented in the European Commission Green Paper 
"Corporate governance in financial institutions and remuneration policies" COM(2010) 284 from 2 
June 2010 and European Commission Green Paper  "The EU corporate governance framework" 
COM(2011) 164 from 5 April 2011. 
 
31 including the smaller ones. This option would also have a positive impact on the 
visibility of small and medium-sized issuers, as  they will be able to adjust more easily 
the timing of publication of their reports so as not to fall at the same time as the disclosure of the reports by large listed companies.  
This option should not have any negative impact on investors' protection as all 
information that has to be taken into acc ount by the investors immediately is already 
provided to them according to the Market Abus e and Prospectus Directives as explained 
above. 
(3) Options 4 and 5: maximum harmonisation.  
In order to be effective, Options 4 and 5 should include a provision to prevent Member 
States from imposing more stringent requi rements at national level. Currently, many 
Member States impose stricter disclosure re quirements than the minimum foreseen in the 
Directive. Therefore, preventing Member Stat es from gold plating is proportionate to the 
objective to eliminate unnecessary administrative burden for companies. In order to meet this objective, it has to be ensured that Memb er States do not require more than what is 
necessary concerning the issues indentified in the present impact assessment. Maximum 
harmonisation will also ensure that all liste d companies in the EU benefit from equal 
treatment and that the administrative burden is effectively reduced.  
6.1.2.  Options to achieve the second operation al objective: simplify the narrative 
parts of financial reports for small and medium-sized issuers 
Options Effectiveness 
to achieve 
the 
operational 
objective Impact on 
reducing 
disclosure 
costs for 
small and 
medium-
sized 
issuers Impact on 
visibility of 
small and 
medium-
sized issuers  Impact on 
short-
termism Impact on 
investor 
protection Cost 
savings  Efficiency 
Option 1:  No new action = = = n.a. = = = 
Option 2:  Harmonising the 
maximum narrative content of financial reports at the EU level for small and medium-sized issuers - - ++ n.a.  - ? costs 
savings linked to opportunity costs and  cost of  external advice 
+ 
Option 3 : Requiring ESMA to 
prepare non binding guidance (templates) on narrative content of the financial reports for all listed companies ++ ++ ++ n.a. + ? Idem ++ 
Option 4 : Requiring Member 
States to prepare non-binding templates or guidance at national level on the narrative content of financial reports  for all listed 
companies ++ ++ + n.a.  = ? Idem + 
 
Magnitude of impact as compared with  the baseline scenario: ++ strongly positi ve; + positive; – – strongly negative; 
– negative; = marginal/neutral; ? uncertain; n.a. not applicable 
Option 3  has been chosen as a preferred policy option to achieve the underlying 
objective as it is the most efficient and propor tionate as compared to other options. Under 
Option 3, ESMA would be required to de sign non-binding guidelines (templates) for 
 
32 narrative reports for different categories of  listed companies. When preparing the 
guidelines, ESMA should take into account in particular the capacities of the small and 
medium-sized issuers. This Option would e ffectively facilitate the drafting of narrative 
parts of financial reports for these issuers and therefore spare the external legal and 
compliance advice. It should therefore ha ve a positive impact on cost reduction for 
smaller companies. On the other hand, as the templates would not be binding, the issuers not willing to use them would not be required to do so.  
Indeed, maximum harmonisation across Europe of the content of narrative reports 
(Option 2) could lead to an increase in financial reporting obligations, and hence in 
compliance costs, for those small and medium-sized issuers which, for the time being, have to provide a limited number of inform ation in these narrative reports. Maximum 
harmonisation could also have a negative eff ect on investors' protection. Whilst it would 
allow for more comparability of information fo r cross border investors and thus facilitate 
their investment decisions, respondents to th e public consultation highlighted that the 
quality of the narrative reporting was crucial for investors. If the threshold at the EU level for the content of the narrative reports we re set too low in the hope of saving costs, 
this may have negative implications for investors. Option 2 is therefore discarded.  
In addition, Option 3 could increase the visib ility of small and medium-sized issuers at 
the EU level as the information disclosed would be more comparable throughout the EU 
and could therefore be more easily anal ysed by cross border investors. More 
comparability of information should also facilita te investor decisions. This is the reason 
why Option 3 is preferable to Option 4 whic h provides for elaboration of templates at 
national level.  
6.2.  Comparison of policy options to increa se the legal clarity and effectiveness 
of the existing transparency regime for disclosure of major holdings of 
voting rights 
The following table shows the options aimed to increase the legal clarity and 
effectiveness of the existing transparency re gime for disclosure of major holdings of 
voting rights. These options are classified acco rding to operational objectives they aim to 
achieve. The preferred options are in bold characters. 
 
33  
6.2.1.  Options to achieve the third operation al objective: eliminate the gaps in 
requirements for notification concernin g major holdings of voting rights 
Options Effectiveness to 
achieve the 
operational 
objective  Impact on 
market 
liquidity and 
efficiency Impact on and 
on the market 
for ownership 
control Impact on 
investor 
protection Associated costs  Efficiency 
Option 1:  No new action = = = = = = 
Option 2:  Broad 
regime: disclosure regime extended to all instruments of similar economic effect to holding shares and entitlements to acquire shares 
++ =/+ = ++ One-off costs of 100 to 600 k€  (below 0,1 % of average operating costs),  ongoing cost is
 
difficult to estimate and
 will 
depend on the increase of the number of disclosures/per holder in practice + 
Option 3:  Limitative 
approach: disclosure not required in case "safe harbor" criteria are met. + = = + One-off costs should not be significant, ongoing cost is difficult to estimate and will depend on the increase in the number of disclosures/per holder in practice 
++ 
Magnitude of impact as compared with  the baseline scenario: ++ strongly positi ve; + positive; – – strongly negative; 
– negative; = marginal/neutral; ? uncertain; n.a. not applicable 
Option 2  has been chosen as a preferred polic y option. Option 2 would include a general 
provision in the Transparency Directive that would require notification of all instruments 
of similar economic effect to holdings of sh ares and entitlements to acquire shares. The 
intention would be to cover all instruments that could be used to create an economic 
interest in shares listed on regulated ma rkets. It would capture the cash-settled 
derivatives as well as any other similar fi nancial instruments not yet available on the 
markets to take account of fast financial innovation. This option is supported by the vast 
majority of respondents to the public consu ltation (81% of respondents to the relevant 
question) which considered that the disclosure of holdings of cash-settled derivatives would be beneficial to the market. A broad a pproach similar to the one proposed in this 
option was adopted by the UK in 2009 and mo re recently by Portugal. Germany is 
planning to adopt a similar approach. Italy is  considering also such an approach (see 
Annex 7).   
This general principle should be subject to exemptions in order to avoid providing the 
market with irrelevant information and spar e notification costs for market players which 
by definition should not exercise any influe nce on voting policies or acquire a secret 
stock in the underlying company. These exemp tions should at least cover instruments 
held by market makers and instruments held on the trading book of financial institutions, which already apply to notifications of fina ncial instruments. The UK experience shows 
that these exemptions are in general suffi cient and should cover the bulk of unnecessary 
notifications. However, to take account of market developments, it is envisaged to 
 
34 empower ESMA to develop draft technical sta ndards to adapt the existing exemptions if 
necessary, for instance, with regard to the no tification of instruments linked to a basket 
of shares or for aggregation of instruments held by a financial institution on behalf of a 
client. In developing these draft technical  standards, ESMA should take account of 
possible misuse of additional exemptions to circumvent notification requirements. 
Finally, is it envisaged to harmonise the existing exemptions, so that the same 
exemptions apply in all Member States.  
Option 2 appears to be the most effectiv e and would have a strong positive impact on 
investor protection and investor confidence as  compared to the baseline scenario, as well 
as have a positive impact on issuers. This option would enhance transparency, reducing 
the possibility of hidden ownership and creeping control, and therefore improve market efficiency, as further explained in Secti on 6.3.2 below. It may have a potential negative 
impact on market liquidity and on the market  for ownership control, as described in 
Annex 1. However, according to UK experience, these potential negative impacts have not realised in practice.  
Option 2 , although entailing one-off costs es timated at 100 k€ to 600 k€ per holder of 
significant number of cash settled derivatives, should nevertheless be efficient and proportionate to address the problems de scribed in Section 3.2.2.2, and should have 
limited on-going costs for companies linked to processing and making additional disclosures to the market. Option 3 would be le ss costly but its effectiveness seems to be 
limited as it would be easy to circumvent the disclosure obligation. Therefore, Option 2 will be the preferred option to achieve the operational objective and other options should be discarded. 
 
35  
6.2.2.   Options to achieve the fourth operati onal objective: eliminate divergences 
in notification requirements for major holdings 
Options Effectiveness 
to achieve 
the 
operational 
objective Impact on 
the 
transparency 
regarding 
corporate 
ownership of 
issuers of 
shares Impact on 
investor 
protection Impact on 
costs for 
cross-
border 
investors Cost savings  
 Associated 
costs Efficiency 
Option 1:  No new 
action = = = = = = = 
Option 2:  
Harmonising the regimes of disclosure of major holdings of voting rights by requiring aggregation of holdings of shares with those of financial instruments giving access to shares 
+ ++ ++ ++ An average of 2M€/operator for one-off incremental costs for new cross-border investors and 77k€/year/per operator on average in ongoing costs  
 ? costs difficult to estimate, should be linked to necessity to adapt the IT systems and to the potential increase in the number  of notifications 
+ 
Option 3:  
Harmonising the regime of disclosure of major holdings of voting rights by requiring three separate regimes of disclosure: one for holdings of shares, one for financial instruments giving access to shares and one for the cash settled derivatives. 
+ - - ++ idem Idem, but 
the potential increase in the number of notifications should be lower 
+ 
Option 4:  
Harmonising the regime of disclosure of major holdings of voting rights by harmonising the thresholds for disclosure 
++ - - ++ idem ? costs 
difficult to estimate, should be linked to necessity to adapt the IT systems
 - 
Magnitude of impact as compared with  the baseline scenario: ++ strongly positi ve; + positive; – – strongly negative; 
– negative; = marginal/neutral; ? uncertain; n.a. not applicable  
Option 2  is the preferred policy option. Option 2 will harmonise the method of 
calculation of thresholds for disclosure of  major holdings by introducing the requirement 
to aggregate holdings of shares with holdings  of financial instruments (including cash 
settled derivatives). It will also provide for the method of such aggregation. Option 2 is 
the most effective as compared to the base line scenario and to Option 3 to achieve the 
result of uniform application of EU rules and increased transparency of corporate 
ownership, as explained further in Annex 1. It will eliminate divergences in Member 
States concerning the way to calculate the thresholds triggering notification, which is 
seen as a major problem by the cross-border investors. Whilst it may seem less effective 
than Option 4, as it will not harmonise the thresholds for notification, it is more 
proportionate as it leaves sufficient flexibility to Member States to take account of the 
existing national differences in ownership c oncentration, which are quite significant. In 
 
36 addition, the majority of investors do not consid er different national thresholds as being a 
major source of additional costs. It is ther efore the best option in terms of impacts on 
transparency and on investor protection and in terms of proportionality.  
Although Option 2 could be a source of co sts for investors linked to additional 
disclosures in Member States where there is currently no aggregation requirement, the 
exact amount of these costs is difficult to  estimate as it would vary depending on the 
increases of the number of disclosures in pr actice. Nevertheless, investors are in favour 
of more harmonisation and seem to consider th ese costs as lower compared to the spared 
administrative burden linked to the introducti on of a uniform regime for aggregation. 
This option should therefore be efficient in achieving the underlying objective. 
6.3.  Expected impacts of the preferred policy options  
6.3.1.  Policy options to increase the attracti veness of regulated markets to small 
and medium-sized issuers 
This Section summarises that main impact s of the preferred options on different 
stakeholders and third countries. Othe r impacts (impact on environment and 
employment ) are analysed in Annex 1. 
(1) Abolishing the obligation to present quarterly financial reports and/or interim 
management statements for all listed companies  
Impact on issuers : This option would enable all listed companies to reduce the costs 
associated with listing on regulated mark ets by making the publication of quarterly 
financial information voluntary rather than  mandatory. Those companies which do not 
estimate useful to publish such information could therefore omit quarterly reporting, and redeploy the resources made available elsewhere. The average estimated cost reduction, excluding costs linked to preparation of the qua rterly information, is varying from 2 k€ to 
60 k€ per year/per issuer for the small and medium-sized issuers
 and from 35 k€ to 250 
k€ per year/per issuer for large issuers. The reduction in costs concerning the staff 
employed to prepare this information could not  be estimated in monetary terms for small 
and medium seize issuers : this reduction is varying, per issu er, from 8 man/days/a year to 
30 man/days/ a year. For large issuers, the maximum total cost reduction (including costs 
linked to the staff involved in preparation of these reports) could be estimated as being 2 M €/ a year/per issuer.  
It is expected that larger companies will continue to publish quarterly information if there 
is a demand from analysts, investors and the stock exchanges and in order to maintain 
their 'brand' image. Therefore the estimated co st reduction would be particularly relevant 
for small and medium-sized issuers
.  
This option is not expected to have nega tive impact on the visibility of small and 
medium-sized issuers  as there will be no differentiation of  rules applicable to the issuers 
according to their size. Also smaller issuers w ould be able to redirect their resources in 
order to publish information of more interest to investors. 
By making quarterly information voluntary, this option would eliminate an existing 
regulatory incentive contributing to the short te rm pressure on issuers, particularly the 
small and medium-sized  ones. This will help to create an investment environment more 
 
37 favourable to securing long-term support fo r ambitious and innovative projects based on 
an in-depth understanding of the underlying business model. 
Impact on investors : As explained in Sections  3.2.1.2 and 6.1 above, quarterly 
information does not appear necessary for i nvestor protection. Investor protection is 
already sufficiently guaranteed through the ma ndatory disclosure of half-yearly and 
yearly results, as well as through the disc losures required by the Market Abuse and 
Prospectus Directives. If there is no mandatory requirement to publish quarterly information, small and medium-sized issuers
 will be free to publish whatever information 
they consider will be most useful for their i nvestors and analysts, who in turn will be able 
to engage in a dialogue with them about what  information they most need, and to “vote”, 
via their capital allocation decisions, agains t those companies which do not take their 
criteria into account. Larger issuers are expected to continue publish quarterly information, especially if their investors consider it as useful.  
This option would not entail costs for regulators
. 
(2)  Extending the deadline for publishing half yearly reports to 3 months after the 
end of the respective reporting period for all listed companies 
Impact on issuers : This option would have a limited monetary cost reduction, which is 
however, difficult to precisely estimate. This cost reduction should especially benefit the 
small and medium-sized issuers . Some non-monetary advantages are also expected: in 
particular, greater flexibility that would enable the issuers to better organise the necessary work, relieve administrative comp lexities, improve the quality of the output 
and secure the services of auditors. Again, this action should benefit mainly the small 
and medium-sized issuers  who have difficulties to respect the current deadline of 
publication of the half-yearly reports. 
This option would  also have a positive impact on the visibility of small and medium-
sized issuers , as they will be able to adjust more  easily the timing of publication of their 
reports so as not to fall at the same time as  the disclosure of the reports by large listed 
companies. 
Impact on investors : some stakeholders expressed negative views on the possibility of 
extending the deadline for publication of financ ial information as being damageable to 
investor protection. According to them, late publication of financial reports could lead to the circulation of outdated information which is less valuable to the market and would 
increase the risk of market abuse. However, information that could lead to market abuse 
has in any event to be disclosed according to the Market Abuse Directive. In addition, any new issuance of listed securities has to be accompanied by updated financial information according to the Prospectus Di rective. Therefore, investors should be 
provided with all necessary information that has to be taken into account in a short period of time to make investment decisions. This option also gives issuers extra time to draft 
their reports which could in turn improve the quality of the output. 
This option will allow the analysts
 to devote more time to the analysis of the half yearly 
results of small and medium-sized issuers. Also in the Member States where the half 
yearly reports need to be audited, auditors  will have more time to provide their opinion.  
This option should not entail any additional costs for regulators .  
 
38 (3)  Requiring ESMA to prepare non bi nding guidance (templates) on narrative 
content of the financial reports for all listed companies 
Impact on issuers : This option would allow, for all the issuers, for some reduction in 
costs of preparing financial reports, alt hough these costs could not be estimated. The 
savings achieved should be particularly benefi cial for the small and medium-sized issuers 
as these issuers have more difficulties in pr eparing disclosures of narrative nature. The 
use of templates prepared at the EU level could increase the visibility of small and medium-sized issuers in the EU as the info rmation disclosed would be more comparable 
and could be more easily analysed by the cross border investors. 
Impact on investors
: This option should not have negative effects on investors' 
protection. The templates should find a good balance between regulatory requirements 
and needs of the investors. The templates should also be adapted to the size of the 
issuers, thus providing investors with ta ilor-made information and giving a minimum 
guarantee as to the quality of such inform ation. This option should also improve the 
comparability of information for cross bor der investors and thus facilitate their 
investment decisions.  
This option should not entail any additional costs for regulators .  
6.3.2.   Policy options to increase the legal clar ity and effectiveness of the existing 
transparency regime for disclosure of  major holdings of voting rights 
The impacts of the preferred options are: 
(1) Disclosure regime extended to all inst ruments of similar economic effect to 
holding shares and entitlements to acquire shares 
Impact on issuers: This option would enhance transparency of holdings of economic 
interest in shares, therefore reducing the possibility of hidden ownership and creeping 
control as companies and the market would have  a clearer idea of who holds key interests 
in listed companies. It would help issuers to  identify their potential shareholders, leading 
to more effective communication of issuers w ith investors, shareholders and the market. 
This option will also lead to less informa tion asymmetry, reducing the volatility of share 
price and lowering cost of capital. On the other hand, it will improve market efficiency, 
reducing the possibility for holders of cash-settled derivatives to benefit from not having to pay a premium on the share price in case of a future take-over. This option should have limited impact on ongoing costs for co mpanies linked to processing and making 
additional disclosures to the market.  
Impact on investors:
 The new disclosure regime covering all types of financial 
instruments equivalent to share ownership mi ght cause an increase of the organizational 
and compliance costs for holders of these instruments (the maximum estimated one off costs are from 100 k€ to 600 k€ per holder of  cash settled derivatives, but they would 
concern only investors who hold significant numbe r of these instruments). It is estimated 
that the most significant holders that woul d mainly incur the one-off costs should be 
essentially the hedge funds and the investment banks 
which will need to update their IT 
systems. For the investment banks, the one off costs could be higher as they will need to 
put in place a more sophisticated internal process.  
 
39 The ongoing costs of the requirement to di sclose the holdings of the cash settled 
derivatives could not be estimated as th ey would vary depending on the increase per 
holder of the number of disclosures in practice.  
This option will be beneficial for investors as the new regime will have a strong positive 
impact on investor protection. It will decrease information asymmetry and contribute to protect investors from market price ma nipulation by hidden stock-building. Minority 
shareholders will also benefit in case of a take-over as potential bidders will have to pay the take-over premium for the shares of the underlying company.  
No material costs are expected for the regulators.
 
(2) Harmonise the regimes of disclosure of major holdings of voting rights by 
requiring aggregation of holdings of shares  with those of financial instruments 
giving access to shares  
Impact on issuers : This option would have a positive eff ect on issuers as the principle of 
aggregation would improve the transparency and reduce the possibility to circumvent disclosure requirements by investors who w ould otherwise acquire holdings of shares 
and financial instruments with the aggregate economic position well beyond the 
threshold for notification without disclosing it to the market.  
Impact on investors: 
This option will have a positive impact on investor protection as it 
would provide for an uniform and more transparent regime across the EU and inform the market of the real economic position of the i nvestors. This option could be a source of 
costs linked to additional disclosures in some  Member States where there is currently no 
aggregation requirement. These ongoing costs could not be estimated as they would 
depend on the number of additional disclosure s that would take place in practice. 
However, investors are in favour of a ha rmonised regime for disclosure of major 
holdings as they consider it would bring a co st reduction. The estimated cost reduction in 
on-going cost is of 77 k€/year/ per operator fo r the cross border investors. This option 
will also reduce legal uncertainty for cro ss border investors as it will harmonise the 
method of calculation of the thresholds. 
No material costs are expected for the regulators
.  
6.4.  Impact on third countries and on international attractiveness of EU 
markets 
As the third countries issuers are also listed in the EU stock exchanges, they would 
benefit from the new measures reducing th eir administrative burden and the European 
markets should therefore become more attractive for third countries issuers. The attractiveness of European capital markets to  third countries' investors should not be 
affected. In particular, it is not expected that there exist a reputational risk for the 
perceived standards of EU markets relative to third countries' markets linked to the removal of the obligation to publish quarterly information.  
As explained in Annex 5, some other juri sdictions require publication of quarterly 
information. However, contrary to the EU , they do not require interim management 
statements but full quarterly reports. In the US, for example, there are no specific half- 
yearly reports but three quarterly statemen ts established according to the accounting 
standards. In the EU, imposing full quarterly  financial reporting was not considered as 
 
40 necessary for the purpose of investor protec tion on the occasion of the revision of the 
Transparency Directive in 2004. Therefore, qua rterly information currently required for 
companies listed on the regulated markets in th e EU is already less elaborated than what 
is for example required in the US and there are no voices criticizing European capital markets in this respect.  
Equally, Switzerland does not require quarter ly financial information at all on its 
regulated markets. However, there is nor evid ence that Swiss standards are considered as 
not providing sufficient protection to investors. 
In addition, the EU stakeholders are not alone in questioning the requirement for 
quarterly information. In the US, there is also  a debate on quarterly reporting even if this 
debate takes place in a different context as explained in Section 3.2.1.3 above
.  
Finally, the new regime of disclosure of major holdings of voting rights should have 
positive effects for international attractiveness of EU markets for both issuers and investors (the impacts will be similar to th e ones identified for these categories in the 
EU). 
6.5. Choice of instrument 
Concerning the issues linked to the small and medium-sized issuers, only a binding 
instrument can modify the current minimal requirements at the EU level and prevent 
Member States from re-imposing similar oblig ations at the national level. A binding legal 
instrument should also ensure that all Me mber States applied the same regulatory 
framework based on the same principles, ther eby ending the current fragmentation of the 
regulatory response concerning the regime of notification of major holdings. However, it 
is necessary to define whether the appropriate  legal instrument should be a Directive or a 
Regulation. 
(1) Partial modification of the current Directive  
A Directive has the advantage of being a le gally binding instrument which at the same 
time leaves to Member States the flexibility to adapt some measures to their legal and 
economic environment. This option would th erefore provide an opportunity to aim for 
maximum harmonisation concerning the regime of notification of major holdings while 
leave, (with exception) the current nature of minimum harmonisation Directive for the 
part on periodic disclosure of financial information. This principle of minimum harmonisation on periodic disclosure of financial information will have some exceptions as discussed in Section 6 above and in Annex 1. Also concerning the objective of 
harmonisation of the regime of notification of  major holdings, the analysis of the impacts 
concluded that the maximum harmonisation w ould not apply to all the provisions. For 
example Member States would be able to adopt lower thresholds for disclosure of major holdings of voting rights. Ther efore a Directive seems an appropriate instrument to 
achieve the operational objectives.  
(2) Introduce a Regulation as a new instrument in this field  
In this option, the revised Directive would be  transformed into a directly applicable 
Regulation. While a Directive requires nationa l implementing provisions to be adopted, 
leaving scope for interpretation, the direct applicability of a Regulation would offer greater legal certainty for those subject to the legislation across the EU. Furthermore, a 
 
41 Regulation would offer the highest degree of  harmonisation and any subsequent changes 
to it would be directly applicable without  transposition delay. Once in force, it would 
override incompatible provisions in domestic legislation. 
However, maximum harmonisation is not considered as the best option for some 
provisions of the Transparency directive. Fo r example the part of the current directive 
concerning periodic financial informati on could not be fully harmonised. Also 
concerning major holdings, some flexibility has to be left to the Member States.  
On this basis, the Commission services  concluded that replacing the existing 
Transparency Directive by a Transparency Regulation is not the most proportionate 
option. The most proportionate option to achie ve the objectives would be to partially 
modify the current Directive.  
7.  TRANSPOSITION AND COMPLIANCE AS PECTS AND ADMINISTRATIVE BURDEN  
7.1. Transposition and Compliance 
In order to ensure a better implementation of the Directive and following the 
Commission's communication from December 2010 "Reinforcing sanctioning regimes in 
the financial services sector"90, the existing framework for sanctions91 should be 
improved as explained in Annex 3.  
In particular, the following changes are envisaged in the Transparency Directive:  
a) Give all competent authorities the power to suspend the exercise of voting rights : 
certain sanctioning powers are particularly important to respond adequately to key 
violations of the Transparency Directive.  It should be therefore ensured that all 
competent authorities have at their disposal  those powers. In particular, suspend the 
exercise of voting rights seems the most effec tive sanction for an issuer who had violated 
the notification requirements for disclosure of major shareholdings of voting rights.  
b) Automatic publication of sanctions : publication of sanctions is considered to be one 
of the most deterrent tools to prevent viola tions, particularly because of the reputational 
damage that the author of the violation will incur. While almost all competent authorities are allowed to publish sanctions, this does not ensure that sanctions are published on a systematic basis in all Member States. Th is could be achieved by the introduction of a 
general obligation to publish sanctions. 
c) Introduce criteria to determine the sancti ons to be imposed in a particular case
: 
some criteria are particularly important to adapt the sanction to be imposed, and particularly the level of the administrative fine, to the seriousness and the consequences of the violation and to the personal conditions of the author of the violation, which would 
help ensuring effectiveness, proportionality a nd dissuasiveness of the sanctions actually 
applied. 
                                                
 
90 European Commission (December 2010). 
91 CESR (2009) presented an overview of the different sanctions applicable in the Member States 
concerning the violations of the provisions of the Transparency Directive. See also ESMA (2011).  
 
42 d) Set a minimum level of the maximum amount of administrative fines: the amount 
of fines which can be applied to violations  of the Transparency Directive should be 
sufficiently high to ensure that the fine has a deterrent effect.  
The levels of fines provided for in national legislation vary across Member States and 
may be too small in some Member States compar ed to the benefits that could be realised 
by infringing the rules, for example concerning lack of notification of major holdings of 
voting rights. 
The following fundamental rights  of the EU Charter are of relevance for these 
measures: the right to an effective remedy and fair trial (Art. 47), presumption of 
innocence and right of defence (Art 48), fr eedom to conduct a business (Art 16), data 
protection (Art 8), consumer protection (Art 38), and – even though Art. 49 on the 
legality and proportionality of criminal offe nces and penalties may not be directly 
applicable to all of the administrative sanc tions envisaged – the general principles of 
legality and proportionality underpinning the Charter.  
In relation to these fundamental rights, th e envisaged measures would ensure that a 
violation of reporting and notification requireme nts would be subject to the same type of 
administrative sanctions across the EU. These uniform rules would particularly ensure that the types and levels of administra tive sanctions that can be imposed are 
proportionate to each specific violation acro ss all Member States. This option will not 
harmonise the national liability regimes a nd will not affect the procedure for the 
imposition of administrative sanctions. Therefore, it will preserve Member States’ current arrangements ensuring compliance with pr ocedural rights such as the right to an 
effective remedy and to a fair trial (Art. 47) , the presumption of innocence and the right 
of defence (Art.48). The obligation to publish sanctions may have a negative impact on the right to protection of personal data (A rt. 8) in regard individuals concerned. 
However, publication of sanctions is an important element in ensuring that sanctions have a dissuasive effect on the addressees and is necessary to ensure that sanctions have 
a dissuasive effect on the general public. 
7.2. Administrative burden 
Abolishing the requirement for quarterly reports and prolongation of deadline for 
publication of the half yearly reports  would bring a significant reduction of 
administrative burden for all the issuers as explained in Section 6 above and would not 
entail any additional costs for regulators. Ta king into account that there is about 12 000 
listed companies in Europe
92, waiving the obligation to present quarterly information 
would bring a potential global cost reduction of about 573 M€, considering only the costs 
of editing, printing and translating the info rmation and not including the potential cost 
reduction linked to preparation of such info rmation, which is difficult to numerically 
estimate but which, according to Annex 2, shoul d be largely superior to other costs 
linked to disclosure of quarterly information. Requiring ESMA to prepare templates or guidance at national level on the narrative content of financial statements would bring a cost reduction for issuers. 
                                                
 
92 Source : European Issuers. 
 
43 The requirement to disclose cash settled deri vatives together with the principle of 
aggregation of holdings of shares with thos e of the financial instruments would entail 
additional costs on off for investors as e xplained in Section 6 above. The ongoing costs 
could not be estimated. However, maximum harmonisation regarding rules for calculation of thresholds and other rules fo r notification of major holdings should reduce 
the ongoing administrative costs for about 77 k€/year/ per operator for the cross border 
investors.  
The implementation of the framework on sanctions will not create an administrative 
burden on companies, which are already toda y subject to sanctioning regimes in all 
Member States. More uniform sanctioning regimes throughout the EU may in fact lead to reduced compliance costs for market particip ants through the simplification of the legal 
framework for cross-border financial institutions.  
The total additional resources for ESMA for th e tasks that would be conferred to it by the 
proposal are estimated to be less than one person a year and should be covered by the 
reallocation of the existing staff. The res ources for the European Commission that would 
arise from exercising its implementing pow ers and monitoring tasks would also be 
covered by the reallocation of the existing staff.  
8.  M
ONITORING AND EVALUATION  
The Commission is the guardian of the Treaty and therefore will monitor how Member 
States have implemented the changes of the Transparency Directive. Where needed, the 
Commission services will offer assistance to Member States for the implementation of the legislative changes in the form of trans position workshops with all the Member States 
or bilateral meetings at the request of a ny of them. When necessary, the Commission will 
pursue the procedure set out in Article 258 of  the Treaty in case any Member State fails 
to respect its duties concerning the implementation and application of Community Law. 
The Commission will be monitoring the applica tion of the Transparency Directive, as 
amended, through ESMA and an extensive and continuous dialogue with all major 
stakeholders, including market participants (i ssuers, investors). It may also use of the 
findings of studies carried out by stakeholders . The main indicators that would be used 
during the evaluation would be the following: 
– Impact of abolition of the requirement  to publish quarterly information on 
issuers and investors; 
– Impact of the new disclosure regime for major holdings on transparency of 
corporate ownership given in particular the possibility that the market develops new financial instruments. 
The evaluation of the consequences of the app lication of the revised Directive could take 
place six years after the entry into force of the legislative measure in the form of a 
Commission report to the Council and the Europ ean Parliament. Indeed, the period of 4 
and half years left for evaluation of the curre nt Transparency Directive proved to be too 
short to obtain informative quantitative figures measuring the impact of the Directive in 
 
44 all the areas concerned93. In order to measure efficiently the impacts mentioned above, 6 
years period seems also appropriate as it is necessary to take into account the possible 
progressive modification of be haviour of the different stakeholders (progressive abandon 
of quarterly information) and the possible de velopment of new financial instruments over 
time.   
ESMA can be usefully involve d in the evaluation process by providing information to the 
Commission on the supervisory practice, the num ber of infringements, actions taken, and 
on any undesired effects the Directive might have on market liquidity or trading. 
                                                 
93  That was one of the conclusions of the Mazars study: see for example the executive summary p. XI. 
 
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49 ANNEX  1 
Detailed analysis: impacts of the policy options   
1. POLICY OPTIONS WITH REGARD TO SMALL AND MEDIUM -SIZED ISSUERS   
1.1. Description, analysis and comparison  of policy options to allow for more 
flexibility regarding the frequency a nd the timing of publication of 
periodical financial information for small and medium-sized issuers 
The options described and analysed in this  Section are not mutually exclusive and 
preferred option could be a combination of di fferent options. In addition to the criteria 
presented in Section 6 of the impact assessm ent document, there is a need to assess the 
impact of the options in this Section, on visi bility of small and medium-sized issuers, on 
reduction of costs for the small medium issuers and the impact on short-termism.  
1.1.1.  Option 1 – No new action 
This option would result in no change to the pres ent situation as described in the first part 
of the baseline scenario in the impact a ssessment document, Section 4.1. This option will 
not achieve the objective. 
1.1.2.  Option 2 - abolish the obligation to pres ent quarterly financial reports and/ or 
interim management statements for small and medium-sized issuers 
(1) Effectiveness 
This option would be effective to achieve th e operational objective at the level of the EU 
legislation. However, removing the requirement for quarterly information in the Transparency Directive would not, under the act ual regime, prevent Member States from 
maintaining an obligation at national level to  publish such information for the small and 
medium-sized issuers.   
Indeed, already today Member States often go far beyond the minimum requirements of 
the Directive and introduce their own additiona l obligations at national level (see Annex 
5). In order to be effective, therefore, th is option should include a provision to prevent 
Member States from re-imposing an analogue  reporting requirement at national level for 
small and medium-sized issuers. Also, as one  of the objectives of the review is to 
eliminate unnecessary administrative burden fo r companies, it has to be ensured that 
Member States do not require more than  necessary i.e. "gold plate". Maximum 
harmonisation concerning this provision will then  ensure that all the listed companies in 
the EU benefit in an equal manner from the reduction of the administrative burden. 
However, 69% of the respondents to the public consultation that provided an answer to 
the relevant question were not in favour of a maximum harmonisation approach if a 
differentiated regime for small listed comp anies were added to the Transparency 
Directive. Some of the respondents underlin ed that if such maximum harmonisation 
approach was implemented, the issuers should be free to publish quarterly information. 
Under this option, even if there is no ma ndatory requirement to publish quarterly 
information, small companies that find it useful  to do so or because they are pressured by 
 
50 their investors or the stock exchanges they c hose to list on, would be able to provide the 
same information as the large companies. 
Therefore, this option would avoid over-regula tion, and at the same time allow issuers to 
adapt their disclosure to the investors' and markets' needs. 
(2) Impact on reducing disclosure costs for small and medium-sized issuers 
This option would enable smaller companies to reduce the costs associated with listing 
on regulated markets by making the publicati on of quarterly financial information 
voluntary rather than mandatory. Those co mpanies which do not estimate useful to 
publish such information could therefore om it quarterly information, and redeploy the 
resources made available elsewhere.  
Preparing financial information has costs in  terms both of additional expenditure for 
printing and editing the reports and allocation of human resources within the company to 
prepare these reports (these costs are further explained in Annex 2).  
The average estimated cost reduction, excl uding costs linked to preparation of the 
quarterly information, is varying from 2 k€ to  60 k€/per year/per issuer for the small and 
medium-sized issuers. The reduction in cost s concerning the staff employed to prepare 
this information could not be estimated in monetary terms for small and medium seize 
issuers: this reduction is varying, per issuer , from 8 man-days/a year to 30 man-days/ a 
year. The costs of preparation of full qua rterly reports according to the accounting 
standards would be much higher as underlined by the respondents to the public consultation. 
Opportunity costs for the management and the Board which have to spend time to 
approve the quarterly information should also be reduced. Smaller companies, by 
definition, have fewer staff than larger comp anies, and their management resources are 
generally stretched already. Removing the oblig ation of quarterly financial information 
will free up management time for other more useful tasks and therefore reduce the “opportunity costs” associated with listing the company's shares on a regulated market. 
(3) Impact on visibility of small and medium-sized issuers   
Some stakeholders consider that reducing the amount of mandatory public information 
for small and medium-sized issuers would have  the effect of diminishing their visibility 
even further. Just because these companies are considered as more risky by investors 
than larger companies, they need to provide  as much periodic information as possible in 
order to counteract this perception and reassure  the market. It is also argued that if a 
lighter disclosure regime is established for small and medium issuers, it will have a negative impact on their visibility.  
However, the potential benefit to be derive d from disclosure of quarterly financial 
information is controversial, and is ofte n considered by the actors themselves as 
negligible. Quarterly financial reports and interim management statements rarely serve the purpose of disclosing market-sensitive information which can change perceptions of fundamental value or trigger price moveme nts, since any material information will 
already have been announced to the market  under on-going disclosure requirements as 
laid down by the Market Abuse Directive. 
 
51 Smaller companies have fewer shareholders  and free float, and their investors are 
generally located in the market where the company has its operations. As a result, for 
many small and medium-sized issuers, firs t-hand knowledge of a company's operations 
plays a far greater role in determining inve stment decisions than access to more formal 
sources of financial information. This expl ains why these companies are among the most 
vocal in denouncing the disproportional cost of  compliance with the current provisions of 
the Transparency Directive94.  
In addition, removing the requirement for quarterly information would allow small 
companies to redirect their resources to other channels and methods for informing investors and intermediaries of events th ey deem important (press releases, ad hoc 
reports, meetings with analysts and investors, site visits, media coverage,…), and to focus their energy on other means they deem be st able to ensure maximum visibility for 
their operations. 
Nevertheless, although the benefits for quarter ly information are questionable, investor 
community could perceive a differentiated tran sparency regime for these companies as a 
wrong signal to the market and thus such a di fferentiated regime could negatively impact 
the visibility of smaller issuers. 
(4) Impact on short-termism 
The emphasis on short-term financial performance has multiple causes, but is the 
obligation to provide quarterly informati on is a regulatory incentive exacerbating this 
culture. By making quarterly reporting vol untary, this option would contribute to 
reducing this pressure on small and medium-sized  issuers, and help create an investment 
environment more favorable to securing l ong-term support for ambitious and innovative 
projects based on an in-depth understanding of the underlying business model. Not only 
small issuers would not be required to disclo se their quarterly financial position but they 
will be also able, if they wish so, to re direct their resources in order to develop 
communications about their long term strategy and values
95.  
(5) Impact on investor protection 
This option would not have a nega tive impact on investor protection. When the interim 
management statements were introduced in 2004, it was decided that full quarterly reporting 
would not be necessary for investor protection in the EU: full quarterly reports are also more costly in terms of burden imposed on listed companies; especially the smaller ones and they could be even a bigger inventive for the short termism than the interim management 
statements are. 
Investor protection is already sufficiently guaranteed through the 
mandatory disclosure of half yearly and year ly results, as well as through the disclosures 
required by the Market Abuse and Prospect us Directives. In fact, Market Abuse 
Directive already requires issuers to disclose inside information as soon as possible to the 
market. This inside information includes a ll information that is likely to have a 
significant effect on the prices of financial instruments listed on regulated markets. In 
addition, Prospectus Directive requires issuers of securities admitted to trading on regulated markets to publish a Prospectus for each new share issuance which increases issuer's capital, subject to some excepti ons. This Prospectus contains financial 
information, including the management's explan ation of factors that have affected the 
                                                
 
94 Mazars (2009), section 2.3.5. 
95   Such form of communication is for exam ple envisaged by CFA Institute: see CFA (2006). 
 
52 company's financial condition and results of operations for the historical periods covered 
by the financial statements, and management's assessment of factors and trends which are 
expected to have a material effect on the company's financial condition and results of 
operations in future periods.  
Therefore, investors should be duly informed about important events and facts that could 
potentially influence the price of the underlyi ng shares independently of the quarterly 
information as foreseen in the Transparency Directive. Other information, which does not need to be disclosed to the market urgen tly, is better disclosed in the yearly or the 
half yearly financial statements which ar e prepared under the accounting standards and 
give high quality information to the invest ors. In contrast, interim management 
statements are not prepared according to the accounting standards and therefore the 
information they provide might be of lower quality. Information disclosed in this kind of reports is also not easily comparable. 
Lack of comparability of information contained in the interim management statements is 
in particular relevant for the small and me dium sized issuers. Indeed, investors (and 
intermediaries) often consider that the ki nd of information small and medium-sized 
issuers disclose is not sufficiently focused and streamlined for it to be easily comparable, thus leading to a discouragingly high research  burden in order for it to be made usable
96. 
There is also a general perception that the total amount of information communicated to 
the markets is currently too high97. Investors often underline that what matters most is the 
quality of information, not the quantity. R ecent research shows that there are many 
circumstances in which interim reporting does not improve accounting quality, sometimes, it even reduces it
98. Thus, it does not seem necessary to mandate disclosure 
of interim management statements in legislation. 
On the other hand, quarterly financial informa tion is considered to be useful by a number 
of stakeholders. The results of the public consultation are non clear cut on this point. The majority of respondents to the public consu ltation find quarterly financial information 
valuable and believe that it enhances the tran sparency and efficiency of the markets. In 
this respect, 59% of respondents to the relevant question in the public consultation believed that waiving the obligation to disclose quarterly financial reports or interim management statements for small listed co mpanies would result in a diminution of 
transparency and would therefore reduce invest ors' protection and confidence.  However, 
100 % of issuers and 50 % of investors who have responded to this question were of the view that this requirement could be abolished for small and medium-sized issuers without negative impact on transparency. T hose respondents that opposed to abolishment 
of quarterly information for small and medium-sized issuers were the stock exchanges (100%), public authorities (90%) and auditors and accountants (100%). One important argument of the respondents to this question, opposed to the removal of the obligation to 
publish quarterly information for small and medium-sized issuers, was that a differentiate transparency regime according to the size of the issuer would confuse the investors.  
According to the external study performed by M azars, the majority of stakeholders in the 
EU (68,8%) consider that publication of qua rterly information is useful for the 
transparency and the efficient functioning of  the market. However, a different result 
                                                
 
96 Such views were for example expressed during the public conference from June 2010: 
http://ec.europa.eu/internal_market/securities/transparency/index_en.htm  
97 See for example: Tomorrow's Corporate Reporting (2011). 
98  Schiller and de Vegt (2010). 
 
53 comes from three important capital markets in the EU: 66,7% of the stakeholders from 
the UK, 50 % from Luxembourg and 44% from Fr ance consider that this information is 
not useful99.  
Whereas quarterly information could be usef ul for a number of investors, it does not 
seem necessary to guarantee investor protec tion, as explained above. Therefore, it seems 
possible to leave to the market and to issuers themselves to decide on whether it is useful 
to provide such information on the market or not.  
If there is no mandatory requirement to  publish quarterly information, small and 
medium-sized issuers will be free to publish wh atever information they consider will be 
most useful for their investors and analysts, who in turn will be able to engage in a 
dialogue with them about what information they most need, and to “vote”, via their 
capital allocation decisions, against those companies which do not take their criteria into account. 
However, 60% of respondents to the public cons ultation that have provided an answer to 
the relevant question believe that a differentiated regime for small listed companies would result in a perceived gap in investor protection.  
(6) Efficiency 
This option would entail costs for regulators li nked to the need to periodically check the 
size of the companies which do not publish quarter ly financial reports to ensure that they 
remain eligible for this exemption. These co sts could not be estimated as they would 
depend of the method retained to define a small and medium-sized issuer.  
1.1.3.  Option 3 – abolishing the obligation to present quarterly financial reports and/ 
or interim management statements for small and medium-sized during an initial 
period of 3 years after admission to trading   
In his report, Demarigny
100 proposed that the publication of Quarterly Interim 
Management Statements should become compul sory for small and medium-sized issuers 
only after three years of admission to tradi ng on a regulated market. Such an option was 
also put forward by some respondents to the public consultation.  
(1) Effectiveness 
This option would be less effective to achieve the operational objective as it would only 
temporarily alleviate the requirement to publish quarterly reports. Similarly to Option 2, in order to be effective, this option should include a provision to prevent Member States 
from re-imposing an analogue reporting requirement at national level.  
(2) Impact on reducing disclosure costs for small and medium-sized issuers 
This option would allow cost savings only during the first three years after admission to 
trading. Therefore its impact to reduce costs for small and medium-sized issuers will be 
limited.  However, the first three years of listi ng are the most critical for issuers in terms 
                                                
 
99  See Mazars (2009) section 2.6.3 and Annex 5. 
100 Demarigny (2010) p. 26, Recommendation Number 9. 
 
54 of burdens and therefore it is especially important to reduce costs for the newly listed 
companies.  
(3) Impact on visibility of small and medium-sized issuers   
The same impacts as these described for Op tion 2 apply for this option. It could be 
argued that newly listed companies need to provide even more information than the 
others in order to increase their visibilit y. However, as for Option 2, their operational 
transparency could be more appropriately ensured through information and material event disclosure requirements, rather than through a further layer of financial reporting 
obligations. Nevertheless, creating a differentia te regime for these companies could have 
a negative impact on their visibility. 
(4) Impact on short-termism 
This option would, compared to the other options, have a more limited impact on short-
termism as it would apply to limited number of listed companies and for a limited period of time. 
(5) Impact on investor protection  
The same impacts as these described for Option 2 would apply. Nevertheless, 
introducing a different transparency regime acco rding to the size and the age of an issuer 
operating in the same regulated market could potentially be confusing for investors. Also 
some stakeholders argue that quarterly info rmation is mostly necessary during the first 
three years after admission of trading. Before introduction of quarterly information in the 
Transparency Directive, in the UK, quarter ly reporting was for example required only for 
companies with a listing track record of less than three years. 
(6) Efficiency 
This option would entail costs for regulators li nked to the need to periodically check the 
size and the age of the companies which do not publish quarterly financial reports to 
ensure that they remain eligible for this exemption.  
1.1.4.  Option 4 – abolishing the obligation to  present quarterly financial reports for 
all listed companies   
(1) Effectiveness  
This option would be as effective as Opti on 2 in achieving the operational objective. In 
addition, if the requirement for quarterly information is abolished for all listed companies, there will be less pressure on small listed companies to produce quarterly 
reports.  
However, as for Option 2, simply abolishing this obligation at EU level would not 
prevent Member States from maintaining an obligation at national level to publish 
quarterly financial information. In order to be effective, Option 4 should therefore also 
prevent Member States from re-introducing such a requirement at the national level.  
This option would, however, leave it open for the companies themselves to publish this 
information if they deem it useful for their investors or analysts. 
 
55 For larger companies, it can be considered th at, whatever their legal obligations are, the 
majority would continue to publish quarterly financial information as at present if there is a demand from analysts, investors and stock exchanges on which they chose to list
101 and 
in order to maintain their 'brand' image.  
(2) Impact on reducing disclosure costs for small and medium-sized 
issuers 
Option 4 would produce the same cost reducti ons for small and medium-sized companies 
as under Option 2 described above. The av erage estimated cost reduction, excluding 
costs linked to preparation of the quarterly  information, is varying from 35 k€ to 250 
k€/per year/per issuer for large issuers. The maximum total cost reduction (including 
costs linked to the staff involve d in preparation of these reports) could be estimated as 
being maximum 2 M €/per year/per issuer (See Annex 2). Although, if larger companies 
continue to publish quarterly financial info rmation in practice (as described under (1) 
above), this cost reduction would only concern minority of large issuers. 
The positive impact for the small and medium-s ized issuers could also be mitigated by 
the possibility of "coordination failure": i.e small and medium-sized issuers may wait for 
each other to modify the frequency of thei r reporting. Nevertheless, the proposed Option 
should send a strong signal to the market and stimulate a debate which should encourage 
behavioural changes. 
(3) Impact  on the visibility of small and medium-sized issuers   
Option 4 would have the same effect in this respect as would Option 2 described above.  However, Option 4 would avoid the possible negative impact on the visibility of small 
and medium-sized issuers that could be id entified under Option 2: the same rules would 
apply to all listed companies, irrespective of their size, avoiding the risk that the visibility of small and medium-sized issuers is hamper ed by a lighter transparency regime applied 
to them. 
(4) Impact on short-termism   
Option 4 would produce the same results as  would Option 2, described above.  Short-
term performance pressure on management and investment strategies has negative 
consequences for small as well as for large issu ers, even if it is particularly harmful for 
smaller emerging companies. Consequently, the benefits described under Option 2 above 
would also potentially extend to a far larger  number of companies. Removing mandatory 
quarterly information for all issuers would thus be coherent with recent Commission 
initiatives encouraging financial institutions and issuers to establish incentives for a longer-term vision
102. 
                                                 
101 There is for example a distinction between pr emium and standard listing for example in UK or 
Germany.  Premium listing is addressed mainly to  the biggest listed compan ies which accept to follow 
stricter rules in order to benefit from the "premium listing" label.   
102  The European Commission has, for instance, recommended that remuneration of directors in issuers and financial institutions takes into account the l ong term behaviour of companies. See European 
Commission Recommendation 2009/384/EC of 30.4.2009 on remuneration policies in the financial 
services sector , OJ L 120, 15.5.2009, p. 22; and Commission Recommendation 2009/385/EC of 
30.4.2009 complementing Recommendations 2004/913/EC and 2005/162/EC as regards the regime 
 
56 (5) Impact on investor protection   
Option 4 will potentially produce the same imp act on investor protection as described 
under Option 2, although the number of companies to which Option 4 would apply would be greater. However as the same rules will apply to all issuers irrespective of their size, there is no risk of confusion of investors as identified under Option 2 and 3.  
(6) Efficiency  
Option 4 should have the same impact on efficiency as described under Option 2 above. 
However, Option 4 would avoid the need for s upervisors to periodically check the size of 
the companies which are allowed not to publish quarterly financial information, as all companies will be exempted from such re quirement. Consequently, Option 4 will be 
more efficient as compared to Options 2 and 3 with regard to related costs for supervisory authorities. 
1.1.5.  Option 5 – extending the deadline for pub lishing the half yearly reports to 3 
months after the end of the respective reporting period for all listed companies   
(1) Effectiveness  
This option leaves flexibility to the issuers to publish their half yearly rapports at the 
time that they consider to be the most suitabl e, within the limits of  the extended deadline. 
In order to be effective, this option shoul d not allow Member States to shorten the 
deadline of publication of half yearly reports.  
(2) Impact in reducing disclosure costs   
A quarter of respondents to the relevant ques tion in the public consultation believed that 
extending the deadline of publication of fina ncial reports, in particular, half-yearly 
reports, would result in a reduction in costs for issuers. The following types of costs which could be reduced were mentioned: the burden on boards and senior management 
(opportunity cost); accounting costs (e.g. less need to hire external staff/consultants in certain periods for accounting needs because wo rkload of internal staff would be better 
spread throughout the year, less overtime paid);  auditing costs (e.g. easier for auditors to 
cope with the work); extra hours (both of in-house staff and of external auditors).  
However, it seems that the monetary cost reduction linked to the extension of deadline 
for publication of half-yearly reports would be marginal (about half of the respondents 
did not believe that an extension of the deadline for publication of financial reports would result in any significant cost reduction). 
Nevertheless, some of the respondents to the public consultation were enthusiastic about 
the non-monetary advantages, in particular gr eater flexibility that could result from an 
extension of the deadline for the publication of half-yearly reports from two to three 
months. This would enable the issuers to better organise the necessary work, relieve 
                                                                                                                                                
 
for the remuneration of directors of listed companies , OJ L 120, 15.5.2009. See also European 
Commission Green Paper "Corporate governance in fina ncial institutions and remuneration policies" 
COM(2010) 284 from 2 June 2010 and European Commission Green Paper  "The EU corporate 
governance framework" COM(2011) 164 from 5 April 2011. 
 
57 administrative complexities, improve the quality of the output and secure the services of 
auditors. 
(3) Impact on visibility of small listed companies 
This option would contribute to solve the i ssue of visibility described in Section 3.2.1.4. 
Indeed, this Option would avoid that the publi cation of the reports falls in the month of 
August where the market activity is reduced, wh ich is now the case for the majority of 
listed companies, as explained in Section 3. Therefore, it would leave more time for analysts and investors to look at and analyse the half-yearly results of issuers, including 
the smaller ones. In addition, small and medium-s ized issuers will be able to adjust more 
easily the timing of publication of their reports so as not to fall at the same time as the 
disclosure of the reports by large listed companies. 
This option goes also into the direction indicated by the respondents to the consultation: 
it provides for the same rules for all listed compan ies. It avoids the risk that visibility of 
smaller listed companies would be hampered by lighter transparency regime applicable to them. 
(4) Impact on short termism   
This option should not have any impact on short termism. 
(5) Impact  on investor protection  
Some stakeholders express negative views on the possibility of extending the deadline 
for publication of financial information as being damageable to investor protection. 
According to them, late publication of financia l reports could lead to the circulation of 
outdated information which is less valuable to  the market and would increase the risk of 
market abuse.  
However, this argument is not convincing. Info rmation that could lead to market abuse 
has in any event to be disclosed according to the Market Abuse Directive. In addition, any new issuance of listed securities has to be accompanied by updated financial information according to the Prospectus Di rective. Therefore, investors should be 
provided with all necessary information that has to be taken into account in a short period of time. This option also gives issuers extra tim e to draft their reports which could in turn 
improve the quality of the output and theref ore could be beneficial for investors' 
protection. 
Again, as previously described, the majority  of respondents to the public consultation 
call for a single set of rules for disclosure, i rrespective of the size of  issuers. A single set 
of rules would better insure investor protection. This option is on line with this approach. 
(6) Efficiency 
This option should not entail any additional co sts for issuers or supervisory authorities 
and is therefore cost-efficient. 
 
 
58 1.1.6.   Option 6 - extending the deadline for pub lishing half yearly reports to 3 months 
after the end of the respective reporting period for small and medium-sized 
issuers  
(1) Effectiveness 
This option would extend the current deadlin e for the publication of the half-yearly 
financial reports for small and medium-sized  issuers and leave the current deadline of 
two months unchanged for larger companie s. The suggestion of having different 
deadlines for smaller listed compan ies has been recommended by IOSCO103 and is 
currently practiced in the US104. It is also recommended in the External Study in order to 
enhance market efficiency105. This option will be efficient to achieve the operational 
objective if Member States are not allowed to  shorten the deadline of  publication of half-
yearly reports for small and medium-sized issuers. 
(2) Effectiveness in reducing disclosure costs  
The same as for Option 5. However, the cost reduction will concern a more limited 
number of companies.  
(3) Impact on visibility of small listed companies 
This option is expected to have a positive impact on the visibility of small and medium-
sized issuers: as the half yearly reports w ill not be issued at the same time for all the 
companies, this will avoid the bottleneck of the financial reports and users would be able to devote more time to analyse the results of the small and medium-sized issuers. However, as explained above, a similar result could be achieved by extending the 
deadline for all issuers.  
(4) Impact on short-termism   
This option should not have any impact on short-termism. 
(5) Impact on investor protection  
The impact on investor protection should be the same as for Option 5. However, this 
option introduces a differentiation of rules according to the size of an issuer. Such 
different rules could be confusing to the investors.  
(6) Efficiency 
This option entails a cost for the regulators li nked to the need to check the size of the 
company subject to the extension of the d eadline for publication of financial reports on 
regular basis. As compared to Option 5, this option would therefore be less cost-efficient. 
1.1.7.  Conclusion 
Given that quarterly information is not necessa ry in order to ensure investor protection, 
that this requirement has relatively high costs and the fact that it makes a non-negligible 
                                                
 
103  IOSCO (February 2010), p.23. 
104  See Annex 5. 
105  See Mazars (2009), Possible Improvement n°4. 
 
59 contribution to the short-term pressure on a ll issuers, it does not appear desirable to 
maintain a legal obligation on issuers at EU level to publish such information (Option 4).  
While the main target of this action are sma ll and medium-sized issuers, the majority of 
respondents to the public consultation believe that it is not desirable to have differentiated regimes for company listed on re gulated market according to their size, as 
this could undermine investors' protection. It would therefore be pref erable to adapt the 
standard regime to make it better suited to the needs of smaller companies, rather than to introduce a separate regime based on the size of the issuer.  
There is also some evidence that the deadline of publication of half yearly reports could 
be prolonged for all listed companies. Option 5 should have a positive impact on 
visibility of small and medium-sized issuers.  It will also reduce co sts for all the listed 
companies but specifically for the small and medium-sized issuers without having 
negative impact on investor protection.  
In addition, Options 4 and 5, which foresee a single voluntary regime for all companies, 
regardless of size, represent the most effici ent options as compared to related costs. 
These options are also proportionate to achieve the operational objectives as they bring significant benefits for small and medium-sized  issuers without creating a specific set of 
rules for disclosure of periodic information acco rding to the size of the issuers that could 
have negative effects on investor protection and that could entail costs for regulators. 
It would therefore seem that Options 4 a nd 5 are the best policy option, Options 1, 2, 3 
and 6 should therefore be rejected. 
 
60  
Table 1: Impact of options to allow for mo re flexibility regarding the frequency and the 
timing of publication of periodical financial information for small and medium-sized issuers 
Options Effectiveness  Impact on 
reducing 
disclosure 
costs for small 
and medium-
sized issuers Impact on 
visibility of 
small and 
medium-sized 
issuers   Impact on 
short-termism Impact on 
investor 
protection Efficiency 
Option 1:  
No new action  = = = = = = 
Option 2: 
Abolishing  the obligation 
to present quarterly financial reports and/ or interim management statements (IMS) for small and medium-sized issuers
 ++ ++ =/- + - + 
Option 3:  
Abolishing the obligation to 
present quarterly financial reports and/ or IMS for small and medium-sized issuers during an initial period of 3 years after admission to trading
 + + =/- = - + 
Option 4:  
Abolishing the obligation 
to present quarterly financial reports and/ or  IMS for all listed companies
 ++ ++ = ++ = ++ 
Option 5 :  
Extending the deadline for 
publishing half yearly reports to 3 months after the end of the respective reporting period for all listed companies
 ++ + + n.a. = ++ 
Option 6: 
Extending the deadline for 
publishing half yearly reports to 3 months after the end of the respective reporting period for small  and medium-sized issuers
 ++ + ++ n..a =/- + 
Magnitude of impact as compared with  the baseline scenario: ++ strongly positi ve; + positive; – – strongly negative; 
– negative; = marginal/neutral; ? uncertain; n.a. not applicable 
 
61 1.2. Description, analysis and comparison  of policy options to simplify the 
narrative parts of financial reports for small and medium-sized issuers 
In addition to the criteria presented in Secti on 6, there is a need to assess the impact of 
the options on visibility of small and medium -sized issuers and on reduction of costs for 
the small medium issuers. 
1.2.1.  Option 1 – No new action 
This option would result in no change to the pres ent situation as described in the first part 
of the baseline scenario in the impact a ssessment document, Section 4.1. This option will 
not achieve the objective. 
1.2.2.  Option 2 - Harmonising the maximum cont ent of narrative parts of financial 
reports at the EU level for small and medium-sized issuers 
The following disclosure requirements were id entified (in addition to the obligation to 
publish quarterly reports as described above) by the respondents to the public consultation as particularly complex for sm all listed companies with regard to the 
narrative content of financial reports: compliance with the corporate governance 
requirements and corporate social responsibility disclosures. The obligations that fall on small listed companies could be made simpler if the narrative part of the annual financial report and of half-yearly were subject to maximum harmonisation at EU level.  
(1) Effectiveness 
This option would be effective to achieve  harmonised standards for narrative reporting 
which could simplify the current obligations fo r small and medium-sized issuers in some 
Member States. However, it could make the content of these reports more complicated 
for the small and medium-sized issuers locat ed in the Member States where currently 
only a limited amount of information has to be provided.  
(2) Impact on reducing disclosure costs for small and medium-sized 
issuers 
Some respondents to the public consultation considered that a measure of cost reduction 
could be achieved by this means. In particul ar, internal administrative costs could be 
reduced because it would be possible to partly  automate the process of preparing reports. 
Still, most respondents could see no scope fo r cost reductions arising from maximum 
harmonisation of narrative reports for small a nd medium-sized issuers. On the contrary, 
according to these respondents, maximum harm onisation across Europe of the content of 
narrative reports could lead to an increase in  financial reporting obligations, and hence in 
compliance costs, for those small and medium-sized issuers which for the time being have to provide a limited number of information in these narrative reports. 
(3) Impact on visibility for small and medium-sized issuers 
Maximum harmonisation at the EU level could increase the visibility of small and 
medium-sized issuers at the EU level as the information disclosed would be more 
comparable and could be more easily analysed by the cross border investors.  
(4) Impact on investor protection  
 
62 On the other hand, whilst maximum harmonisati on at the EU level would allow for more 
comparability of information for cross bor der investors and thus facilitate their 
investment decisions, respondents to the public  consultation highlighted that the quality 
of the narrative reporting was crucial for investor s. If the threshold at  the EU level for the 
content were set too low in the hope of saving costs, this may have negative implications 
for investors. 
(5) Efficiency  
Harmonising the content of narrative reports should not entail any additional costs for 
supervisory authorities. However, as described above, this option could entail additional costs for some small and medium-sized issuer s as compared to the current situation and 
thus not be cost-efficient and even be contrary to its objective.  
1.2.3.  Option 3 - Require ESMA to prepar e non binding guidance (templates) on the 
narrative content of the financial reports for all listed companies 
(1) Effectiveness  
Instead of harmonising the content of the narra tive reports in the EU legislation for small 
and medium-sized issuers, ESMA could be required to design non-binding guidance 
(templates) for such reports for different cat egories of listed companies. When preparing 
the guidelines, ESMA should take into account in particular the capacities of the small 
and medium-sized issuers. Most respondent s to the relevant question in the public 
consultation saw some value in the possible preparation of ready-to-use templates for 
narrative disclosures, provided they were not  mandatory. This option would be therefore 
effective to achieve the operational objective.  
(2) Impact on reducing disclosure costs for small and medium-sized 
issuers 
This option could achieve cost savings for all the categories of issuers which would 
decide to use such templates. The cost sa vings should be higher for small and medium-
sized issuers which do not have internal cap acities to prepare such reports and which 
normally have to outsource this task, including the legal review for compliance. These companies could use the template which will facilitate the drafting of the reports, and 
therefore spare the external legal and co mpliance advice. On the other hand, as the 
templates would not be binding, the issuers not  willing to use them because they would 
consider that they increase their costs, would not be required to do so.  
(3) Impact on visibility for small and medium-sized issuers 
The use of templates prepared at the EU level could increase the visibility of small and 
medium-sized issuers in the EU as the info rmation disclosed would be more comparable 
and could be more easily analysed by the cross border investors.  
(4) Impact on investor protection  
Some respondents to the public consultation considered templates for narrative 
disclosures as likely to result in box-ticking disclosures. However, it seems that well 
designed non mandatory templates could str eamline the narrative reporting in order to 
make it better suited to the investors' need s.  ACCA in its report on narrative reporting 
underlines that even though 88% of the responde nts to its survey "considers shareholders 
 
63 to be the most important audience, legal and regulatory requirements are considered 
equally important drivers of narrative reporting"106. It is therefore important that the 
templates find a good balance between regul atory requirements and needs of the 
investors. The templates should therefore be adapted to the size of the issuers, thus 
providing investors with tailor-made informa tion and giving a minimum guarantee as to 
the quality of such information. As underlin ed by ACCA, the globalisation of business 
has led to calls for greater consistency in th e information provided to stakeholders across 
jurisdictions107. This option should respond to this call as it would improve the 
comparability of information for cross bor der investors and thus facilitate their 
investment decisions. 
(5) Efficiency 
Developing the templates for the content of narrative reports could entail some costs for 
ESMA. These costs are on-off costs of prepari ng the template and are not expected to be 
significant. This option should reduce costs for issuers as compared to the current situation. It seems therefore to be proportionate and cost-efficient.   
1.2.4.  Option 4 – Require Member States to prepare non binding templates or 
guidance at national level on the narrative content of financial reports for all 
listed companies 
(1) Effectiveness  
Each Member State will be able to adapt the templates to its internal market, taking into 
account the local legal requirements. This option would therefore be effective to achieve the objective of simplifying the preparation of  reports of narrative nature for small and 
medium-sized issuers. 
(2) Impact on reducing disclosure costs for small and medium-sized 
issuers 
National templates should achieve cost reduc tion and they will be adapted to local 
market conditions. The savings achieved should be particularly beneficial for the small 
and medium-sized issuers as these issuers ha ve more difficulties in preparing disclosures 
of narrative nature.  
(3) Impact on visibility for small and medium-sized issuers 
The use of national templates could increase the national visibility of small and medium-
sized issuers but will not help solving the issu e of lack of cross border visibility for this 
category of issuers.  
(4) Impact on investor protection  
This option should not have a negative imp act on investor protection. Member States 
would be in good position to prepare templates or guidelines that are adapted to their 
legal environment and that ensure the same level of information for users. The templates would be adopted taking into account the size of  the issuers and the local particularities. 
                                                
 
106  ACCA (2010). 
107   ACCA (2010). 
 
64 For example special guidelines are available in France for small and medium-sized listed 
companies108.  However, under this option, ther e will be no more comparability of 
information than there is a case today and therefore cross border investment decisions 
will not be facilitated. 
(5) Efficiency  
Costs linked to the establishment of such te mplates will be borne by Member States. The 
total costs across the EU should be higher as compared to Option 5. 
1.2.5.  Conclusion 
Option 3 requiring ESMA to prepare non-bindi ng guidance for narrative reporting is the 
best option to achieve the operational objec tive, it could help improving cross border 
visibility of small and medium-sized issuer s without undermining the investor protection. 
This option is also the most proportionate option to achieve the objective and it respects 
the principle of subsidiarity.  
Table 2: Impact of options to simplify the narra tive parts of financial reports for small and 
medium-sized issuers 
Options  Effectiveness Impact on 
reducing 
disclosure costs 
for small and 
medium-sized 
issuers Impact on 
visibility of small 
and medium-
sized issuers Impact on 
investor 
protection Efficiency 
Option 1: 
No new action = = = = = 
Option 2: Harmonising the maximum 
narrative content of financial reports at the EU level for small and medium-sized issuers 
- - ++ - + 
Option 3: 
Requiring ESMA to prepare 
non binding guidance (templates) on narrative content of the financial reports for all listed companies ++ ++ ++ + ++ 
Option 4: 
Requiring Member States to 
prepare non-binding templates or guidance at national level on the narrative content of financial reports for all listed companies  ++ ++ + = + 
Magnitude of impact as compared with  the baseline scenario: ++ strongly positi ve; + positive; – – strongly negative; 
– negative; = marginal/neutral; ? uncertain; n.a. not applicable   
                                                 
108  In France there is a supplementary Corporate Govern ance Codes prepared by Middlenext applicable to 
small and mid caps. 
 
65 2. POLICY OPTIONS TO IMPROVE THE REGIME FOR NOTIFICATION OF MAJOR 
HOLDINGS  
2.1. Policy options to eliminate the gaps in requirements for notification 
 concerning major holdings of voting rights  
In addition to the criteria presented in Secti on 6, there is a need to assess the impact of 
the options on market liquidity and efficiency and on the market for ownership control. 
2.1.1.  Option 1 - No new action  
This option would result in no change to the present situation as described in the second 
part of the baseline scenario in the impact  assessment document, Section 4.1. This option 
will not achieve the objective. 
2.1.2.  Option 2 – Broad regime: disclosure regi me extended to all instruments of 
similar economic effect to holdings of shares and entitlements to acquire shares  
This option would include a general provision in the Transparency Directive that would 
require notification of all instruments of si milar economic effect to holdings of shares 
and entitlements to acquire shares. The intenti on would be to cover all instruments that 
could be used to create an economic interest  in shares listed on regulated markets. It 
would capture cash-settled derivatives as well as any other similar financial instruments not yet available on the markets to take account of financial innovation. This general 
principle should be subject to exempti ons (see Annex 6 for the possible list of 
exemptions) in order to avoid providing the ma rket with irrelevant information and spare 
notification costs for market players wh ich by definition should not exercise any 
influence on voting policies or acquire a secret stock in the underlying company.  
This option is supported by the vast majority  of respondents to the public consultation 
(81% of respondents to the relevant question)  which considered that the disclosure of 
holdings of cash-settled derivatives would be be neficial to the market. A broad approach 
similar to the one proposed in this option was adopted by the UK in 2009 and more recently by Portugal. Germany is planning to adopt a similar approach. Italy is 
considering also such an approach (see Annex 7).   
(1) Effectiveness in enhancing the transparency regarding corporate 
ownership  
The benefits of such disclosure are underlined by many respondents to the public 
consultation and by CESR (ESMA) in its proposal to extend major shareholding notifications to instruments of similar ec onomic effect to holdings of shares and 
entitlements to acquire shares
109.  Benefits similar to those described below were also 
identified by the British regulator: the Fina ncial Services Authority (FSA) in the 
Consultation and draft Handbook text concerning "disclosure of contracts for difference"
110.  
According to the Commission services anal ysis and to the results of the public 
consultation, this option would enhance transpar ency of holdings of economic interest in 
shares, therefore reducing the possibility of  hidden ownership and creeping control as 
                                                 
109  CESR, (January 2010). 
110  FSA 07/20 (November 2007). 
 
66 companies and the market would have a clearer  idea of who holds key interests in listed 
companies. It would help issuers to identify their potential shareholders, leading to more 
effective communication of issuers with inve stors, shareholders and the market. This 
option will also lead to less information asymmetry, reducing the volatility of share price and lowering cost of capital. On the othe r hand, it will improve market efficiency, 
reducing the possibility for holders of cash-settled derivatives to benefit from not having to pay a premium on the share price in case of a future take-over. 
In addition, it will help addre ss the practice of empty voting
111, provide useful 
information to the market on free float of the issuer and improve legal certainty as to which instruments need to be notified across the EU. This option will therefore 
efficiently address the problems described in Section 3.2.2.2. and help preventing cases 
described in the Annex 8 (e.g. LVMH/Hermes, Porsche/VW, Schaeffler/ Continental). 
However, it also has been argued by some respondents to the public consultation that the 
introduction of a disclosure regime for cas h-settled derivatives could jeopardize the 
efficiency of the current transparency regime. Cash-settled derivatives are in most cases used for their primary purpose of hedging st rategy and not in order to acquire hidden 
ownership. The latter are isolated cases and do not represent the common situation on the 
market. Requiring systematic disclosure of such derivative positions would have as a result to overwhelm the market with useless information, which will not help to form a 
correct view of the real economic ownership of the underlying shares. 
Also, according to the FSA consultation paper
112, too much disclosure can cause 
problems for market participants in their unde rstanding of the true position in relation to 
control of companies and can, therefore, harm  transparency. Specifically the disclosure 
could lead to: (i) confusing the investor co mmunity as to who holds underlying interests 
and the motives behind acquisitions and dispos als; (ii) complex situations where the 
community tries to second guess potential sh areholdings creating a false feeling of 
interest/disinterest in the market; (iii) increasing volatility in the market.  
However, in its response to the public consultation, the FSA underlined that "the UK has 
not witnessed a dramatic increase in announcements and the market has adapted efficiently to the additional obligations placed on them". Also, the potential negative effects can be mitigated by providing for ex emptions in cases where the use of cash-
settled derivatives is a common market practi ce. In the UK, for example, the number of 
announcements was mitigated by the fact that the UK has implemented a Client Serving Intermediary exemption that allowed write rs of CFDs to disapply the aggregation 
requirement in certain specific circumstances.  
(2) Impact on market liquidity and efficiency 
Requiring notification of cash-settled derivatives could in theory have a negative impact 
on market liquidity.  
                                                
 
111  By better informing the market on the actual holders of economic interest in shares, this  option would 
help identify holders of voting rights which do not hold the corresponding economic interest in the shares ("empty voting") and therefore could use their votes in the detrimental manner to the invested company.  
112  FSA 07/20 (November 2007). 
 
67 According to AIMA, which represents the he dge fund industry, disclosure of holdings of 
all types of financial instruments would rev eal to the market the strategies of hedge 
funds, allowing other actors to replicate th e trading strategies of leading players113.   This 
would reduce the incentive for hedge funds to undertake fundamental research and engage in activism, both of which carry with  them considerable costs. Hedge funds will 
low their participation in companies below the threshold for notification in order to avoid 
disclosure and thus reduce their trading ac tivity, which may in turn have an adverse 
impact on market liquidity. 
Since it would appear that hedge fund activ ism benefits existing shareholders and 
increases market efficiency, new disclosure  requirements which would discourage hedge 
fund activism may have a negative impact on the underlying objective
114. These possible 
negative impacts were considered by the UK FSA the Consultation and draft Handbook text concerning "disclosure of contracts for difference" (CfD).  
FSA recognised, that "increased disclosure  of all significant CfD positions potentially 
has impacts on the activity of hedge funds a nd other investors who seek to profit from 
undertaking research and exploiting ar bitrage opportunities. New disclosure 
requirements could influence investment strategy, causing hedge funds to take holdings below the disclosable thresholds in order that other investors do not observe and copy 
their investment decisions and strategies. This could reduce hedge fund activity and profitability. More importantly this could re duce the incentives of market participants 
such as hedge funds to undertake research and arbitrage activities. In turn this could have  
a negative impact on market efficiency. This is because the research and arbitrage activities of hedge funds generally improve market efficiency.
 115" 
FSA considered also that "a drop in demand for CfDs may reduce demand for the 
underlying shares. This could in theory re duce liquidity in the underlying share and 
therefore increase the cost of capital"116. However, information we have further received 
from the FSA proves that in the UK there were  no voices from market participants about 
any experienced negative impact on liquidity. Therefore, there is no reason to believe 
that the regime implemented in the UK had a negative impact in this area.  In addition, 
this option would improve market efficien cy by reducing information asymmetry and 
thus contributing to a formation of a fair price for underlying shares. 
(3) Impact on the market for ownership control 
Imposing disclosure of holdings of cash-settled derivatives could have an adverse impact 
on contestability of control of listed compan ies and could outweigh the benefit of an 
increased transparency. It has been argued, for instance, that during a takeover bid, the 
obligation to disclose interests in derivativ es at an early stage could detrimentally 
increase the price of shares in the target company, rendering it unviable, and, if the target 
company is on notice, it may wish to defend the bid. 
The management of listed companies may also use enhanced information on stake-
building through derivatives to protect its own in terests, rather than those of the company 
                                                 
113  Schouten (2010), Letter from the Alternative Investment Management Association (AIMA) to the 
FSA (Feb. 12, 2008). 
114  Schouten (2010), Hu and Black (2006). 
115  FSA 07/20 (November 2007), Annex 1 p.9. 
116  Ibid 
 
68 and its shareholders. For instance, some US  companies explicitly include derivatives 
when calculating the level of beneficial ownership that triggers the "poison pill"117.  A 
"poison pill" is a type of defensive tactic used by the management of a company to prevent takeover bidders from negotiating a pr ice for sale of shares directly with 
shareholders, and instead forcing the bidder to  negotiate with the board. This typically 
involves a scheme whereby shareholders will have the right to buy more shares at a 
discount, if one shareholder buys a certain per centage of the company's shares. The plan 
could be triggered, for instance, when any one  shareholder buys a certain percentage of 
the company's shares (or derivative instrume nts), at which point every shareholder will 
have the right to buy a new issue of shares at a discount. 
Such poison pills are controversial because they hinder an active market for corporate 
control and allow management to enrich th emselves as management may have to be 
compensated for the price of consenting to a takeover. However, some stakeholders consider, on the opposite, that the practice of poison pills would rather increase due to 
the current lack of disclosure of cash settled derivatives . According to this view, if the 
uncertainty over the notification of economic ow nership remains at European level, listed 
companies will be encouraged to extend th e control and economic ownership rules in 
their articles of association to include the use of cash–settled derivatives or seek short-
term approval form shareholders to implement poison pills that capture derivative positions as a best available solution to the problem of hidden ownership
118.   
Also, according to our information, FSA does not believe that the disclosure of cash 
settled instruments have had any negative impact on takeovers in the UK.  
(4) Investor protection 
Increased transparency of corporate owne rship will have a strong positive impact on 
investor protection. It will decrease inform ation asymmetry and contribute to protect 
investors from market price manipul ation by hidden stock-building. Minority 
shareholders will also benefit in case of a take-over as potential bidders will have to pay the take-over premium for the shares of the underlying company.  
(5) Efficiency  
The new disclosure regime covering all types of  financial instruments equivalent to share 
ownership might cause an increase of the organizational and compliance costs for holders of these instruments. As explaine d in Annex 2, the maximum estimated one off 
costs are from 100 k€ to 600 k€ per holder of cash settled derivatives (but they would 
concern only investors who hold significant numbe r of these instruments). It is estimated 
that the most significant holders that woul d mainly incur the one off costs should be 
essentially the hedge funds and the investment banks
.  For the investment banks, the one 
off costs could be higher as they will need to  put in place a more sophisticated internal 
process. The ongoing costs of the requirement to disclose the holdings of the cash settled derivatives could not be estimated as th ey would vary depending on the increase per 
holder of the number of disclosures in practice.  It has to be noted that these costs would 
only apply for holders located in the Member States where there is not yet a requirement to disclose the cash settled derivatives.  
                                                
 
117 Schouten (2010),  Lemos-Stein (2008). 
118  Corporate Governance Research (2010). 
 
69 2.1.3.  Option 3 - Limitative approach: disclosure  not required in case "safe harbor" 
criteria are met 
Such an alternative approach is considered by CESR (ESMA) in its proposal to extend 
major shareholding notifications to instrument s of similar economic effect to holding of 
shares and entitlements to acquire shares. However, it is not the preferred approach for ESMA. This option would mean that all inst ruments that potentially give access to the 
underlying voting rights would require disclosu re unless 'safe harbour' requirements are 
met, such as, for instance: 
(a) The agreement with the writer of the financial instrument explicitly precludes the 
holder from exercising or seeking to exercise the underlying voting rights;  
(b) The agreement excludes any arrangements or understandings in relation to the 
potential sale of the underlying shares;  
(c) An explicit statement is made by the hol der that there is no intention to use the 
financial instrument to seek access to the voting rights.  
A similar approach was analysed by the UK FSA in the Consultation and draft Handbook 
text concerning "disclosure of contracts for difference"
119.  
(1) Effectiveness in enhancing the transparency regarding corporate 
ownership  
If correctly implemented, this option should be  as effective as Option 2 described above. 
However, the effective implementation of th is option could be problematic. Even if 
robust contractual agreements were created regarding explicit influence over voting rights and disposal of shares, it would be possible to circumvent the purposes of the 
disclosure obligation
120 simply by changing the contr act terms of the instrument 
immediately prior to the contract being closed121. Also, such a regime would be partly 
based on the disclosed initial intention of the hol der of the instrument. This means that (i) 
a holder may change its initial intention and (ii) even if holders might comply strictly with the terms of contractual arrangements,  it would not with certainty prevent the 
building up of stakes on an undisclosed basis. 
CESR (EMSA) and ESME consider in their re spective analyses that such an approach 
that creates a ‘safe harbour’ for certain t ypes of contractual agreements would be 
unworkable in practice
122. FSA initially did not reject this approach. However, further to 
its public consultation, FSA concluded that this  approach may be difficult to enforce and 
it may not deliver the expected benefits123. FSA also noted that disclosure requirements 
that would be more general in scope would be  easier to comply with than specific rules 
which are based on the structure of indi vidual contractual arrangements and the 
underlying intentions of the parties involved.  
(2) Impact on market liquidity and efficiency 
                                                 
 119  FSA 07/20 (November 2007). 
 120  Schouten (2009), p. 54. 
 121  This was, for instance, the e xperience in the Fiat case described in the Annex 8. See Kirchmaier 
 et al. (2009), p. 14. 
 122  See CESR (January 2010) and ESME (November 2009). 
 123  FSA 08/17 (October 2008). 
 
70 This option should not have any negative imp act on market liquidity and efficiency as 
the scope of disclosures would be very limited.  
(3) Impact on the market for ownership control 
This option should have the same impacts as Option 2 described above.  
(4) Impact on investor protection 
The impact on investor protection will be pos itive as compared to the baseline scenario 
and should potentially be similar to that de scribed under Option 2. However, given that 
this option seems to be difficult to implemen t in practice, the improvement in investor 
protection might in practice be lower compared to Option 2. 
(5) Efficiency  
This option will entail additional costs as compared to the baseline scenario. However, 
this option, if correctly implemented, woul d allow avoiding unnecessary disclosures and 
the total number of disclosures would pot entially be lower than for Option 2. In 
consequence, the costs of this option woul d be lower. However, this safe harbour 
approach might entail additional legal costs fo r market participants in order to include 
the necessary contractual provisions in the agreements on cash-settled derivatives to fall under the safe harbour. 
2.1.4.  Conclusion   
The cost and benefit analysis seems to show that Option 2 would have a strong positive 
impact on investor protection and investor  confidence as compared to the baseline 
scenario, and  will also be efficient and pr oportionate to address the problems described 
in section 3.2.2.2. Option 3 would be less costly but its effectiveness seems to be limited. 
Therefore, Option 2 will be the preferred op tion to achieve the operational objective. The 
question whether holdings of derivatives shoul d be aggregated with holdings of shares 
will be treated in section below. 
Other technical issues, such as exceptions to the requirement to disclose holdings of 
financial instruments, could be left to ES MA, which would be in the best position to 
develop draft technical standards for all Memb er States. Also, in its proposal to extend 
major shareholding notifications to instrument s of similar economic effect to holding of 
shares and entitlements to acquire shares
124, CESR (ESMA) suggests that a non 
exhaustive list of instruments that are in scope  may serve as guidance to the market. Such 
a list might include convertibles (bonds excha ngeable for shares), writing of put options 
(European and American, in and out of th e money), futures and forward contracts, 
contracts for difference, equity swaps, warra nts, baskets and shares indices. ESMA could 
be required to draft such guidance. Annex 6 explains further issues for which ESMA 
should develop draft technical standards that  would be further adopted by the European 
Commission.  
Table 3: Impacts of options  to eliminate the gaps in requirements for notification 
concerning major holdings of voting rights 
                                                 
124 CESR (January 2010). 
 
71 Options  Effectiveness  Impact on 
market 
liquidity and 
efficiency Impact on the 
market for 
ownership 
control Impact on 
investor 
protection Efficiency 
Option 1: 
No new action  = = = = = 
Option 2: 
Broad regime: disclosure 
regime extended to all instruments of similar economic effect to holding shares and entitlements to acquire shares
 ++ =/+ = ++ + 
Option 3: 
 Limitative approach: disclosure 
not required in case "safe harbor" criteria are met
 + = = + ++ 
Magnitude of impact as compared with  the baseline scenario: ++ strongly positi ve; + positive; – – strongly negative; 
– negative; = marginal/neutral; ? uncertain; n.a. not applicable  
2.2. Policy options to harmonise the rules for disclosure of major holdings of 
voting rights 
In addition to the criteria presented in Secti on 6, there is a need to assess the impact of 
the options on the transparency regarding cor porate ownership of issuers of shares and 
on costs for cross-border investors. 
2.2.1.  Option 1 - No new action 
This option would result in no change to the present situation as described in the second 
part of the baseline scenario in the impact  assessment document, Section 4.1. This option 
will not achieve the objective. 
2.2.2.  Option 2 – Harmonise the regimes for di sclosure of major holdings of voting 
rights by requiring aggregation of holdings  of shares with those of financial 
instruments giving access to shares. 
This option introduces the requirement to aggr egate holdings of shares with holdings of 
financial instruments (including cash settled derivatives) in order to calculate the threshold for notification of major holdings and provides for the method of such aggregation. In its advice to the Commission, CESR (ESMA) proposed to create a notification system with four different bask ets (holdings of voti ng rights; holdings of 
financial instruments under Article 13; holdi ngs of cash settled derivatives and total 
holdings). The obligation to disclose the ma jor holdings should be triggered when the 
threshold for any of the four baskets is reach ed or crossed. Several replies to the public 
consultation supported such a notification system proposed by CESR (ESMA). Another 
possibility would be to create a notification sy stem with three different baskets (holdings 
of voting rights, holdings of financial instruments under Article 13 and total holdings). The two methods should achieve the same result; the choice between these two methods is of a pure technical nature and it does not  imply policy choices: the two methods are 
further explained in Annex 6.   
 
72 (1) Effectiveness  
This option is effective to harmonise the method of calculation of thresholds but not the 
thresholds as such. However, according to the investors, the existence of different 
thresholds does not pose major problems to i nvestors. In order for this option to be 
effective, the legislative proposal should also  include a prohibition of netting of long and 
short positions (see Annex 6). For other issues , such as the list of exceptions or timing 
for disclosure, the Commission would empow er ESMA to develop draft technical 
standards that would be further adopted by the Commission (See Annex 6). 
(2) Impact on the transparency rega rding corporate ownership of 
issuers of shares 
Respondents to the public consultation underlined that a uniform regime for disclosure of 
major holdings would reduce legal uncertainty, enhance transparency, simplify cross-border investments and increase attractiveness of EU capital markets. The principle of aggregation would improve the transparency and reduce the possibility to circumvent disclosure requirements by investors who w ould otherwise acquire holdings of shares 
and financial instruments with the aggregate economic position well beyond the 
threshold for notification without disclosing it to the market. 
Almost all respondents to the public consulta tion were in favour of aggregating holdings 
of shares with holdings of financial instrume nts described in Article 13 of the Directive 
for the purposes of triggering the notifica tion obligation. A minority of respondents to 
the public consultation did not support an aggregation, which in their view would 
confuse the market.  
(3) Impact on investor protection 
This option will have a positive impact on inve stor protection as it would provide for an 
uniform and more transparent regime across th e EU and inform the market of the real 
economic position of the investors. 
(4) Impact on costs for cross-border investors 
Respondents to the public consultation mentione d different examples of divergent rules 
in different Member States for calculation of major holdings and underlined that these 
divergences implied difficulties and costs for companies with cross-border activities. In 
their view, a uniform regime for disc losure of major holdings would reduce 
administrative expenses for cross-boards i nvestors linked to IT infrastructure and 
monitoring systems for equity positions of issuers based in different Member States.  
Potential savings are directly linked to th e scale of cross-border activity. The cost 
reduction could reach an average of 2 M€/ pe r operator for one off incremental costs for 
new cross border investors and 77 k€/year/ per cross border investor on average for 
ongoing costs.  This option will also reduce costs linked to legal uncertainty for cross 
border investors as it will harmonise the method of calculation of the thresholds. 
(5) Efficiency  
As compared to the baseline scenario, this option could be a source of costs linked to 
additional disclosures in Member States where there is currently no aggregation 
 
73 requirement. However, these costs could not be estimated as they would very depending 
on the increases of the number of disclosures in practice. 
Nevertheless, investors are in favour of more  harmonisation and seem to consider these 
costs as lower compared to the spared admi nistrative burden linked to the introduction of 
a uniform regime for aggregation. 
2.2.3.  Option 3 - harmonise the regime of disclo sure of major holdings of voting rights 
by requiring three separates regimes of disclosure: one for holdings of shares, 
one for financial instruments giving acce ss to shares and one for cash-settled 
derivatives. 
According to this option, notification would be required when one of the three baskets 
(holdings of shares, holdings of financia l instruments giving access to shares and 
holdings of cash-settled derivatives) would cr oss the relevant threshold and only this 
basket should be notified. Holdings in other baskets would not be taken into account.  
In its response to the public consultation, CESR (ESMA) indicated that three CESR 
members do not agree with the need for havi ng to aggregate holdings of shares with 
holdings of financial instruments and cash- settled derivatives to trigger notification. 
These members considered that sufficient transparency of holdings can be achieved requiring three separate regimes for disclosu re for the three baskets of holdings. These 
members are of the view that a notification obligation in relation to total holdings would 
not be desirable because different types of hol dings are in their view not comparable. The 
obligation could also add too much admini strative burden for investors and excessive 
flow of information to the markets. 
(1) Effectiveness  
Option 3 will be as effective as option 2 in order to achieve a uniform regime and the 
same measures than these described for option 2 should be adopted in order to insure its 
effectiveness. 
(2) Impact on the transparency rega rding corporate ownership of 
issuers of shares 
This option could have a negative effect on tr ansparency regarding ownership of issuers 
of shares as it could reduce the level of tr ansparency in the Member States where the 
principle of aggregation of holdings of voting rights with holdings of financial 
instruments already exists. In fact, the cu mulative economic interest in the company 
would not be taken into account to trigger notification if the holdings in each basket 
remain just below the threshold. Consequently, the market will not be informed about the aggregate holdings of different instruments which in practice could give a significant 
influence on the company's strategy to the holder of these instruments.  
Moreover, the three CESR (ESMA) members who were against the aggregation, note 
that for this regime to be effective in informing the market about economic ownership, the initial threshold for notification and the subsequent increments between the thresholds for the three baskets would need to  be lower than those currently in place in 
the Transparency Directive (5%, 10%, 15% , 20%, 25%, 30%, 50% and 75%). Therefore 
this option would only be effective to increas e the transparency if it was decided that 
these thresholds for disclosure should be harmonised at a lover level that current 
minimum thresholds (see Option 4). 
 
74 (3) Impact on investor protection 
The level of transparency and therefore of investor protection and confidence could be 
negative compared to the baseline scenario as it could reduce the level of transparency in 
the Member States where the principle of a ggregation of holdings of voting rights with 
holdings of financial instruments already exis ts. If there is no aggregation, an investor 
holding, for example, 4,5% in voting rights and 4,5% in financial instruments in a 
company could artificially avoid the di sclosure, although this investor would 
cumulatively hold 9% of economic interest in a company which could give him a significant influence on the company's strategy.  
(4) Impact on costs for cross-border investors 
The impact is the same as for Option 2. 
(5) Efficiency 
This option would imply additional costs fo r investors as compared to the baseline 
scenario but these additional costs will be lower than for Option 2 as the number of 
disclosures will be lower. Option 3 will achie ve the same costs savings for cross-border 
investors as Option 2. 
2.2.4.  Option 4: harmonise the regime of disclo sure of major holdings of voting rights 
by harmonising the thresholds for disclosure.  
This option would harmonise the thresholds for notification, forbidding Member States 
to adopt lower thresholds. 
(1) Effectiveness  
The question of the harmonisation of thres holds was considered as secondary by many 
respondents to the public consultation, as compared to the harmonisation of the method to calculate the thresholds for notificati on. However, harmonising the thresholds would 
bring a higher level of harmonisation across the EU as compared to the baseline scenario 
and to the Options 2 and 3.  
(2) Impact on the transparency rega rding corporate ownership of 
issuers of shares 
As compared to the baseline scenario, this  option could have a negative impact on the 
level of transparency of corporate owners hip. It has been argued by many respondents to 
the public consultation that harmonising thre sholds would not allow taking account of 
the specificities of national regulated mark ets or national company laws and could 
therefore have negative effects on transparenc y. In fact, in some Member States with 
dispersed corporate ownership, such as UK, the first threshold for notification and the 
subsequent increments need to be relativel y low to provide the market with sufficient 
transparency as regards potential significan t influence in companies. The current 
minimum threshold for notification in UK is 3%. For other Member States with 
concentrated corporate ownership, such as Spain, a low threshold will not provide the 
market with meaningful information as a sh areholder can potentially exercise significant 
influence in a company only when it holds a relatively high percentage of voting rights. Consequently, if a uniform threshold is imposed  in all the Member States, this threshold 
could be too high for some Member States and too low for others.  
 
75 (3) Impact on investor protection 
As compared to the baseline scenario, this  option would not take account of the local 
situation and could thus have a negative imp act on investor protection in Member States, 
where the thresholds are currently very low. 
(4) Impact on costs for cross-border investors 
Impact should be similar to Options 2 and 3. 
(5) Efficiency  
In the view of many stakeholders, existence of different thresholds does not pose major 
problems to investors, the major source of costs being the way these thresholds are 
calculated. Moreover, thresholds for notification seem to be difficult to harmonise because of the differences in shareholdi ng population in Member States. Therefore, 
taking into account the costs and benefits, this  option seems to be inefficient and it would 
not respect the principle of proportionality.  
2.2.5.  Conclusion  
Option 2 is the best option in terms of impacts on transparency and on investor 
protection. Indeed, this option would improve transparency and reduce the possibility to circumvent disclosure requirements. This option could be a source of costs linked to 
additional disclosures in some Member Stat es where there is currently no aggregation 
requirement. The one off costs are comprised in the estimation provided for option 2 in 
Section 2.1 (these costs could not be separated from the one off costs calculated for this 
option). The ongoing costs could not be estimated as they would depend on the number of additional disclosures that would take pl ace in practice. However, investors are in 
favour of a harmonised regime for disclosure of major holdings as they consider it would 
bring a cost reduction.  This option will also  reduce legal uncertainty for cross border 
investors as it will harmonise the method of calculation of the thresholds.  
 
76  
Table 4: Impact of options to eliminate div ergences in notification requirements for major 
holdings 
 
Options  Effectiveness  Impact on the 
transparency 
regarding 
corporate 
ownership of 
issuers of shares Impact on 
investor 
protection  Impact on cost 
for cross- border 
investors Efficiency 
Option 1: 
No new action = = = = = 
Option 2: Harmonising the regimes of 
disclosure of major holdings of voting rights by requiring aggregation of holdings of shares with those of financial instruments giving access to shares 
+ ++ ++ ++ + 
Option 3: 
Harmonising the regime of 
disclosure of major holdings of voting rights by requiring three separate regimes of disclosure: one for holdings of shares, one for  financial instruments giving access to shares and one for cash settled derivatives. + - - ++ + 
Option 4: 
Harmonising the regime of 
disclosure of major holdings of voting rights by harmonising the thresholds for disclosure ++ - - ++ - 
Magnitude of impact as compared with  the baseline scenario: ++ strongly positi ve; + positive; – – strongly negative; 
– negative; = marginal/neutral; ? uncertain; n.a. not applicable 
3. IMPACT ON EMPLOYMENT AND ENVIRONMENT OF THE PREFERRED OPTIONS  
Measures concerning small listed companies are expected to have a positive effect on 
employment as the small listed companies are an important source of employment in the 
EU and the preferred options should encourag e the growth of small listed companies and 
new listings of small companies. For instan ce, in a UK 2002 report, it was estimated that 
small listed companies in the UK (defined as those quoted in the London Stock Exchange but outside the FTSE 350 and those quoted on AIM
125) accounted for 5% of the total 
market capitalisation of all quoted companies but 13% of their total sales and, importantly, 18% of total employment
126 (see the table below): 
 
                                                 
125  Alternative Investment Market. 
126 Kearns and Young (2002), p.26. 
 
77 Comparative statistics of large and small caps: UK (2002) 
 
It is not expected that the preferred options  are going to have any direct impact on the 
natural environment. Alleviating the obligati on to publish quarterly reports could have an 
indirect positive impact on the issuance of pa per documents and thus on the environment 
(there will be less printed information).  
  
 
78 ANNEX  2 
Estimation of costs  
1. COSTS OF QUARTERLY REPORTING  
1.1.  Methodology 
Figure 1 represents the conclusions dr awn from the study conducted by Europe 
Economics127. Figures 2 and 3 are based on the re sponses to a questionnaire sent by DG 
Internal Market and Services to the Eu ropeanIssuers association (EuropeanIssuers 
received a response from their members from  three Member States: Austria, Germany 
and UK). We have further received information from Middlenext128 that the costs of 
preparation of quarterly information by sma ll and medium-sized issuers could not be 
separated from other costs and therefore could not be estimated.  
1.2. Results 
It appears that as far as transparency requi rements are concerned, staff costs are the main 
costs drivers (see Figure 1 below). 
Figure 1: Drivers of ongoing costs – Transparency directive  
Type of costs Relative weight 
Staff 69% 
IT 17% 
Audit 12% 
Other 2% 
Figure 2: Measuring yearly staff involvement in the preparation of quarterly information 
(per issuer) 
 Man Days Number of staff involved 
Small and medium-sized 
issuers 8 to 30 5 to 15 
Large issuers Considerable  Over 50 
 
                                                 
127  Europe Economics (2009)  page 110 table 5.18. 
128  A French association repres enting listed SMEs and midcaps. 
 
79 Figure 3: Measuring yearly costs per issuer linked to editing, printing, translating, etc129 . 
Small and medium issuers From  2 k€ to  60 k€ 
Large issuer From 35 k€ to € 250 k€ 
Taking into account that there is a bout 12 000 listed companies in Europe130, waiving the 
obligation to present quarterly information would bring a potential global cost reduction of about 573 M€, considering only the cost s of editing, printing and translating the 
information and not including the potential cost  reduction linked to preparation of such 
information
131, which is difficult to numerically es timate but which, according to Figure 
1, should be largely superior to other costs li nked to disclosure of quarterly information. 
According to our information, some compan ies do not print and do not translate their 
quarterly reports and therefore for such co mpanies costs reduction would be potentially 
lower than for others. However, the costs in relation to the staff involved in the 
preparation of the reports are relatively highe r in monetary terms (as shown in Figure 1) 
than  other costs estimated in Figure 3.  
These costs linked to staff invol vement in preparation of quarterly information could not 
be precisely estimated in monetary terms. It has to be underlined that the amount of work 
and the number of staff involved in prepar ation of quarterly information depends on 
applicable national rules. In some Member States quarterly information has to contain additional figures and therefore the costs of th eir preparation are higher (See Annex 5). It 
also results from responses to the public c onsultation that preparation of full quarterly 
reports (with full financial statements) would be much more costly than preparation of 
the interim management statements. Middlenext informed us that if full quarterly reports were required, each small and medium-sized i ssuer would need to allocate one or two 
more persons a year, full time, in order to prepare this information
132. 
As an example, one large issuer estimated that  its total costs for preparation of quarterly 
information (including the costs of staff)  could be as high as 2 M €/ a year. 
2. COSTS FOR HOLDERS OF CASH SETTLED DERIVATIVES IF THE REQUIREMENT TO 
DISCLOSE CASH SETTLED DERIVATIVES IS INTRODUCED133 
 
                                                 
 129  The cost estimates are based on the available data , therefore a fair amount of uncertainty needs to 
 be included in the numbers provided. 
 130 Source: European Issuers. 
 131  Considering the average of the costs disclosed on figure 3 (i.e. 31 000 and 142 500 €) then 
 weighted by the relative importance of each type  of companies (85% of small and medium and 
 15% of large companies) the average weighted costs amounts to 47 725 €. This amount multiplied 
 by 12 000 equals 573 M€. 
 132  The standard cost model was not used to estim ate the total costs as c oncerning existing costs, it 
 was decided to ask the issuers themselves to provide an estimate on costs of quarterly 
information.  As the issuers were not able to provide such full estimates, it was decided to provide information  received rather than give theoretical estimates that w ould result from the application of 
the  standard cost model. 
133  The cost estimates are based on the available data, therefore and due to the qualitative nature of the 
measures potentially to be implemented, a fair amount of uncertainty needs to be included in the numbers provided. 
 
80 Costs in relation to One-off costs 
per holder Recurrent costs per 
annum/per holder Remarks 
Option 2: Broad regime 
-  disclosure regime 
extended to all 
instruments of similar 
economic effect to 
holding shares and 
entitlements to acquire 
shares   100 to 600 k€  
(below 0,1 % of 
average operating 
costs)134 
  Will depend on the increase of the number of disclosures/per holder in practice  
 
 This option would imply for some players potentially 
significant systems upgrades that are the source of the one- off costs. One-off cost, however, depends on the current disclosure arrangements existing in Members States, for instance whether the processes to disclose cash settled derivatives already exist or whether they need to be 
created. It is estimated that th e most significant holders that 
would mainly incur the one off costs should be essentially the hedge funds and the investment banks. For the investment banks, the one off co sts could be higher as they 
will need to put in place a mo re sophisticated internal 
process. 
Concerning the ongoing costs, the increase of costs per 
holder will depend on the number of cash-settled derivatives held by the given operator. For operators not holding cash settled derivatives, the ongoing costs will not increase.  
According to information received from FSA, the 
introduction of this regime in the UK caused an average 
increase of around 6-8% in daily announcements. However, UK has introduced much lower thresholds that what is 
required by the Directive and therefore this increase is 
likely to be lower in averag e in other Member States.  
Option 3: Limitative 
approach: disclosure not 
required in case "safe 
harbor" criteria are met 
 Non significant Will depend on the 
increase of the number of disclosures/per holder in practice  
 Under that approach only a limited number of transactions 
would have to be disclosed. 
However, this option may involve ex ante legal analysis to 
validate the intention associated  to every transaction which 
would be more costly (but these costs cannot be estimated). 
 
 
The preferred option should also have lim ited on going costs for companies linked to 
processing and making additional disclosures to the market.  
3. COST SAVINGS ON TRANS -NATIONAL PLAYERS IF MAXIMUM HARMONISATION 
OF RULES FOR NOTIFICATION OF MAJOR HOLDINGS IS INTRODUCED  
The differentiated implementation of the rule s on disclosure on major holdings across the 
European Union, notably through different me thods to calculate the thresholds for 
notification, is source of additional cost s for cross-border investors. Lack of 
harmonisation implies special monitoring, IT developments and sometimes even additional human analysis for players operating across the EU.  
                                                
 
134  The ratio is calculated by comparing estimated " one-off" costs to "normative" operating costs. The 
"normative" operating costs are the result of an av erage between amounts associated to "Investment 
banks" on the one hand and "Banks and Financial c onglomerates" on the other hand  in the "Study on 
the cost of Compliance" released by the consu ltant "Europe Economics" following DG Markt request 
(p 95) : this average amounts to 1294 M€ ((1558+1030)/2). The "one off" costs are based on FSA estimates (FSA 07/20-Annex 1 p7). 
 
81 Potential savings are thus directly linked to the scale of trans-national activity. The cost 
reduction could reach an average of 2 M€/ope rator for one-off incremental costs for new 
cross-border investors and 77135 k€/year/per operator on average in ongoing costs.  
The one-off costs for the preferred option (opti on 2) regarding the necessity to adapt the 
IT systems should already be comprised in  the estimation provided for option 2 in 
Section 2 above (these costs could not be sepa rated from the one off-costs calculated for 
this option). The ongoing costs could not be estimated as they would depend on the number of additional disclosures that would take place in practice. However, investors 
are in favour of a harmonised regime for disclo sure of major holdings as they consider it 
would bring a cost reduction. 
                                                
 
135  In the "Study on the cost of Compliance" released by the consultant "Europe Economics", the median 
of ongoing costs on transparency issues assessed for tr ansnational asset managers is 0.02%. This ratio 
applied to the normative operating costs (i.e. 385 M€) provides an amount of about 77 k€. 
 
82 ANNEX  3 
Improvements and clarifications that need to be introduced in the Transparency 
Directive  
1. RULES UNDER THE TRANSPARENCY DIRECTIVE THAT REQUIRE FURTHER 
CLARIFICATION AS IDENTIFIED BY THE RESPONDENTS TO THE PUBLIC CONSULTATION AND THE 
COMMISSION ' REPORT  
1.1. Home Member State rule 
– Transparency Directive is unclear with  regard to which country is the home 
Member State for issuers who have to choose their home Member State according to article 2, paragraph 1, sub (i), (ii), but who have not done so. In this 
respect, CESR (ESMA) suggests to amend the Transparency Directive to include 
an assumption of Home Member State for these issuers. Transparency Directive 
should ensure that the reporting of all lis ted companies is subject to enforcement 
in a Member State. It is important that the Transparency Directive in this matter 
in the future does not provide for any possi bility to implement the rules in such a 
way that a listed company can operate without being under supervision of any 
Member State. 
– According to Transparency Directive, the choice of home Member State for 
third country issuers is valid for 3 years. However, this leads to practical 
problems when such issuer is no longer listed in the regulated market of the 
Home Member State and only remains lis ted in one host Member State. CESR 
(ESMA) suggests that the home Member State rule should be clarified as 
follows: it should be stated that the three year period for the validity of issuer's 
choice of the home Member State no longer applies if shares or debt securities 
with denomination of less than EUR 1.000 of  the same issuer are no longer listed 
in the chosen home Member State but remain  admitted to trading on a regulated market in another Member State. 
– Communication of choice of home Member  State: it should be considered 
whether Article 2 of the implementing Directive would need to be amended so that EU issuers would also be requi red to communicate the choice of home 
Member State to the competent authority of the Member State where the issuer has its registered office (if different). 
1.2. New loans 
– The application of article 16, paragraph 3 of the Transparency Directive leads to 
the question of which additional inform ation is required by the issuer of 
securities admitted to trading on a regulated  market when issuing a new loan. In 
this respect, CESR (ESMA) proposes to a bolish the requirement to disclose all 
new loan issues. This requirement overlaps partially with the Prospectus Directive and Article 6 of the Market Abus e Directive. Reference to new loans is 
also unclear, as new loans are not define d in the Transparency Directive. For 
example, it is unclear whether issues of  commercial papers or loans not admitted 
to trading on a regulated market should be disclosed. Some respondents 
 
83 considered that Article 16.3 should be de leted: the implementation of article 16.3 
is unclear and complex notably due to the absence of any materiality clause. 
1.3. Exceptions to the notification of major holdings 
– A broad and consistent "market maker" definition would be welcome (Article 2).  
– Some clarifications would be welcome concerning the scope of the exceptions 
for shares acquired for the purpose of  clearing and settling and by custodians 
(Article 9(4)). For example, one CESR  (ESMA) member stated that in its 
Member State it had been discussed wh ether the exemption also applied to 
positions acquired for a short period through underwriting . 
– Clarification to the trading book exemption would be needed (Article 9(6)): It 
should be clarified, inter alia, whether th e 5 % threshold is calculated at group 
level or the level of an individual company. Moreover, it should be clarified how the different categories of holdings are aggregated when calculating the 
threshold. CESR (ESMA) proposed the thre shold to be calculated at group level 
where disaggregation exemptions set out in Articles 12(4) and 12(5) do not apply 
and that holdings of all instruments (Article 9, 10 and 13) are aggregated. 
Moreover, further clarification to subpa ragraph (b) should also be considered. 
The wording of the subparagraph should be  more definite in order to more 
clearly prohibit credit institutions and i nvestment firms applying the exemption 
from exercising voting rights held in their trading book and from using their 
shareholder positions to intervene in any way in the management of the issuer. 
1.4. Clarification of definitions 
– Applicability of Transparency Direc tive to depository receipts when the 
underlying shares are not admitted to trading on a regulated market: the 
applicability of different rules (especi ally Articles 9–13 and 16–18) to depository 
receipts and holders of depository receipt s or holders of underlying shares should 
be clarified. 
– Terms used in Article 9 (2), "as a re sult of events changing the breakdown of 
voting rights", should be clarified. For exam ple, it could be clarified, as the FSA 
has done in the UK (see DTR5.1.2R(2)), that  where there is a notifiable switch 
(e.g. 1% for UK issuers) from a soft shar eholding to an absolute shareholding by 
the exercise of entitlements to acquire  shares, without affecting the overall 
percentage of the holding, a new disclosure  would be required. It could also be 
clarified that this particular provision does not necessitate a disclosure where a 
person has disclosed its holding of voting ri ghts, but then it subsequently changes 
the capacity in which it holds them. For example, where a person has disclosed its indirect holding of shares as a bene ficiary (and these shares are held by a non-
discretionary nominee), the person would not be required to disclose a change if it then takes those shares out of th e nominee account and holds the shares 
directly itself. 
1.5. Other issues  
– Article 19(1) (2nd paragraph) should be deleted: this article requires an issuer to 
communicate any amendment of its instrument  of incorporation or statutes to the 
 
84 competent authority. This requirement may result in some confusion about the 
role of the competent authority. CESR (ESMA) proposes to abolish this requirement in order to reduce administrative burden for issuers. The Shareholders' Rights Directive already re quires issuers having shares admitted to 
trading on a regulated market to make th e proposal and the invitation to general 
meeting of shareholders publicly available. Moreover, although the Shareholders’ Rights Directive does not  apply to issuers having only other 
securities than shares admitted to trad ing on a regulated market, the Market 
Abuse Directive requires also these issuers to disclose information relating to the 
issuer which is likely to have a signifi cant effect on the price of the securities 
admitted to trading. 
– Definition of an issuer: It seems that in  some Member States there are issuers 
other than legal persons with securities admitted to trading on regulated markets. 
The definition of an issuer should therefore be aligned with the situation. 
2. B
ETTER TRANSPOSITION AND COMPLIANCE OF THE TRANSPARENCY 
DIRECTIVE  
In its Communication of 9 December 2010 "R einforcing sanctioning regimes in the 
financial sector"136 the Commission presented policy actions and orientations on how to 
promote convergence and reinforcement of na tional sanctioning regimes in the financial 
services sector. In fact, th e review of those regimes carried out by the Commission, along 
with the Committees of Supervisors (now transformed into European Supervisory 
Authorities), has shown a number of diverg ences and weaknesses which may have a 
negative impact on the proper application of EU  legislation, the effectiveness of financial 
supervision, and ultimately on competition, stab ility and integrity of financial markets 
and consumer protection. Therefore, the Communication suggested setting EU minimum 
common standards on certain key issues of sa nctioning regimes, to be adapted to the 
specifics of the different sectors and EU legislative acts in the financial services area.  
Concerning the Transparency Directive, the study carried out in 2009 by the Committee 
of European Securities Regulators (hereunder: CESR report)137 provided information on 
sanctions laid down in national legislation fo r violations of that Directive. The study 
shows that national sanctioning regimes are divergent and not always appropriate in 
some of the key issues identified in the a bove mentioned Communication as essential to 
ensure effectiveness and dissuasiveness of  sanctions. The main problems which can 
derive from this situation have been descri bed for financial services in general in the 
Impact Assessment for the Communication "Reinforcing sanctioning regimes in the 
financial sector". 
In particular, the following key issues are releva nt in field of the Transparency Directive:  
                                                 
 136  COM(2010)716 final. 
 137 CESR (2009)  Report on the mapping of supervisory powers, administrative and criminal 
 sanctioning regimes of Member States in rela tion to the Transparency  Directive (TD). CEBS 
 (2009): "Mapping of supervisory objectives, including early intervention measures and sanctioning  powers", March 2009/47, available on < http://www.c-ebs.org/home.aspx
>. Information 
contained  in this report has been subsequently  updated on the basis of th e contributions received 
from  Member States. 
 
85 a) powers available to competent authorities : certain sanctioning powers are particularly 
important to respond adequately to key violations of the Transparency Directive. It should be therefore ensured that all competent authorities have at their disposal those powers. In particular, the power of suspensi on of the voting rights of the issuer who had 
violated the notification rules on major sh areholdings (currently available on in 6 
Member States, p. 50 CESR report) can help ensuring the deterrent effect of sanctions 
and thus better prevent future violations. 
b) publication of sanctions
: publication of sanctions is important to enhance 
transparency and to maintain confidence in the financial market138 and is considered to 
be one of the most deterrent tool (as s hown by the results of the consultation on the 
Communication "Reinforcing sanctioning regimes in the financial sector"), particularly 
because of the reputational damage that the author of the violation will incur. While 
almost all competent authorities are allowed to publish sanctions, this does not ensure that sanctions are published on a systematic basis in all Member States. This could be achieved by the introduction of a general obligation to publish sanctions, unless publication would seriously jeopardise stability in financial markets. 
c) criteria taken into account to determine th e sanctions to be imposed in a particular 
case: some criteria are particularly important to adapt the sanction to be imposed, and 
particularly the level of the administrative fine, to the seriousness and the consequences of the violation and to the personal conditions of the author of the violation, which would 
help ensuring effectiveness, proportionality a nd dissuasiveness of the sanctions actually 
applied. 
In particular, all competent authorities shoul d take into account at least the following 
criteria: - the seriousness of the violation (taken in to account in 21 Member States, table 32, p. 
100 of CESR report); - the degree of intent (taken into account in 18 Member States, table 32, p. 100 of CESR 
report);  - the financial strength of the author of th e violation, (taken into account in 15 Member 
States, table 32, p. 100 of CESR report); - the benefits derived from the violation (t aken into account in 15 Member States, table 
32, p. 100 of CESR report); - cooperation of the author of the violati on (taken into account in 16 Member States, 
table 32, p. 100 of CESR report); - previous violations (taken into account in 18 Member States, table 32, p. 100 of CESR 
report). 
d) level of administrative fines
: the maximum level of the administrative fines which can 
be applied to violations of the Transparen cy Directive should be sufficiently high to 
ensure that the fine has a deterrent effect. The levels of fines provided for in national 
legislation vary across Member States and may be too small in some Member States. They are at over 1 million euros in 8 Member  States while in 4 Member States the 
maximum level is lower than 100.000. This le vel may be too small compared to the 
benefits than could be realised by infringi ng the rules for example concerning lack of 
notification of major holdings of voting rights. 
                                                
 
138  ESMA (2011) Mapping of the Transparency Directive –Options, Discretions and “Gold-plating”. 
 
86 ANNEX  4 
Glossary of terms  
 A Cash settled derivative: Cash-settled equity derivatives refer to equity linked 
transactions settled by the payment of cash only without any physical delivery of the underlying equity. Such transactions can include options, futures and swaps over a single share, an index or a basket of shares. They are usually based on the difference between a pre-agreed settlement price and the then prevailing market price of the shares. Thus, without physically buying or selling the underlying shares, the contracting parties to a cash-settled equity derivative are able to acquire or dispose of an economic interest in the shares (i.e. acquire exposure to equity price movements). 
A Contract for difference: 
is a contract between two par ties where the buyer will receive 
from (or pay to) the seller, the difference between the value of a company's share at 
expiry and its value at the time of the cont ract. The buyer could also have the option to 
buy the shares at the later date although the CfD does not confer a right to buy them. The 
holder of a CfD on a company's shares has an  economic interest in the company, without 
direct ownership of shares in the company.  
Hedging : An investment made in order to reduce the risk of adverse price movements in a 
security. Normally, a hedge consists of taking an offsetting position in a related security, 
such as a futures contract. 
A Multilateral Trading Facility (MTF)  is an electronic system which facilitates the 
exchange of securities between counterparties. The securities may include derivatives and instruments which do not have a main market, as well as traditional securities.  
A Trading Venue  is an official venue where securities are exchanged; it includes MTFs and 
regulated markets (e.g. typical stock exchanges).  
A Long Position  refers to the buying of a security with  an expectation that the security will 
rise in value.  
A Short Position  refers to the selling of a security with  an expectation that the security will 
fall in value.  
A Net Position  is where a short position has been subtracted from a long position.  
Regulated market: regulated market is a multilateral system which brings together or 
facilitates the bringing together of multiple third-party buying and selling interests in financial instruments in a way that results in a contract. Examples are traditional stock exchanges such as the Frankfurt and London Stock Exchanges.  
Interim management statement: Article 6 of the Transparency Directive requires that 
issuer whose shares are admitted to tradi ng on a regulated market shall make public a 
statement by its management during the first six-month period of the financial year and another statement by its management during th e second six month period of the financial 
year. Such a statement shall provide:  an explanation of material events and transactions that have taken place during the relevant period and their impact on the financial position of the issuer and its controlled undertakings, and  a general description of the financial 
position and performance of the issuer and its  controlled undertakings during the relevant 
period.  
 
87 Reports of narrative nature : Those reports are: 
- the annual management report (Article 4(5) TD), which refers to Article 46 of the 
 Fourth Company Law Directive or to Article 36 of the Seventh Company Law  Directive, and integrates disclosure obligations relating to environmental and  social data;   - the corporate governance statement as referred to in Article 46a of the Fourth  Company Law Directive and Article 36(2) of the Seventh Company Law  Directive, to be included in the annual management report;  - the information requested in Article 10 of the Takeover bids Directive, to be  included in the annual management report;  - the interim management report (Article 5(5) TD); and -  the interim management statement (Article 6(1) TD). 
 
88 ANNEX  5 
 
Issues around periodic disclosure of financial information139 
1. HALF YEARLY REPORTS  
1.1. Difficulties to respect the deadline of publication 
The following table indicates that 41,7% of sm all and medium listed companies consider 
that the deadlines for disclosure of financial information should be different for big and for small and medium issuers. 
 
1.2.  Requirements to audit half yearly financial statements 
 
                                                 
139 Source: Mazars (2009), Transparency Directive Assessment Report , external study conducted for the 
European Commission: http://ec.europa.eu/internal_market/securities/transparency/index_en.htm   
 
89 2. QUARTERLY INFORMATION  
 
3. STRICTER NATIONAL RULES CONCERNING THE CONTENT OF QUARTERLY 
REPORTS  
 
4. COMPARISON WITH OTHER JURISDICTIONS : 
A comparison with the systems existing in the other jurisdictions under review (US, 
Japan, China, India, Hong Kong and Switzerland) provides the following main results: 
- Yearly, half-yearly and quarterly reports ar e required in all reviewed jurisdictions for 
issuers of shares, with the exception of  Switzerland regarding quarterly reports. 
Regarding issuers of debt securities, yearly financial reports are required in all reviewed jurisdictions, half-yearly financial reports are required in China, India and Japan and 
quarterly reports are required in Hong Kong and the US. 
- Some jurisdictions provide for different re gimes depending on two criteria: the size of 
the issuer (for instance, in the US, the time to file the annual and quarterly reports is 
 
90 longer for smaller issuers) and its nationality (for instance, foreign issuers have more 
time to file annual reports in Japan). 
Concerning specific issue of the time period to  publish half-yearly financial statements, it 
should be noted that the US provides for s horter deadlines (40 calendar days for the 
standard regime), China is applying the same  rule as the transparency  directive and 
Hong Kong, Japan and Switzerland grant a longe r period (three months). It should also 
be noted that, in the US, smaller issuers benefit from a slightly longer period to file (45 days instead of 40 days). 
 
91 ANNEX  6 
Issues linked to the notification of major holdings of voting rights.  
1. METHOD OF AGGREGATION /CALCULATION OF THRESHOLDS  
 Although there was support for the aggregation of all financial instruments to trigger the 
notification requirement, in general respondent s to the public consultation would prefer 
that the notification itself presented a breakdown of voting rights and financial 
instruments according to their nature. 
CESR's (ESMA) proposal was to create a notifi cation system with four different baskets 
(holdings of voting rights; holdings of financ ial instruments under Article 13; holdings of 
cash settled derivatives and total holdings) that  would trigger an obligation to disclose 
the holdings of the four baskets when the threshold for any of the four baskets was 
reached or crossed. 
Another possibility would be to create a notifi cation system with three different baskets 
(holdings of voting rights, hol dings of financial instruments under Article 13 and total 
holdings). This method would be more compatib le with the preferred option consisting to 
have a large definition of financial inst ruments in Article 13 of the Directive 
corresponding to all instruments of similar economic effect to holding shares and entitlements to acquire shares. 
2. N
ETTING OF LONG AND SHORT POSITIONS  
An investor can have both long positions and short positions on the same assets: a short 
position refers to entering into any contract unde r which the investor profits from a fall in 
the value of an asset and a long position refers  to entering into any contract under which 
an investor profits from any increase in the price of the asset. CESR (ESMA) considers 
that netting of long and short positions doe s not prevent access to voting rights and 
therefore gives the possibility of hiding stakes. Netting should therefore not be allowed. 
These 2 questions can be already solved  in the proposed modification of the 
Transparency directive.  
3. QUESTIONS TO BE DEALT WITH THROUGH BINDING TECHNICAL STANDARDS  
For other issues, ESMA should be empower ed to develop draft binding technical 
standards. Examples of these issuers include:  
• Basket of securities 
Question of derivatives using a basket of securities : when the basket is a standard, well-
diversified one, there is no issue: no notification should be required. However, if the basket includes only a limited number of securities, specific rules should be applicable. 
• Nominal or delta adjusted approach 
 
92 They are two general approaches to calculate  the equivalence of instruments of similar 
economic effect with potential voting rights: 
Under a nominal approach, an instrument is  counted as the number of shares it is 
referenced to. Voting rights are calculated ba sed on the number of shares. For instance, a 
CfD based on 100,000 shares would result in  the holder potentially having access to 
100,000 shares. This allows a straightforward calculation to be undertaken by the holder, 
results in relatively lower costs, and the holder will only need to recalculate if the 
position is altered or the denominator cha nges. The current Article 13 instrument 
disclosure works on a nominal basis.  
Under a delta adjusted approach, share equivalence is based on the delta. The delta of an 
equity derivative represents how the pay off fr om that instrument changes in relation to a 
change in the price of the underlying equit y. A CfD for example would normally have a 
delta of 1 as it perfectly mirrors the change in the underlying share price. Options on the other hand have a delta that fluctuates. Fu rthermore, the delta of a cash-settled option 
will change as the time to expiry shortens.  
Delta can be seen as a useful and relevant m easure as it is representative of the number of 
shares the person writing the instrument would need to hold in order to perfectly hedge 
its exposure. However, the instrument holder may need to recalculate on a daily basis the delta-adjusted holding as the delta will gene rally change over time and may result in 
thresholds being crossed passively.  
Example 
 
Company A has 1 Million shares or voting rights. 
A CfD for 100,000 shares in Company A has a delta of 1. Therefore the appropriate 
calculation would be (100,000 x 1) / 1,000,000 which gives a position of 10% of 
Company A’s shares. This would trigger a disclosure obligation on the CfD holder.  
A cash-settled call option for a nominal 100,000 sh ares in Company A has (at transaction 
date) a delta of 0.2. Therefore the cal culation (100,000 x 0.2) / 1,000,000 results in a 
delta-adjusted position of 2% of the company’ s shares, and therefore no disclosure is 
required. 
4. EXCEPTIONS FOR DISCLOSURE . 
According to CESR (ESMA), a general approach  raises the issue of exemptions as it is 
likely to yield a large number of disclosure s. Exemptions would seek to limit that 
number. ESMA would be empowered to de velop draft binding technical standards 
determining these exceptions. 
Below are listed the exceptions proposed by CESR (ESMA)140: 
                                                 
140 See CESR proposal to extend major shareholding notifications to instruments of similar economic 
effect to holding shares and entitlements to acqui re shares. Consultation Paper, January 2010.  
 
93 • The TD currently allows member states not  to require investment firms and credit 
institutions to count part of the holdings in their trading book for the purposes of the 
Directive. The voting rights held in the trading book under this exemption are not to exceed five percent and the holder needs to ensure that the voting rights are neither 
exercised nor used to intervene in the management of the issuer.  
• The TD currently exempts the acquisition or  disposal of a major holding reaching or 
crossing the 5% threshold by a market maker acting in its capacity of a market maker. 
In addition, the shareholder needs to be r ecognised as a market maker for the purpose 
of the Directive, and may neither intervene in the management of the issuer concerned 
nor exert any influence on the issuer to buy such shares or back the share price.  
Member states that have already taken acti on have included or are planning to include 
additional exemptions. Examples include client serving positions, and transfers for accounting purposes, which are set out below:  
• Exemption for client-serving transactions: In order to reduce the amount of 
disclosures, positions where CfD writers are effectively acting as intermediaries and providing liquidity may be exempt. This would only be available for transactions done in a client-serving capacity (for instance fulfilling a client order, or in order to facilitate filling a client order), and not fo r proprietary business. Those CfD positions 
taken out to hedge a client order would also not need to be disclosed. For instance, when writing a short CfD position for a client  the writer will effectively take out a 
long CfD position itself. The principle underlyi ng this exemption is that firms holding 
a position purely to facilitate a client position, with no interest in the performance of 
the underlying equity, should not be required to disclose their position.  
• Exemptions for accounting purposes: Positions created by intra-group movements 
may also be exempt from the notification pr ocess as they may not be deemed to have 
similar economic effect to holding shares and entitlements to acquire shares providing 
such movement occurs purely for tax or accounting purposes. This would only be the 
case if the original transaction had either b een disclosed if required (or included in the 
calculation for disclosure) or continues to benefit from an exemption notwithstanding 
this intra-group movement.  
 
94 ANNEX  7 
Different regimes introduced by the Member States for disclosure of cash-settled 
derivatives  
The United Kingdom141 has introduced a regime that re quires the disclosure of (gross) 
long positions on cash settled derivatives from 1 June 2009 onwards142. It requires 
reporting once the threshold of 3% has been  reached, aggregating both the derivative 
transactions and any actual holdings of the voting shares.  
The UK FSA position on cash-settled derivatives 
In its consultation paper of 2007143, the UK regulator (Financial Servi ces Authority, FSA) considered the 
question of whether the regime as set out in the Tr ansparency Directive was open to abuse and whether 
specific rules should be introduced to legislate for the potential loopholes. The FSA considered that cash 
settled contracts for difference (CFD) and similar instruments were not disclosable under the terms of the 
Transparency Directive (as implemented by UK rules) given that they do not constitute a legal right to 
acquire the underlying share. 
The FSA noted the 2 main problems with this position being: 
1) The issuer of the CFD will almost always seek to hedge its position on the derivative by acquiring the 
underlying share; and 
2) Those with a pure economic interest in the shar es of a company may still seek to influence its 
management. 
This resulted in the following potential problems for market transparency: 
• The situation where a CFD, although intended to be cas h settled, is in fact physically settled. By this 
route the person taking the derivative could instantly ta ke ownership of a substantial percentage of the 
shares in the company with no disclosures having been made during the building of the stake. 
• The majority of issuers of CFDs claim that they do not exercise the votes attaching to the shares they 
hold for hedging purposes and, specifically, do not follo w the instructions of those holding the relevant 
CFDs. However, there is widespread recognition that, wh ere issuers have no real in terest in the affairs of 
the company whose shares they hol d, they can easily be influenced by the holder of the CFD. 
• Even if the issuer of the CFD does not vote its hedged shares, this can take a large proportion of the 
votes out of the voting pool, effectively increasing the significance of other holders. 
• The cost in management time of investigating e nquiries and demands from those who claim to hold an 
interest in the company to verify their equity with little information.  
In its consultation paper, the FSA also put the arguments for the opposing view, that the rules should 
remain unchanged. The principal points of this argument being: 
• The majority of issuers state that they do not settle CFDs by physical delivery of the shares; 
• The majority of issuers state that they do not vote shares which they hold in relation to hedge positions 
and do not allow themselves to be influenced  in this regard by the holders of CFDs; 
                                                 
 141  In the United Kingdom, the UK Takeover Code already required the disclosure of economic 
 interest  during the offer periods: see Rule 8(3) . In Ireland, similar rules were contained in the 
 Irish Takeover Code. 
 142  See UK FSA (March 2009). 
 143  UK FSA (2007). 
 
95 • Too much disclosure can cause problems for market participants in their understanding of the true 
position in relation to control of companies and can , therefore, harm transp arency. Specifically the 
disclosure could lead to: 
- confusion of the investor community as to w ho holds underlying interests and the motives behind 
acquisitions and disposals; 
- complex situations where the community tries to second guess potential shareholdings creating a false 
feeling of interest/disinterest in the market; 
- increasing volatility in the market; and 
- the additional costs associated w ith the extra disclosure burden. 
The FSA clearly saw the merit in ma ny of these arguments. However, it was ultimately convinced by the 
view in the market that, whatever  CFD issuers may imply about their practices, taking positions in CFDs 
is an effective and widespread method for building a stake in a company without the burden of 
disclosure. This was a clear loophole that the FSA sought to close. This resulted in the FSA revising the 
applicable rules to include CFDs and similar instruments in the obligation to notify interests. 
In France , rules on cash settled derivatives came into force on 1 November 2009. These 
rules require that once a threshold has been  crossed by holdings of shares and options, 
gross long positions held through financial in struments of similar economic effect to 
holding shares also need to be reported. Th ere is no separate threshold for financial 
instruments of similar economic effect to  holding shares. A recent case described in 
Annex 8 below proves that the regime in  place was not efficient to avoid hidden 
ownership. 
In Portugal , following a public consultation144, a Regulation (Regulation 5/2010) on the 
duty to disclose long positions was issued by the CMVM and entered into force in 
October 2010145. According to the regulation, all in struments need to be aggregated 
towards the existing thresholds. 
In Germany , the Ministry of Finance has publishe d draft legislation. The legislative 
procedure is still pending with enactment of th e respective law to be expected in March 
2011 and, after a transition period, entering into  force to be expected on 1 January 2012. 
The draft law establishes a new obligation of i nvestors to make a disclosure if “they are 
holding financial instruments or other instru ments which due to their structure enable 
their owner to acquire existing voting shar es of an issuer domiciled in Germany, 
provided that they reach, exceed or fall short of  a relevant threshold. Relevant thresholds 
are 5, 10, 15, 20, 25, 30, 50 and 75%. In such an  event, the holder must immediately 
make the necessary notification to the issu er and the German regulator BaFin. The bill 
lists two examples where instruments “enable” the holder to acquire shares, i.e. (i) when 
the counterparty to the instruments could hedge  or reduce its risk by holding the relevant 
shares or (ii) when the instruments include  a right or an obligation to acquire the 
shares146. 
In the Netherlands , the Ministry of Finance has published draft legislation for 
consultation in 2009. The draft law would create the presumption that the holder of an 
                                                 
144  http://www.cmvm.pt/NR/exeres/9ADECEA9-1A6C-47FD-9526-5A9E9664D7F8.htm   
145  CMVM Regulation No. 5/2010 Duty to Disclose Long Positions on Shares. 
146  See http://blogs.law.harvard.edu/co rpgov/2011/03/01/germany-to-ban-s tealth-takeover-strategies/  
 
 
96 instrument which creates an economic long pos ition but is not settled in shares, controls 
the underlying shares. Such instruments would have to be aggregated to with shares and entitlements to acquire shares. 
In Italy , the Department of Finance is in the course of preparing analogous disclosure 
requirements for Contracts for Difference (C fD) holders. As it is possible to divorce 
economic interests from voting rights, the introduction of additional disclosure requirements in relation to CfDs is considered justified.  
Outside the EU, Switzerland, Hong Kong and Australia  have also taken action 
– The Swiss regulator has extended the sc ope of notification rules at end of 
2007. Disclosures on cash settled derivativ es only are seldom, in many cases 
such disclosures are done in connection with disclosures on other participations (shares) in the respec tive companies. The disclosures have 
become more complex by expanding the disclosure requirements to cash 
settled derivatives, but the disclosures contain more information. 
– In Hong Kong, all types of equity instru ments of similar economic effect to 
the holdings of shares are in scope of the significant holdings regime. A 
person holding, writing or issuing instrume nts of similar economic effect is 
taken to be interested in the underlying shares. These interests must be aggregated with physical holdings on a gross basis. 
– The Australian Treasury has started a consultation to determine whether 
equity instruments of similar economic  effect should be included in the 
definition of substantial holding, and, if  so, on what basis they should be 
included. It considers that while equity instruments of similar economic effect give economic interests but not voting rights, they may give a degree of effective control over the referenced shares. 
 
97  
ANNEX  8 
Recent cases in the European Union linked to the use of cash-settled derivatives  
Hermes/LVMH 
In October 2010, Louis Vuitton Mo ët Hennessey ("LVMH") surprise d the market by announcing, 
without having given any pr evious notice to the market that it had built up a 17.1% stake at a purported 
50% discount in Hermès International by  using cash-settled equity swaps.   
LMVH built (progressively) its (hidde n) stake by entering into severa l cash-settled equity swaps in 2008. 
In September 2010 the parties altered the terms of the equity swaps so that instead of cash, the swaps 
would be equity-settled. This action enabled LV MH to increase its holdings and as cash-settled 
derivatives are excluded from the French disclosure requirements as long as thresholds of shares or 
options are not crossed, the disclosure for these cash settled positions was not required.  
However, the manner in which the shareholding wa s acquired led the AMF (the French regulator: 
Autorité des Marchés Finaciers) launching a review to determine whether LVMH violated the disclosure 
rules whilst building up its stake in Hermès.  The investigation is due to end in July 2011. 
Continental versus Schaeffler147 
July/August 2008: Schaeffler built an economic interest of 36% in Continental by  entering equity swaps 
with some banks before it declared a public offering on the outstanding capital of Continental. Schaeffler 
was exempted from the lunch of a mandatory bid, since it made a voluntary public offering and wanted to 
pay a fair price. However, this fair price was lowe r than would have been the case if the control position 
was built by normal share acquisitions instead of by equity swaps. The German regulator BaFin ruled that 
the build-up of an economic interest by cash  settled financial instruments does not need to be notified 
under current German law. It should be noted that none  of the banks involved held more than 3% of the 
shares to hedge the equity swaps so as to avoid having to notify themselves under the rules on holding of 
shares. 
Porsche versus Volkswagen 
October 2008: Porsche announces that it has built a dir ect share interest of 42,5% in its competitor 
Volkswagen. Porsche discloses an additional economic interest of 31, 5% by cash settled options. There 
were discussions if the “free float’ in shares of Volkswagen was effectively reduced to 5,8% since the 
land of Low Saxony held an interest of 20,1% in Volkswagen company. Market parties had not taken 
into account the existence of such a large economic interest with only one party. They had speculated on 
a share price fall and were short for about 13% of outstanding shares. The clos ing of these positions led 
to a price explosion of the Volkswagen shares. In order to improve liquidity, Porsche settled 5% of its 
position into cash and thereby apparently profited from the market disorder caused by itself. 
SGL Carbon / Susanne Klatten / SKion GmbH 
March 2009: according to an ad hoc announcement pursuant to § 15 WpHG dated 16 March 2009, SGL 
Carbon notified that the “Board of Management of SGL Carbon SE was informed that SKion, the 
investment company of Mrs. Susanne Klatten, has ac quired an equity stake of 7.92% in SGL Carbon SE. 
According to their notification, SKion is interested  in further purchases of additional SGL Carbon SE 
shares; will however remain below the threshold of 25% of voting rights. SKion has built positions 
within this percentage scope through derivative capita l market instruments.” Different business journals 
(e.g. Handelsblatt,  Manager Magazin) reported that SKion had followed the example of Porsche by 
entering into cash settled equity swaps. On 8 Ap ril 2008, SKion notified SGL Carbon that the voting 
interest in SGL Carbon AG has exceeded the thresholds  of 10% and 15%. At this time the stake of SKion 
amounted to 16.48%. All voting rights of SKion are to be attributed to Susanne Klatten. 
Fiat148 
April 2005: EXOR, a company controlled by the Agne lli family (controlling, through IFIL, FIAT at the 
time with around 30% of the voting rights, through a pyramid structure) enters into an equity swap 
agreement for around 7% of the shares, which remain s undisclosed until executed.  While the originally 
equity swap agreement would be settled in cash, the agreement was eventually modified in August 2005 
to allow physical settlement in shares. Physical deliv ery of the shares to the Agnelli family took place on 
                                                 
147  See generally Zetzsche (2009). 
148  See also Kirchmaier et al. (2009), p.12. 
 
98 the date in which a group of banks were executing a c onvertible loan agreement not being repaid in cash 
by FIAT and therefore diluting the Agnelli's original  stake to 23%. The equity swap allowed the Agnelli 
family to keep their shareholdings in FIAT constant at 30% and with it the attached control rights intact 
without having to launch a takeover bid for the remain ing of the capital. For reporting obligations, Italian 
law takes into account the way financial derivatives may be settled: only in cas h or possibly in underlying 
physical instruments.   
 
 
 
  
 
99 ANNEX  9 
Thresholds and rules of aggregation for notification of major holdings in the 
Member States  
1. DIFFERENT THRESHOLDS IN THE MEMBER STATES  
The following table shows the extent to wh ich several Member States have adopted 
lower initial thresholds (and additional thresholds) in addition to the minimum thresholds required by the Directive
149.  
 
                                                 
149  Mazars (2009). 
 
100 
 
 
2. DIFFERENT RULES IN THE MEMBER STATES FOR AGGREGATION OF HOLDINGS 
OF VOTING RIGHTS WITH THESE OF THE FINANCIAL INSTRUMENTS  
A minority of Member States (AT, BG, CY, ES, LU, IT and PL) considers that Article 
13 enacts a notification obligation which is inde pendent of that of Article 9: in other 
terms, the notification obligation is triggered independently. On the contrary, in majority 
of Member States (BE, DE, DK, EE, EL, FI, FR, HU, IE, LT, MT, NL, PT, SE, SI, SK 
and UK), as well as in Norway and Iceland, investors must aggregate their holdings of 
voting rights with their holdings of financial instruments (within the sense of Article 13) 
for the purposes of evaluating whether the rele vant threshold referred to in Article 9 is 
reached or crossed. 
 
101 ANNEX  10 
 
FEEDBACK STATEMENT: SUMMARY OF RESPONSES TO THE 
CONSULTATION BY DG INTERNAL MARKET AND SERVICES ON THE MODERNISATION OF THE TRANSPARENCY DIRECTIVE (2004/109/EC) 
 
 
102  
Brussels, 17 December 2010 
  
FEEDBACK STATEMENT  
SUMMARY OF RESPONSES TO THE 
CONSULTATION BY DG INTERNAL 
MARKET AND SERVICES  
ON  
THE MODERNISATION OF THE 
TRANSPARENCY DIRECTIVE 
(2004/109/EC) 
 
103 1. GENERAL REMARKS ON CONSULTATION PROCEDURE AND FEEDBACK  
On 28 May 2010,  the European Commission (DG Internal Market and Services) launched 
a public consultation on the modernisati on of Directive 2004/109/EC (Transparency 
Directive)150. 
The Commission also adopted in May 2010 a Report on the operation of the Directive 
and a related staff working document on emerging issues151. This report (i) describes the 
impact of the Transparency Directive and how it has been complied with and (ii) presents 
the main issues emerging from its application.  
Five years after the entry into force of the Transparency Directive, its rules are 
considered to be useful for the proper and efficient functioning of the financial markets 
and for making informed investment decisions. Despite this positive general perception of the Directive, there is evidence that so me inefficiency still remains that hampers 
investment decisions and diminishes investor confidence.   
In this context, the public consultation launched by the Commission aimed at gathering 
quantitative and qualitative evidence on impacts, costs and benefits resulting from the requirements of the Transparency Directive as well as views on possible amendments to 
these requirements. 
• The issues which the Commission invited views and evidence on included: 
• Attractiveness of regulated markets for smaller listed companies; 
• Ways to improve the transparency regime of major holdings of voting rights;  
• Possible ineffective application of the Transparency Directive due to diverging 
national measures and/or unclear obligations in the Directive. 
The deadline for responses to this consultation was 23
rd August 2010. The following 
contributions have been received: 94 from  organisations, 17 from public authorities 
(including a European body and a private orga nisation entrusted with a public function) 
and none from individual citizens. 
                                                 
150  Directive 2004/109/EC of the European Parlia ment and of the Council of 15 December 2004 on the 
harmonisation of transparency requi rements in relation to informati on about issuers whose securities 
are admitted to trading on a regulated market and amending Directive 2001/34/EC, OJ L 390, 
31.12.2004, p. 38–57  
151  Report form the European Commission to the Counc il the European parliament, the European Social 
and Economic Committee and the Committee of th e Regions on the Operation of Directive 
2004/109/EC on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market, SEC(2010)611. 
 
104 2. OVERVIEW OF RESPONSES TO THE CONSULTATION  
The consultation was launched on 28 May 2010 and closed on 23 August 2010152. 
Responses were invited from all interested parties. 111 answers were received from a wide range of professional representatives and public authorities.  
Figure 1 shows the status of organisationa l respondents, classified into several 
categories. 
Figure 1 – Replies received, by type of institution 
  
Type of institution Replies  
 Type of institution Replies  
 Type of institution Replies 
European Bodies 1 European Associations 11 Stock exchanges 
operators (Regulated 
Markets) 6 
National Public 
Authorities 15 National Associations 
(professions only) 7 Individual companies 
(issuers and investors) 10 
OAMs (officially 
appointed mechanism for the storage of regulated information) 1 National Associations 
(issuers only) 4 Individual companies 
(service providers) 5 
   National Associations 
(investors only) 5 Law firms & audit firms 3 
  National Associations 
(including both issuers 
and investors) 25 Academics 1 
  International 
Associations/networks 4 Civil Society 
organisations 13 
      
Total     111 
 
Replies per type of institution
Lawfirms & audit firms
3%Academics
1%Civil Society organisations
11%
Individual companies 
(service providers)
5%
Individual companies 
(issue rs a nd inve stors)
9%
International 
Associations/networks
4%Stock exchanges 
operators  (Regulated 
Markets)
5% National As s ociations  
(including both issuers 
and investors)
22%National Associations 
(investors only)
5%National As s ociations  
(issuers only)
4%National Associations 
(profess ions  only)
6%European Associations
10%OAMs (officially appointed 
mechanism for the 
s torage of regulated 
information)
1%National Public 
Authorities
13%European Bodies
1%
 
                                                 
152  Replies received after that da te have also been considered. 
 
105 Figure 2 lists the 111 answers according to th eir nationality: 100 responses were received 
from EU-domiciled organisations or European  associations representing members from 
different Member States, 3 answers were received from non-EU domiciled organisations 
(US, Norway) and 8 answers from international associations. 
Figure 2 – Replies received, by geographical origin 
 
Countr
y Number of responses  Country  Number of responses  
AT 2  LV 1 
BE 3  NL 3 
CZ 1  PT 1 
DE 10  SE 5 
DK 6  UK 29 
ES 3    
FI 4  Nordic 1 
FR 10  EU 14 
HU 1  NO 2 
IE 4  US 1 
IT 1    
LU 1  International 8 
 
 Total   111 
 
Replies by country
051015202530
ATBECZDEDKESFI
FRHUIEITLULVNLPTSEUK
Nordic
EUNOUS
International
 
 
A list of all the organisations and public authorities, who have accepted that their 
answers to the consultation be published, is attached in Annex 1153. 
                                                 
153  One respondent requested a confidential treatment. 
 
106 3. ANALYSIS OF RESPONSES  
3.1. Methodological issues 
The feedback statement provides a broad summa ry of responses to each of the specific 
questions raised in the consultation paper. It is a factual document which presents the results of the consultation and does not announce any policy options.  
During the analysis of the responses, opinions have been categorized into 'yes/no' 
categories of answers where possible. The ma jority of respondents have also provided 
qualitative commentaries to supplement or nuance their 'yes/no' answers. The 
explanations have been grouped under a number of sub-headings to enable a more detailed analysis of respondents' views. 
Some interpretation of the replies received has been necessary. A number of respondents 
did not provide replies to the questions but general statements on issues covered by the 
questions. Those contributions have been interpreted in order to allocate the views expressed to the relevant questions. When replying to certain questions, some answers 
were unclear as to the allocation of a "yes" or "no" and required interpretation. Replies to 
some questions were more relevant or also relevant for other questions. As a result, those views have also been taken into account in  the analysis of these other questions. 
Respondents raised similar or identical issues in the replies to more than one question. Where possible, the analysis of these views has been grouped under only one question in order to facilitate understanding. This is par ticularly relevant for the following issues: 
several respondents raised the subject of the identification of shareholders which, for the 
purposes of this feedback statement, w ill be treated under question 18 (and not under 
questions 15 or 24); many respondents raised the need to clarify the rules on stock 
lending which, for the purposes of this feedback  statement, will be treated in the Annex 
2.  
It is noted, however, that this interpretation may not reflect fully or effectively the 
opinion of the respondents. 
It also should be noted that, for the preparation of the statistics reflected in this paper, all 
responses have been given equal weight. In addition, some respondents who provided 
individual contributions indicated that th ey also contributed to, or supported a 
submission by a professional association of which they were members.  
A number of respondents have answered only a limited number of questions which they 
considered to be of particular relevance and did not provide a response to other questions. 
3.2. Detailed analysis 
I. Attractiveness of Regulated Markets for small listed companies (questions 1 to 10)
 
General issue . Is it desirable to enact a differentiated regime for small listed companies in 
the rules applying to regulated markets? 
The consultation paper did not contain a sp ecific question on the merits of enacting a 
differentiated regime for small listed companies in the rules applying to regulated markets.  However, nearly half of the re spondents provided an opinion on this issue. One 
third supported the possibility to enact a di fferentiated, more proportionate, regime for 
 
107 small listed companies regarding the rules a pplying to regulated markets so that these 
markets remain attractive for small listed companies. It was argued that the administrative burdens and associated costs for small listed companies could be reduced 
without affecting the level of transparency or the quality of the information disclosed. 
The US was mentioned as an example. So me respondents supported the differentiated 
regime provided that investor protecti on and soundness of the markets were not 
adversely affected.  
On the other hand, two thirds of the opinions  provided opposed this idea on the basis that 
the same disclosure requirements should a pply to all issuers on regulated markets 
irrespective of their size. They were of the opinion that regulated markets were a 
guarantee for certain quality standards, which must not be undermined with the creation 
of sub-markets or segments according to the size of issuers.  
Several replies mentioned that exchange -regulated markets (also known as junior, 
alternative, growth or second-tier markets) were more suitable for smaller companies and that regulatory solutions to increase the attrac tiveness of this type of market would be 
preferable. Smaller companies should have the choice of listing first on these smaller markets and then migrating to major markets as they grew.  
It was also outlined that EU legislation s hould recognise that there are and should be 
different types of capital markets in the EU , with different regulatory intensity: (i) 
exchange regulated markets with a light-touch regime; (ii) regulated markets with common standards for all issuers; and (iii) pr emium segments, within regulated markets, 
voluntarily joined by issuers, which may incl ude regulatory add-ons defined by the stock 
exchanges.  
All respondents who expressed an opini on on this general issue called on the 
Commission to conduct a holistic review of the burdens for small listed companies and of 
the appropriate and beneficial solutions in terms of the regulatory approach for primary 
markets (both regulated markets and excha nge-regulated markets). One respondent also 
indicated that the development of a more vibr ant venture capital and private equity sector 
in Europe could, in many cases, represent a more viable source of funding than public 
equity markets for smaller companies.  
Question 1 – Impact of the Transparency Directive on the attractiveness of regulated 
markets for small listed companies . Do the Transparency Directive obligations for 
issuers (e.g. disclosure of annual and half-year ly financial reports, quarterly information 
etc.)  impact on the decisions of small listed companies to be listed on or to exit regulated 
markets (e.g. do they act as an entry barrier)?  
Respondents' views diverged on this issue.  
A number of respondents considered that the transparency requirements, while implying 
a certain burden, were not a critical considera tion in a company's decision to get listed on 
a regulated market or a barrier to entry. In their view, the benefits of the requirements 
provided by the Transparency Directive outweighed the related costs.  By requiring firms to provide more complete, clear and harmonized financial information, comparability between issuers was facilitated and investor awareness and confidence increased. It also 
encouraged better organization of issuers, whic h was particularly relevant in the case of 
small listed companies. In addition, several respondents believed that the most significant costs were caused by legislative requirements other than the Transparency Directive. 
 
108 On the other hand, some respondents were convi nced that the cost of ongoing disclosure 
requirements imposed by the Transparency Di rective created an incentive for smaller 
companies to avoid listing on regulated ma rkets unless this could be justified by 
significant benefits in terms of access to ex ternal sources of funding, which were not 
always achieved.  
Many replies pointed out that an increasi ng number of issuers had recently left or 
considered leaving regulated markets in order to decrease their compliance costs. However, while the costs of the transparency  obligations were often cited by small listed 
companies themselves as the main reason for delisting, other respondents underlined that a number of factors contributed to the delis ting phenomenon:  small free float affecting 
the trading and the liquidity of the equity  issued by smaller companies, insufficient 
performance, buy-out transactions, mergers etc.   
Finally, some respondents had difficulties to eval uate the real impact of the requirements 
of the Transparency Directive since they c ould not be seen in isolation from other 
obligations to be complied with by issuers in order to be listed on regulated markets.  
Question 2 – Costs for smaller listed companies . Which are the most important costs for 
small listed companies associated to complia nce with the Transparency Directive (e.g. 
cost of preparing  the accounts, auditing costs, legal costs, cost of making public the 
information etc.)? 
Most of the respondents provided qualitative answ ers. Some outlined that the main cost 
was the time that board and senior management spent in complying with transparency related requirements rather than in directing the business (opportunity cost). Others suggested that the preparation of the accounts (IFRS) and the related auditing costs resulted in a heavy burden for small listed co mpanies because they often had limited in-
house financial expertise and it was more difficult for them to comply with the short publication deadlines of the Transparency Directive.  
In addition, legal compliance costs, translati on (into English) costs and publication costs 
were also mentioned as important as we ll as other requirements (corporate governance 
rules, regular reporting obligations, advertising, financial marketing, disclosure of management transactions and shareholdings) which required listed companies to incur costs linked to the hiring of specialists including lawyers, accountants and investor 
relation teams, often in amounts well beyond t hose associated with public information 
reporting. 
Some respondents also underlined that important  costs arose from national rules, such as 
the obligation to prepare quarterly financial re ports or to publish regulated information in 
certain media. 
For the majority of respondents, the main probl em appeared to be the level of costs as 
compared to the turnover of the small issuers. 
In addition, some respondents considered that  the benefits of transparency outweighed 
the costs and that the requirements were not disproportionate.  
It was mentioned that some of the costs w ould have been incurred anyway even if the 
company wanted to access capital without be ing listed on a regulated market (e.g. via 
private equity investment). 
 
109 Question 3 – Potential diminution of cost for small listed companies . What changes of 
the Transparency Directive will bring impor tant reductions in costs for small listed 
companies? [see also questions 7 and 8] 
Views of respondents were split. About half of those responding believed that the margin 
of manoeuvre for reducing the requirements without lowering transparency standards 
was limited and, consequently, changes to the Transparency Directive could not 
significantly reduce costs for small listed companies. 
The remainder of respondents believed that some cost reductions could be achieved 
without necessarily affecting the level of tran sparency necessary to protect investors. The 
following ideas were advanced: streamline disclosures; more flexible deadlines for publication of financial reports; no obligation to produce quarterly financial information 
either definitively or during the first 3 year s of listing; allow issuers to decide on the 
optimal interval of regular reporting (e.g. two or three times a year); use a common 
standard reporting format and common la nguage (XBRL);  use  non-binding uniform 
templates for reports (including the narrative sections); make regular annual financial reports closer to prospectuses in format a nd content; avoid gold plating (e.g. in relation to 
the audit of half-yearly financial reports). 
Question 4 – The lower visibility of smaller listed companies . How does the visibility 
problem materialise (e.g. lower attention of analysts, lower investment levels, lower 
trading etc.) for (objectively) well performing small companies?  
Respondents that provided an answer to this question in general agreed that there was a 
visibility problem for small listed companies’ equity. This lack of visibility generally resulted in lower investment levels, which remained very much national, lower trading,  lower attention of analysts, in particular acr oss borders, as well as lower attention from 
media. 
Concerning the low investment and trading le vels, investment in small companies was 
viewed as much riskier than in large ones due  to the lower liquidity and therefore greater 
volatility in the share price. Also, information asymmetries resulted in higher due diligence costs - which in some cases may exceed return on investment - for investors willing to invest in smaller companies. One respondent in particular explained that investors did not have all the necessary information to enable accurate assessment of risks and make optimal investment decisions , as it was harder for investors to obtain 
reliable information on smaller businesses. 
For some respondents, however, low investme nt and trading activity could also be 
related to factors other than visibility. For in stance, for large funds, investment in even 
strongly outperforming small listed companies wa s unlikely to make much of an impact 
on the fund's overall performance. In order to gain material exposure to small companies, 
their holdings would have to be relatively la rge. However, it could be difficult for fund 
managers to take significant positions in sma ll listed companies due to the impact that 
this would have on the share price. This al so carried not only the risks that can be 
inherent in a small company (earlier stage in  a growth cycle, for example) but also 
illiquidity risks (not being able to sell the hol ding easily). All of this had to be factored 
into the investment decision.  
One respondent indicated, however, that there were institutional investors specialised in 
investing in small listed companies. 
 
110 Concerning the lower attention of equity an alysts, respondents were of the opinion that 
lack of turnover in small listed companies st ocks made it difficult to generate brokerage 
commissions. As a result, relatively few brokera ge research and trading resources were 
dedicated to smaller listed companies. This resulted in a vicious cycle and raised the question of the viability of the small caps equity research model. 
Several replies linked the question of visibility to how information is disseminated and 
raised the issue of the bottleneck of the half -yearly financial reports published at the end 
of August. 
Other respondents believed that current provi sions of the Transparency Directive on 
dissemination/storage of regulated information were unsatisfactory, since they intensified 
or, at least, failed to address the problem of  the low interest shown by EU investors in 
smaller listed companies. In their view, the Transparency Directive should facilitate, to 
the maximum extent possible, an easy, lo w cost and non-discriminatory access to 
regulated information to all investors. Curre ntly, small issuers were reluctant to spend 
more money to ensure wider dissemination of information considering the low cross-border attention they received. 
Finally, some respondents called for a holistic review of the visibility problem, outside 
the Transparency Directive. Several respondents suggested that tax incentives should be applied to address the persistent market failu res associated with equity investment in 
smaller listed issuers. By adjusting the risk re ward of investment in smaller listed issuers, 
funds could be attracted to primary and secondary markets, supporting market liquidity and lowering the cost of capital. 
Question 5 – Other cases reflecting low benefits . Are there, in your view, other cases 
reflecting low benefits for small listed companies resulting from disclosure obligations 
compared to larger listed companies? 
Few replies were received to this question. For some respondents, the benefits to be gained through adequate disclosure were higher for small listed companies than for larger companies. Reducing information may deter some investors and was a particular 
problem for smaller companies, which may not  have a well recognised track record or 
brand. 
For other respondents, there were additional cas es reflecting low benefits for small listed 
companies.  
For example, most of the competitors of small listed companies were not listed on 
regulated markets. Providing too detailed in formation can have negative consequences 
and present competitive disadvantages for small listed companies.  
Question 6 – Definition of a small listed company . What would be the optimal definition 
of a "small  listed company" in the context of regular  (i.e. after the admission to trading of 
the securities) transparency requirements?  i) for issuers of shares, those companies with 
 
111 a market capitalisation below a certain threshold such as €100 Million154, 
€250 Million155 or other (please specify the threshold);  ii) for issuers of shares, those 
companies with a market capitalisation be low a certain percentage (e.g. 60%) of the 
average capitalisation of a company in the regulated market where the company is 
admitted to trading (please specify the percen tage); iii) for issuers of shares, those 
companies with a market capitalisation be low a certain percentage (e.g. 60%) of the 
average capitalisation of a company in the regulated market(s) of the home Member 
State of the company (please specify the per centage); iv) for issuers of debt securities 
only, those companies having outstanding debt securities below a certain threshold 
(please specify the threshold); v) for issue rs of debt securities only, those companies 
having a turnover below a certain threshold (please specify the threshold); vi) other. 
There was no consensus among respondents to this question.   
Slightly more than one third who answered supported a definition of small listed 
company based on the market capitalisation. This criterion was considered to be simple and straightforward, although some kind of transitional arrangements for companies 
crossing the thresholds as a result of changes in capitalisation would need to be established. Concerning the threshold its elf, views were split. The following 
capitalisation thresholds were mentioned: the Prospectus Directive
156 threshold; €100M; 
€150 M; €250M; €400M; €750 M; €1 billion; the thre sholds used by stock exchanges for 
the different market segments. 
About one fifth of the replies would prefer  to rely on a relative threshold, either by 
reference to the average (or median) capita lisation in the home Member State of the 
issuer or on the regulated market where th e company is or intends to be listed. For 
example, using a 35% threshold of the average  capitalisation in Paris would allow to 
capture in practice 75% of the issuers, whic h would otherwise represent only 4,4% of the 
total  capitalisation in Paris. Several of thes e respondents suggested, however, leaving the 
question of the threshold to be decided at national level. 
Few respondents addressed the question of the issuers of debt. One expressed preference 
for using a balance sheet threshold and another respondent for a mixture of the two criteria proposed in the question. Other rep lies expressed a preference for not touching 
the question of issuers of debt. 
More than two fifths of respondents, however, opposed a definition of small listed 
company and provided arguments against th e different solutions proposed in the 
question. They tool the view that the proposed  definitions would be impractical because 
of the volatility and the variations in the capitalisation of companies, which in turn 
resulted in legal uncertainty, investment confusion, increased costs for issuers related to 
                                                
 
154  See the definition of " company with reduced market capitalisation " in the context of the on-going 
review of the Prospectus Directive (for instance, in the Council's compromise text of February 4, 2010 http://register.consilium.europa.e u/pdf/en/09/st17/ st17451-re01.en09.pdf
). 
155  See the External Study (section 1 of the executiv e summary) which refers to a threshold of between 
250 Million and 1000 Millions euros. 
156  Directive 2003/71/EC of the European Parliament and of the Council of 4 November 2003 on the 
prospectus to be published when securities are o ffered to the public or admitted to trading and 
amending Directive 2001/34/EC 
 
112 monitoring the relevant thresholds as well as  enforcement burden. It was also argued that 
these thresholds would not capture the comp any risk profile and would be difficult to 
apply to all markets, which could result in regulatory arbitrage.  
Finally, some respondents suggested that if there were a definition of a small listed 
company which resulted in a different transparency regime, such listed companies should be allowed to “opt-out” from the differentia ted regime and to continue applying normal 
standards. Another respondent cautioned agains t the possible proliferation of different 
definitions of a small listed company in different EU directives. 
Question 7 – Potential diminution of cost fo r small listed companies if changes to the 
Transparency Directive were to be adopted.  
Question 7.1 – If a differentiated regime fo r small listed companies is added to the 
Transparency Directive with a view to redu ce the compliance costs of those companies, 
would it be desirable to prevent Member St ates/regulated markets from imposing in 
national law/listing rules more stringent or additional obligations on small listed 
companies?  
A large majority of respondents that provided an answer to this question were not in 
favour of a maximum harmonisation approach if  a differentiated regime for small listed 
companies were added to the Transparency  Directive. These respondents considered 
desirable that Member States or regulated markets operators would be able to set more stringent or additional obligations to small listed companies, in particular because of the need to adapt the market to the local conditions. In their view, imposing maximum 
harmonisation could result either in lowering the existing high level standards in certain 
regulated markets or imposing a significant new burden in those countries that were 
currently only applying the minimum requirement s of the Transparency Directive. Some 
of these respondents however considered that  only regulated markets operators, and not 
Member States, should enjoy the capacity to impose stricter requirements.  
Only a small minority of respondents favoured a maximum harmonisation approach 
because, in their view, the current regulat ory burden was partly caused by national gold 
plating.  
Question 7.2  – Do you think that an extension of the deadline for the publication of 
financial reports would imply  a reduction in legal, auditing or  other type of costs? Please 
provi de evidence supporting your answers (e.g. how  much the cost would be reduced 
depending on the extension of the deadline)?  
Respondents to this question provided qualitativ e rather than quantitative views on costs, 
with a small minority not providing any opinion on costs at all.  
About half of the respondents did not believe  that an extension of the deadline for 
publication of financial reports would result in any significant cost reduction. Some of 
these respondents, however, appreciated th e flexibility that could result from an 
extension of the deadline for the publication of half-yearly reports from two to three 
months, so as to better organise the necessa ry work, relieve administrative complexities, 
improve the quality of the output and secure the services of auditors.  
Some other respondents believed, on the contrary, that extending the deadline of 
publication of financial reports, in particular , half-yearly, would result in a reduction in 
 
113 costs. The following types of costs which c ould be reduced were mentioned: the burden 
on boards and senior management (opportunity  cost); accounting costs (e.g. less need to 
hire external staff/consultants in certain periods for accounting needs because workload of internal staff would be better spread th roughout the year); auditing costs (e.g. easier 
for auditors to cope with the work); extra hours (both of in-house staff and of external 
auditors).  
In addition to the cost issue, some respondents expressed negative views on the 
possibility to extend the deadline for publication of financial information. Late publication of financial reports could lead  to outdated information which was less 
valuable to the market and would increase the risk of market abuse. It was also argued 
that a better way for issuers to better allocate internal resources was to adjust their accounting year. 
Some other respondents considered that such extension of the deadline should benefit all 
listed companies, not just small ones. 
Question 7.3  – Do the various rules requiring th e disclosure by listed companies of 
reports of narrative nature157 bring  significant costs/operation complexity for small listed 
companies (e.g. legal, account preparation, auditing, other type of costs)?  
Only a small number of respondents provided an answer to this question.  
Around half considered that the various rules requiring the disclosure by listed 
companies of narrative reports brought significant costs/operation complexity to small listed companies. The opportunity cost re lated to the time of boards and senior 
management was again particularly highlight ed, since there was little scope to delegate 
the task to more junior staff. One reply men tioned that the bulk of the cost consisted of 
understanding what each requirement meant, how much text was required, what should 
be the content and what degree of detail was required. Narrative reports needed also to be 
checked, proof-read and compared to other narrative reports, which generated a significant amount of work for companies. Additionally, one respondent mentioned that 
auditors and lawyers were increasingly involved in the preparation of narrative reports due to the growing complexity, which contri buted to increasing the related costs. The 
following disclosure requirements were identified as complex for small listed companies: preparation of interim management stat ements, compliance with the corporate 
governance requirements, corporate social responsibility disclosures. 
                                                
 
157  Those narrative reports (see Annex to this que stionnaire for the legislative references) are: 
-the annual management report (Article 4(5) TD), which refers to Article 46 of the Fourth Company 
Law Directive or to Article 36 of the Seventh Company Law Directive, and integrates disclosure obligations relating to environmental and social data;   -the corporate governance statement as referred to in Article 46a of the Fourth Company Law Directive and Article 36(2) of the Seventh Compan y Law Directive, to be included in the annual 
management report;  -the information requested in Article 10 of the Take over bids Directive, to be included in the annual 
management report;  -the disclosure on remuneration of directors (provided it is not integrated in the corporate governance statement); -the interim management report (Article 5(5) TD); and -the interim management statement (Article 6(1) TD);  
 
114 The other half of the respondents was not c onvinced nor had evidence of any significant 
costs/operation complexity for small listing companies arising from the various rules 
requiring the disclosure by listed companies of narrative reports that would warrant a reduction in the reporting requirements. Some respondents said that removing disclosure requirements would not be prudent from a transparency and investor protection 
perspective and/or that the benefits of tran sparency outweigh the costs. Others pointed 
out that investors do not expect the same vol ume of disclosure from small companies as 
from the larger, often more complex, compan ies. Some replies also suggested leaving 
this issue to national rules. 
Question 7.4  – Would you see benefits from integr ating in the Transparency Directive 
the disclosure  obligations mentioned in question (7.3158) which are currently in different 
directives?  
A slight majority of respondents to this ques tion would see some benefits in integrating 
in the Transparency Directive the disclosure  obligations concerning narrative reports that 
are currently dispersed in different directives . Some of the respondents pointed to the fact 
that one set of rules would be more user-fri endly for issuers and could make clear that 
the responsibility for monitoring the disclosu res would remain with a single competent 
authority. However, it was also argued that the perceived improvements might be limited 
and that everything would depend on how Member States would implement the 
obligations. 
The remaining the respondents could not see a ny particular benefit in integrating all 
narrative disclosure obligations in the Transparency Directive. For some, it would not be appropriate to include corporate-governance related disclosures in the Transparency Directive, except for the corporate governan ce statement which is part of the annual 
financial report. For others, integration of all narrative disclosures in the Transparency Directive would have a negligible impact. Such "relocation" could confuse market 
participants rather than being helpful: overall, the “location” of an obligation was irrelevant as it was the content that causes compliance costs and not where the respective 
rule is codified. 
Finally, one respondent mentioned that a consultation on the narrative reporting 
framework had been recently launched in the United Kingdom. 
Question 7.5  – If the Transparency Directive provided for maximum harmonisation (no 
national  add-ons) of the content of narrative reports  referred to in question (7.3) for small 
listed companies, would this imply a reduction in legal, auditing or other type of costs?   
Few respondents provided views on costs. A fe w of them considered that some cost 
reduction could be achieved. In particular inte rnal administrative costs could be reduced 
because of the possibility to introduce more au tomation in the process. But most of the 
respondents could not see scope for cost reductions arising from maximum harmonisation of narrative reports for small listed companies. On the contrary, one respondent underlined that maximum harmoni sation across Europe on the content of 
                                                
 
158  The consultation paper wrongly referred to questi on 8.3 instead of 7.3. Some respondents expressed 
they were unable to reply to the question because of  the wrong cross-reference. Others interpreted the 
cross-reference as referring to question 7.3, whic h as the intention of the consultation paper. 
 
115 narrative reports would increase financial reporting obligations and hence compliance 
costs for a large portion of small listed companies which were listed on those regulated markets which did not currently impose th eir own additional reporting obligations 
beyond the minimum EU requirements. 
Most of the respondents that provided views on the merits of such maximum 
harmonisation opposed the idea. It was high lighted that the quality of the narrative 
reporting was crucial for investors. If the thre shold for the content were set too low in the 
hope of saving costs, this may have negative implications for investors, with subsequent long run negative effects on the share price a nd the cost of capital for the company. In 
this context, some respondents called for a llowing markets to maintain their premium 
listings. 
Question 7.6  – In case you think maximum harmonisation regarding the content of 
narrative reports referred to in question (7.5) is desirable, what do you think would be the 
best way? i) non-mandatory ready-to-use templates regarding these narrative 
disclosures (which could be prepared for instance by CESR/ESMA); ii) more detailed 
rules in European law, either in the Transparency Directive or in delegated acts adopted 
by the Commission; iii) a combination of both.  
Few respondents provided an opinion on this question.  
Most saw some value in the possible prepara tion of ready-to-use templates for narrative 
disclosures, provided they were not mandatory.  
Only one respondent supported more detailed rules in EU law (either in the Transparency 
Directive or in implementing acts a dopted by the Commission). Two respondents 
supported a combination of both options. Two replies suggested other options such as 
guidance work of the IASB. 
Other respondents, however, were opposed to maximum harmonisation in this area. For 
instance, some considered templates for narra tive disclosures to be particularly worrying 
and likely to result in box-ticking and "boile rplate" disclosures. This would be less 
informative to investors and contrary to  the objective of disclosing comprehensive 
information. It was also argued that favouring form over content was not the best way to 
improve regulation. One respondent explained th at more detailed rules in EU legislation 
could result in more regulation, less flexibility and higher costs of compliance. 
Question 7.7  – Concerning question (7.6), could you provide a specific reply regarding 
the disclosure of environmental and social data requested in Article 46(1)(b) of the 
Fourth Company Law?  
Few respondents provided a reply to this question.  
Several respondents supported the view that th e rules on disclosure of environmental and 
social data should not be integrated in the Transparency Directive or that such rules 
should not be changed. Others underlined that this type of disclosure was often sector 
specific and difficult to harmonise.  
Some respondents, however, supported the idea of maximum harmonisation or at least 
non-mandatory ready-to-use templates, in particular for numeric data. Other replies favoured more guidance. 
 
116 One respondent underlined that sector-specifi c key performance indicators needed to be 
developed in order to ensure that issuers di sclose comparable data on a broad range of 
potential risks. 
Question 8 – Diminution of cost for small listed companies vs. diminution of 
transparency to the market.  
Question 8.1 – Is it possible to apply lighter transparency obligations for small listed 
companies without a corresponding significant diminution of transparency provided to 
the market?  
The majority of respondents that provided a reply to this question believed that a 
differentiated regime for small listed compan ies would result in a significant diminution 
of transparency provided to the market and a perceived gap in investor protection. They 
notably highlighted that reducing the freque ncy and the amount of information to the 
market could result in lower interest fr om investors and a general reduction of 
confidence, which in fine  would be detrimental to small listed companies. Lighter 
transparency requirements could create a s econd-tier market which could be abandoned 
by investors seeking higher standards of quality. A minority of respondents believed 
nevertheless that already today various ma rket segments with different reporting 
requirements existed without necessarily aff ecting the overall level of transparency to 
investors. Different levels of obligations c ould be beneficial provided this is clear to 
investors, as has been done already in the US. It would allow streamlining disclosures 
and reducing the flood of information which is currently difficult to manage for analysts and investors. In any case, any price sensitiv e information had to be disclosed under the 
Market Abuse Directive, thus avoiding disclo sure gaps. Also, lightening the obligations 
did not prevent small listed companies from providing more information if 
investors/stakeholders so requested. 
Other respondents referred to the need to look at the methods for dissemination of 
information: some supported posting inform ation on websites (which allegedly could 
result in savings of €5000/10000 per issuer), while one respondent suggested to use 
regulatory information services to disseminate information.  
Question 8.2  – If the obligation to disclose quarterly financial information159 was waived 
for small listed companies, would this result in an unreasonable diminution of 
transparency?  
The majority of respondents that provided a reply to this question believed that waiving 
the obligation to disclose quarterly financial reports or interim management statements (hereinafter quarterly financial information) would result in an unreasonable diminution of transparency. The main arguments were that: (i) quarterly financial information was useful and valuable to the market and provide d visibility to small listed companies; (ii) it 
was not too difficult to comply with the obligation to prepare an interim management statement which was a proportionate requirement; (iii) reducing the amount of information to the market could result in less appetite from investors to invest in those 
companies and also increased the risk of ma rket abuse; (iv), transparency rules in 
regulated markets should not be determined by size of companies. Some respondents, 
                                                
 
159  Either quarterly financial reports or interim management statements as referred to in Article 6 TD. 
 
117 however, could support some flexibility rega rding less volatile sectors and/or newly 
listed small companies (e.g. temporary waiver). 
A minority of respondents considered that the publication of quarterly financial 
information could be waived for small listed companies. The publication of this kind of 
information was rare in some EU markets be fore the implementation of the Transparency 
Directive in 2007 without there being a perception that securities markets suffered from a lack of transparency. Moreover, some res pondents were of the view that benefits 
resulting from disclosure of quarterly financial information were negligible for small listed companies and that such disclosure contributed to short-termism in company 
decision making. In addition, quarterly fina ncial reports or interim management 
statements would not disclose any sensitive in formation to the market in terms of price 
movements, since any material information s hould have been announced to the market in 
any event according to on-going disclosure requirements provided by the Market Abuse 
Directive. Some respondents expressed pref erence for giving freedom to companies to 
decide whether to publish quarterly financia l information: if investors demanded this 
information, companies would publish it, if th ey did not, there was no point in obliging 
the issuer to produce it.  
Some respondents specifically stated that quarterly financial reports should not be 
imposed (e.g. they contribute to short termis m) and that issuers should be allowed to 
continue publishing interim management statements instead. In this regard, one respondent outlined that issuers should maintain  freedom and flexibility as to the content 
of interim management statements and that there was no need to clarify the requirements 
of Article 6 of the Transparency Directive. 
If the requirement to disclose quarterly fina ncial information were waived in EU law, 
some respondents were of the view that regulated market operators should be allowed to require issuers to disclose such information, at least for the premium segments.  
Question 9 – Addressing the lower visibility of smaller listed companies  
Question 9.1 – Do you think that measures at EU level (including possible changes to the 
Transparency Directive) can help solving the lower visibility of smaller listed 
companies?  
The majority of respondents to this questi on considered that measures at EU level 
(including possible changes to the Transparency  Directive) could not really help solve 
the problem of lower visibility of sma ller listed companies or would do so only 
marginally. The primary obstacle to greater visibility of smaller listed companies was the structure and incentives of the institutional asset management industry. According to one 
respondent, small listed companies often opera ted within a single country which, coupled 
with the language barriers that exist between  EU countries, often resulted in difficulties 
to create investor appetite across Europe. Another respondent argued that in small countries, companies, even if small in abso lute terms, are sufficiently attractive on the 
local market so that their capital issuances are over-subscribed.  
On the other hand, a minority of respondents c onsidered that measures at EU level (and 
at national level) could improve visibility of small listed companies. Among those, one 
respondent suggested a role for EU agencies in  addressing the issue of lower visibility of 
these companies, as part of a broader st rategy for small listed companies in the EU. 
Another respondent expressed support for measures proposed in the Demarigny report, in 
 
118 particular regarding the use of special IF RS for SMEs as an accounting standard for 
small listed companies.  
One reply highlighted that any EU measur e, however, should be without prejudice to 
other market driven initiatives, which should be  also targeted, preferably as a primary 
approach. For instance, issuers should us e all possibilities offered by the current 
framework to enhance their visibility, such as  choosing a financial year different from 
the calendar year.  
Finally, one respondent expressed a negativ e opinion about the possible creation of a 
pan-European trading platform for small listed companies. 
Question 9.2  – What type of measures at EU le vel could help solving the visibility 
problem of small listed companies? i) The Transparency Directive should contain 
differentiated  rules for small listed companies re garding timing and/or methods for the 
disclosure and dissemination of information; ii)  there are rules in other EU directives 
(e.g. prudential requirements) and/or nati onal law (e.g. tax law) which discourage 
financial analysts and intermediaries' interest s in small listed companies which should 
be modified; iii) financial analysts and intermediaries should get incentives to interest 
themselves in small listed companies; iv) other.  
Several respondents provided a specific reply to  this question.  However, there was some 
overlap with the general comments that many respondents provided on the merit of 
having a differentiated regime for small listed companies. The summary of the replies to question 9.2 therefore focus on whether some m easures could help solving the visibility 
problem of small listed companies and not on the merit of adopting them. 
Concerning possible differentiated rules,  many respondents supported extending time-
limits for publication of half-yearly reports to either 11 weeks or three months, instead of 
the current two-month time-limit. Some respondents would support such extension 
provided it was applied to all issuers. Howe ver other views suggested that instead of 
extending the deadline for publication, issuers should adjust their financial yearend to 
avoid disclosing their half-yearly reports a ll at the same time. It was argued that 
disclosure of financial information which was evenly distributed throughout the year 
would encourage users of financial inform ation to pay more attention to small 
companies, particularly if smaller companies were able to disclose regulated information at times when larger companies were not al so disclosing information. This would also 
help to balance the workload of users of  the information, the burden on information 
systems and prevent the currently recurri ng disruptions of the market. Another 
suggestion concerned the reduction of the fr equency of financial reporting to 2 times 
(every 6 months) or 3 times (every 4 months) a year. 
Respondents did not specifically address the i ssue of the impact of  the prudential rules 
and tax laws on investment levels. However,  some respondents agreed that it was of 
decisive importance to improve market cond itions for investors focusing on small listed 
companies. A respondent was of the view that EU efforts should be directed at 
identifying the factors that caused institutional and retail investors not to invest capital in 
smaller listed issuers and to assess whether a regulatory response at EU level would be 
appropriate or desirable to address this factors.  
Some ideas were proposed. One respondent supported initiatives that would foster a 
network of investors who understood the need s of small listed companies. Support was 
 
119 also expressed for the creation of dedicated i nvestment funds or new types of investment 
funds allowed to invest more in smaller issuers listed on exchange regulated markets. The need to provide tax incentives in orde r to encourage investors to allocate their 
investment to small listed companies was al so mentioned: e.g. providing incentives to 
existing funds to invest a minimum amount in small listed companies would increase 
investment.  
Dissenting views, however, were expressed th at it would not be easy to transform the 
perspective of institutional investors with respect to investments in small listed companies. The development of a more vibran t venture capital and private equity sector 
in the EU was considered, a more viable s ource of external funding than public equity 
markets for smaller companies. 
Some respondents were in favour of measures  to incentivise brokers to conduct minimum 
research into small listed companies alt hough the question of who should pay for such 
incentives was also raised. However, other respondents were opposed to this idea and 
questioned the existence of any market failure. It was explained that if there were demand for more detailed information on a specific small listed company, it was likely that a financial analyst would provide the required analysis. It was also argued that 
incentives to analysts would lead to market distortions. Furthermore, a stronger focus of 
analysts and intermediaries on small listed companies based only on incentives would be 
detrimental to investors, as intermediaries would act on inappropriate considerations and 
therefore misallocate funds. 
Additionally, some respondents provided ot her suggestions. Some requested the 
Commission to undertake a more holistic review  on this issue. One respondent explained, 
in particular, that small listed companies we re a different asset class as compared to 
deeply liquid and frequently traded stocks . This should be taken into account when 
developing a policy to promote investment  in these companies. This respondent 
supported a role for the EU agencies in se tting a pan-European strategy with a clear 
vision for the smaller listed company segment, taking into consideration the key areas of 
enterprise, finance and macroeconomic policy, and argued that there was a need to create 
a "community" for the small listed companie s sector as an asset class. Another 
respondent explained that small listed compan ies should engage more with the investor 
community and their agents. 
Other respondents supported an EU legal framew ork for exchange- regulated markets. In 
their view, formalised support across Member States for markets dedicated to smaller 
companies would increase the profile of such businesses and help them attract investors. 
Some respondents raised the question of the need to simplify the information 
dissemination model. Some of them suggested that publishing regulated information in English could provide broader opportunities for investments in smaller issuers, and one 
suggested allowing small listed companies to publish information in English only. One respondent thought that publishing regulated  information on a website provided enough 
visibility for small issuers, although this view was not necessarily shared by other 
respondents who proposed a wider use of speci alised service providers to disseminate 
information. Other respondents were of the opinion that the dissemination model of the 
Transparency Directive did not work well and that other solutions needed to be found: 
for instance, the dissemination system in  Portugal was cited as an example by a 
respondent. 
 
120 Finally, some respondents reiterated their view that the type of measures suggested in 
question 9.2 would not have a positive impact. For instance, one respondent claimed that these proposals would not resolve the current stru ctural bias towards larger firms and that 
the current situation reflected in general the true value of small listed companies. Where 
those companies were undervalued, they woul d be more interesting to analysts and 
investors, therefore the natural balan ce would be restored. Another respondent 
questioned the EU competence in this matter, taking into account limited cross-border activity of many small listed companies. 
Question 9.3  – Do you think that the development of an EU database160 storing regulated 
information on all issuers of securities in the EU will facilitate research and create 
interest/result in greater attention in small listed companies by financial analysts, 
financial intermediaries and investors?   
Respondents were split on this issue. 
Almost half of respondents generally believed that the development of an EU database 
for storage of regulated information on all issu ers of securities in the EU could facilitate 
research and result in greater attention to sm all listed companies from financial analysts, 
financial intermediaries and investors. Howe ver, (i) this should not be a stand alone 
initiative, but a part of a wider strategy for small listed companies; (ii) such database 
would need wide marketing, and be well organised to facilitate research; (iii) no additional cost on issuers should be impos ed; (iv) the Commission should not be in 
charge of developing it; (v) push (media) system s would need to be maintained to reach 
investors; (vi) it should be accompanied by a convergence of substantive disclosure  
requirements and by a common format; (vii) it s hould be accessible free of charge or at 
very low price. 
Another half of respondents conveyed the opposite message. They supported the existing 
situation with national databases or more di sclosure of information on issuers' websites 
on the grounds that: (i) there was a significant ri sk that a pan-European project would be 
excessively costly and would duplicate or  undermine the work being undertaken at 
national level; (ii) costs/drawbacks linked to  the quality of information provided would 
largely outweigh hypothetical benefits; (iii) th e US Edgar system which is similar to a 
pan-European database lacked flexibility; (iv)  the development of research and analysis 
should be left to the market; (v) investors in  small listed companies tended to be largely 
domestic and a central EU database may not help to increase investment into this 
category of listed companies; (vi) issuers should have the choice regarding ways to disseminate regulated information. 
Some respondents thought nevertheless that, while  a central storage database on all listed 
issuers of securities in the EU would not be  of substantial benefit to smaller listed 
companies, such a central database or a single access point could be of benefit to the investor and analyst community. 
One respondent suggested that it may be wort h examining in a separate consultation if 
the US SEC model could be adapted for use in the EU. 
                                                
 
160  It could be a single EU database (such as an improved version of the ECB centralised securities 
database) or a network of national databases (i.e. th e national officially appointed mechanisms referred 
to in Article 22 TD) allowing for multi-country searches. 
 
121 Two respondents supported the use of XBRL to  facilitate the analysis of financial 
information while a larger number of rep lies expressed opposition to its mandatory use 
and thought that more experience with this system is needed.   
Question 10  – Do you have any other views on regular transparency requirements which 
could make regulated markets more attractive to small listed companies?   
A respondent suggested that the language regime  should be more flexible.  Article 20 of 
the Transparency Directive should be adjusted so as to allow small listed companies to disclose regulated information only in Englis h. This would reduce translation cost. Also, 
the current lack of information in English c ould be an obstacle for investment decisions. 
This would also help the development of an EU network of national storage mechanisms.  
Another respondent suggested that there may be opportunities for a private provider or 
for a trade association to establish a facility  funded jointly by small listed companies and 
users of financial information to showcase issuers by sector or by other metrics. 
II. Information about holdings of voting rights (questions 11 to 18)
 
Question 11 – Disclosure of holdings of cash-settled derivatives . Would the disclosure of 
holdings of cash-settled derivatives be beneficial to the market? Please provide evidence 
supporting your answer (e.g. situations in wh ich lack of disclosure of cash-settled 
derivatives produced negative results). Please report about your experience, if any, with 
the disclosure of cash-settled derivatives in the United Kingdom161 and/or in other 
jurisdictions where cash-settled derivatives are disclosed (such as in Switzerland).  
The vast majority of respondents to this que stion considered that the disclosure of 
holdings of cash-settled derivatives would be be neficial to the market with a view to 
avoid hidden ownership. While cash-settled deriva tives are used in the vast majority of 
cases for their normal purpose which is to ga in economic exposure to the issuer and not 
to gain access to voting rights, the current l ack of disclosure in relation to cash-settled 
derivatives is causing market difficu lties: the Takeover Bids Directive162does not apply 
or applies too late to these instruments, so  that a fair market price of the underlying 
shares is not guaranteed. Some respondents e xpressed support for a disclosure regime not 
simply because it would reveal economic exposure to shares – though this was fundamental- but also because it would make  the market more transparent generally. 
However, most respondents considered that  the given the high volume of derivatives 
trading in today’s market, there was a need for a threshold at which the ownership of 
economic interest would become relevant not only for the impact on voting rights (and 
therefore on control) but also for the price formation in a particular security.  
Respondents generally favoured a well target ed and proportionate disclosure system, 
avoiding the provision of useless or irreleva nt information and reducing the number of 
notifications. There were calls to clarify what should be disclosed (e.g. credit default 
swaps, or cash-settled OTC products) and also to allow for exceptions (e.g. pure 
economic exposure; derivatives giving exposure to an index, banks/brokers serving client 
                                                
 
161  A disclosure regime on holdi ngs of cash-settled derivatives was introduced in 2009 in the UK. 
162  Directive 2004/25/EC of the European Parliament and of the Council of 21 April 2004 on takeover 
bids, OJ L 142, 30.4.2004, p. 12–23  
 
122 transactions, market makers, trading books, etc). There was debate as to whether the 
thresholds should be calculated on a delta-adjusted basis163 or on a nominal basis and 
whether the netting of short and long positions in these instruments should be allowed.  
Some of the respondents supported a harmoni zed disclosure system across the EU. 
Generally, many replies suggested learning from the UK experience. 
A small group of respondents, however, was not in  favour of a disclosure regime for this 
type of instrument. Another small group of  respondents did not take a firm position. 
These two groups expressed concerns a bout possible administrative burden of a 
regulatory response to a problem which was pe rceived as limited: the vast majority of 
cash-settled derivative instruments are bought for trading or hedging purposes and only 
in exceptional cases these instruments have b een used to secretly build a stake in a 
company. In their view, these cases were driven by a very small number of take-over situations. One respondent in particular consid ered that a generalised disclosure regime 
for cash-settled derivatives would be ineffec tive and misleading. It was not possible, in 
fact, to distinguish among transactions entere d into in order to acquire and/or hide 
positions in the underlying assets from those transactions which were entered into for 
purely speculative or hedging purposes. The intr oduction of a disclosure regime for such 
kinds of derivatives could jeopardize the effici ency of the entire transparency system and 
reduce volumes and liquidity of cash-settled de rivatives. In addition, such a disclosure 
regime would cause a significant increase of the organisational and compliance costs for 
intermediaries.  
Some of the respondents suggested addre ssing the issue of cash-settled derivatives 
through an anti-fraud provision (e.g. cash-settled derivatives should not be used to avoid 
applicable notification requirements), thr ough the "acting on behalf" and "acting in 
concert" rules of the Transparency Directiv e or through other pieces of legislation, such 
as the Acquisitions Directive
164, the Takeover Bids Directive165 or the Market Abuse 
Directive166. Some of these respondents, however, were not opposed to disclosure of 
cash-settled derivatives provided it had a limite d impact on investors with pure economic 
exposure and/or was fully harmonised to avoid complexity and regulatory arbitrage.  
In answering this question, some respondent s highlighted the positive experience with 
the UK disclosure system of cash-settled deri vatives. For them, disclosures had enhanced 
transparency of ownership and enabled inve stors and issuers to determine the voting 
structure of an issuer's capital and potentially important capital movements. In particular, the UK had not witnessed a dramatic increase in announcements and the market had 
                                                
 
163  If, for example, a call-option is significantly out-of-the-money, to add the nominal value of the shares 
that can be acquired under the option to the calculati on of a disclosure threshold would apparently be 
futile for some respondents. 
164  Directive 2007/44/EC of the European Parliament and of the Council of 5 September 2007 amending 
Council Directive 92/49/EEC and Directives 2002/83/EC, 2004/39/EC, 2005/68/EC and 2006/48/EC as regards procedural rules and evaluation criteri a for the prudential assessment of acquisitions and 
increase of holdings in the financial sector, OJ L 247, 21.9.2007, p. 1–16  
165  Directive 2004/25/EC of the European Parliament and of the Council of 21 April 2004 on takeover 
bids, OJ L 142, 30.4.2004, p. 12–23  
166  Directive 2003/6/EC of the European Parliament and of the Council of 28 January 2003 on insider 
dealing and market manipulation (market abuse), OJ L 96, 12.4.2003, p. 16–25  
 
123 adapted efficiently to the additional obligations placed on them. One respondent, 
however, considered that the UK disclosure system was costly with few identifiable 
beneficial results.  
Concerning the experience in Switzerland, it wa s felt that the resulting disclosures were 
materially less meaningful than in the UK because they were not on a delta-adjusted 
basis. Also, the reporting of cash-settled deri vatives in Switzerland was very broad as it 
included in the “acquisition basket” the writing of put options. 
Question 12.1  – If the Transparency Directive was to require holders of cash-settled 
derivatives to disclose their positions, s hould holdings of cash-settled derivatives be 
aggregated to holdings of voting rights167 and/or of financial instruments giving 
unconditional access to voting rights168 for the purposes of calculating whether the 
threshold triggering the disclosure obligation is reached or crossed?  
The very large majority of the respondents to  this question supported the aggregation of 
cash-settled derivatives with holdings of voting rights169 and of financial instruments 
already subject to the disclosure under Article 13. Many respondents expressed support 
for a system similar to that in the UK. Others  would prefer different  thresholds to apply 
to cash-settled derivatives. Although there was support for the aggregation of all 
financial instruments to trigger the notif ication requirement, in general respondents 
would prefer that the notification itself presented a breakdown of voting rights and 
financial instruments according to their nature.  
Some respondents specifically supported the disc losure regime extensively described in 
CESR's reply or similar systems. CESR's proposal was to create a notification system with four different baskets (holdings of vo ting rights; holdings of financial instruments 
under Article 13; holdings of cash settled derivatives and total holdings) that would trigger an obligation to disclose the holdings of the four baskets when the threshold for 
any of the four baskets was reached or crossed.  
A minority of respondents did not support such  an aggregation, which in their view 
would confuse the market. They preferred a specific and harmonised notification system 
for cash-settled derivatives such as the one proposed by the ESME advice. 
Question 12.2  – If the Transparency Directive was to require holders of cash-settled 
derivatives  to disclose their positions, and if such  disclosure of cash-settled derivatives 
should be done independently of voting rights and of other financial instruments, which 
threshold should be applied? E.g. (i) the thres holds provided in Article 9(1) TD should be 
applied (5%, 10% etc); (ii) the lower/initial threshold for this kind of disclosure should 
be significant and higher than the 5% foreseen  in Article 9(1) TD (e.g. at least 10% or 
higher); (iii) other).  
If cash-settled derivatives were to be subject to a separate disclosure regime independent 
from the notification of holdings of voting rights and financial instruments under Article 
                                                 
167  See Articles 9 and 10 TD. 
168  See Article 13 TD. 
169  See Articles 9 and 10 TD. 
 
124 13, some replies suggested setting a sufficien tly high notification threshold (e.g. 10%) to 
guaranteed meaningful disclosure and eliminat e irrelevant information. This would also 
take account of the fact that cash-settled de rivatives only indirectly influenced the 
company.  
However, some respondents supported the 5% threshold or other lower national 
thresholds (e.g. 3%) as initial thresholds for disclosure. For these respondents, even 3% could represent a significant investment in a listed company and therefore a significant 
influence within a general meeting. As attendance rates at general meetings often did not exceed 50% of the total holdings, the potential influence in general meetings might even 
be higher than the initial holding. However, it was unclear if these respondents were 
referring to an aggregated disclosure or to a separate notification system for cash-settled 
derivatives, which was the purpose of this question. 
Question 13 – Transparency of holdings of voti ng rights after the record date in advance 
of the general meeting of shareholders (the question of empty voting) . Would the 
establishment of a specific disclosure mech anism for holders of voting rights who do not 
hold shares between the record date and the shareholders meeting be useful/effective to 
prevent empty voting practices?  
A majority of the respondents to this ques tion believed that a specific disclosure 
mechanism for holders of voting rights who do not hold shares after the record date for 
the shareholders general meeting would be neither useful nor effective to prevent empty voting practices. Such a disclosure requirement was seen as onerous, easy to circumvent and difficult to enforce as well as providi ng an implicit endorsement of empty voting 
practices. Also, it could result in a de facto  share blocking, which would be 
counterproductive.  
Many respondents explained that the perceive d problem (separation of voting rights and 
economic exposure) was the norm and wanted  consequence of the record date and 
abandonment of the share blocking system in  EU law. In their view, it would be 
preferable to have shorter intervals (two/th ree days) between the record date and the 
general meeting, as is the practice in UK a nd FR, to deal with the problem. Concerning 
securities lending, several respondents explai ned that market practice (e.g. Securities 
Lending Association guidance) did not support borrowing of shares in order to vote and 
that in any event lenders could always recall shares. However, it was also argued that requiring lenders systematically to recall shar es before the record date would not be 
useful, as this would result in volatility. One respondent explained that the recent 
Commission proposal on disclosure of short selling positions would also be helpful. 
Around a quarter of respondents supported a sp ecific disclosure mechanism for holders 
of voting rights who do not hold shares afte r the record date for the shareholders 
meeting. There was some support among thes e respondents for the proposal of the 
European Corporate Governance Forum on February 2010
170 and for an upcoming 
disclosure obligation in France which would re quire disclosure to the issuer and to the 
supervisor of stock lending agreements c oncerning at least 1% of the voting rights 
between the record date and the general meeting. 
                                                 
170  EUCGF Statement - 20 February 2010: 
http://ec.europa.eu/internal_market/company/docs/ecgforum/ecgf_empty_voting_en.pdf  
 
125 Other respondents did not take a firm position. Some considered that more work was 
needed to properly assess this issue and the need for specific measures.  Others believed 
that this issue should not be d ealt with in the Transparency Directive. Reference was also 
made to the need to maintain contractual freedom.  
Many respondents, whether in favour or agains t the specific disclosure obligation linked 
to the record date, argued the need to  improve transparency around stock lending 
practices in general. Views on stock lending practices are further detailed in Annex 2. 
There was no support for a ban on empty voting. 
Question 14.1  – If a specific disclosure obligation is imposed regarding the transfer of 
voting  rights independently of the shares between the record date and the general 
meeting, which threshold of voting rights s hould be applied in order to trigger the 
obligation? E.g. 0,5%, 1%, 2%, other. 
A relatively small number of replies were recei ved to this question. If such an obligation 
were to be imposed, the majority of re spondents would support the use of the same 
thresholds as for the normal notification oblig ations: i.e. starting at 5% or the lower 
national threshold, where it exists. 
Many respondents called for further empirical study of empty voting practices.  
Question 14.2  – If a specific disclosure obligation is imposed regarding the transfer of 
voting  rights independently of the shares between the record date and the general 
meeting, which time-limit for the disclosure shoul d be applied for this disclosure to be 
useful? E.g. immediate disclosure; no later than 1 day, other.  
A relatively small number of replies were recei ved to this question. If such an obligation 
were to be imposed, respondents were divided as to the time-limit for the notification: some were in favour of immediate disclosure , others were in favour of a disclosure no 
later than 1 day, and some respondents suggested keeping the existing time-limits in the Transparency Directive.  
One respondent suggested that this informa tion should be disclosed on the date of the 
general meeting or immediately before. 
Question 15 – Intentions with holdings or voting policies disclosure . Which is the best 
way to make the investment process more tran sparent? i) requesting investors to disclose 
their future intentions with holdings; ii) requesting investors to disclose their actual 
voting policies; iii) both; iv) none; v) other. 
Views were relatively split on this question. A slight majority of respondents were not 
convinced that requiring investors to disclose th eir future intentions or to disclose their 
actual voting policies should be the way forw ard. they argued that such requirements 
would lead to: (i) the unnecessary disseminati on of information in the market; (ii) add 
little value to market participants; and (iii) increase compliance costs.  
Concerning the disclosure of intentions, ar guments were further detailed under question 
16.  Concerning the disclosure of voting po licies, in practice respondents felt that it 
would not result in improved transparency, wa s not a matter of public interest and should 
therefore be left to institutional investors and their clients to agree upon. It was also 
 
126 argued that the role of institutional investors was evolving in a very satisfactory manner 
through self-regulation and that it was unnecessary  to address the issue at EU level. For 
other respondents, this was a corporate govern ance issue that should not be addressed in 
the Transparency Directive. 
Some respondents suggested establishing a syst em for the identification of shareholders: 
if issuers knew their shareholders they coul d enter into dialogue and engagement with 
them more easily. Others supported the UK St ewardship code for institutional investors 
which encourage institutional shareholders to proactively engage with companies.  
Other respondents supported the need for regul atory intervention. However, they did not 
agree on the solution. Among these respondents, a slight majority was in favour of requesting investors to disclose their actual voting policies rather than requesting investors to disclose their future intentions  with holdings. Only few respondents were in 
favour of combining both options.  
Those in favour of disclosing voting policies considered that such disclosure (as well as 
the disclosure of engagement policies a nd actual voting records) would render fund 
managers accountable for their approach to corporate ownership. It was also explained 
that transaction costs for issuers would be re duced with regard to the preparation of the 
general meeting but also with regard to the ongoing investor dialogue. Some respondents 
explained that Article 21 of Directive 2010/ 43 (UCITS IV) required UCITS management 
companies to determine a strategy on when a nd how voting rights attached to instruments 
held in managed portfolios are exercised. A su mmary description of the strategy must be 
made available to investors and details of ac tions taken must be made available to unit 
holders upon request. One respondent replied th at investment managers often disclose 
their voting policies: this was a matter of corporate governance and fiduciary duties, and 
less related to creating transparency around vo ting rights. This respondent requested that 
violation of any disclosure obligations should not impact the exercise of voting rights as 
this would create material legal uncertainty  for issuers. Other respondents also echoed 
the view that disclosure of voting policie s was more a matter of corporate governance. 
Some also supported the establishment of a system for the identification of shareholders. 
Question 16.1  – If investors were required to di sclose to the market which their 
intentions are with  regard to their investment, would such disclosure be useful? 
A large majority of respondents to this questi on were not convinced by the merits of such 
a disclosure. Different reasons were advan ced: (i) such disclosure would provide little 
added value as statements of intention were  not helpful and could be misleading; (ii) 
experience in the US, France  and Germany show s that such disclosures are meaningless; 
(iii) too much transparency renders the mark et too volatile or indeterminable; (iv) it 
would be difficult to enforce as intentions cha nge rapidly; (v) it raises concerns from the 
market abuse perspective because intenti ons change; (vi) it may be dissuasive for 
shareholders wishing to engage in future  takeover activity and could facilitate anti-
takeover defences; (vii) it may trigger the app lication of takeover legislation in certain 
cases; (viii) it would render the EU market una ttractive; (ix) intentions are a private 
matter for the investors and such disclosure could harm them; and (x) administrative burden and compliance costs would be high. 
A minority of respondents, on the contrary, were favourable to the introduction of a 
disclosure obligation on intentions since they saw it as beneficial at least in relation to 
significant holdings: it would allow other inve stors (and issuers) to better understand the 
 
127 background of a major shift in influence and to  adjust their investment decisions, voting 
behaviour and investor relations strategy acco rdingly and to decide whether to engage 
with investors. One respondent suggested that  it would be worth considering whether to 
apply the respective disclosure requirements also to large positions in other financial instruments (including certain qualifying deri vatives). Some respondents indicated that 
the right balance between privacy/confidentiality and the market efficiency needed to be 
found: it should not be too burdensome for i nvestors while at the same time providing 
reliable insights on the intentions of majo r shareholders. In addition, a coordinated 
regime with the takeover rules would need to  be established. References were made to 
the positive experience with the French sy stem but calls were also made for a 
harmonised EU regime as the diversity of systems currently in place was difficult and 
costly to manage and lacked clarity for all parties concerned.  
Several respondents considered that the r eal problem was the lack of shareholder 
identification (see question 18). 
Question 16.2  – If investors were required to di sclose to the market which their 
intentions are with regard  to their investment, which s hould be the minimum threshold 
triggering such disclosure? i) the thresholds provided in Article 9(1) TD should be 
applied (5%, 10% etc); ii) the lower/initial threshold should be significant and higher 
than the 5% foreseen in Article 9(1) TD (e.g. at least 10% or higher); iii) the information 
should only be requested only if certain threshold are crossed and provided that the 
investor is among the largest 3 investors in the issuer; iv) other.   
The majority of the respondents to this question supported option ii) for an initial 
threshold higher than 5% for disclosure of intentions. Most proposed 10% as an initial 
threshold, with few respondents opting for at least 20%. One respondent proposed a 
mixed system with 10% for active invest ors seeking control and 20% for passive 
investors. 
Some respondents proposed applying the thresholds provided for in Article 9(1) of the 
Transparency Directive or the national thresholds (the initial threshold being set at 3% in some Member States). One respondent suggested an initial threshold of 3%. 
One respondent opted for option iii) combined  with a threshold of 20%. Two respondents 
proposed alternative solutions: e.g. the threshold should mirror a blocking minority stake at the annual general meeting; the threshold should follow the US system. 
Two respondents indicated that the takeover bids regime should not be undermined and 
that any obligation should only be set at 30% , which in any case triggered the mandatory 
bid.  
Question 16.3  – If investors were required to di sclose to the market which their 
intentions are with regard to their investment, should such disclosure consist in i) simple 
information on intentions (e.g. box ticking in  a form: I intend to change/influence control 
of the issuer/I do not intend to change/influ ence control of the issuer); ii) more 
substantial information on intentions (e .g. narrative explanations on purpose of the 
acquisition including any plans or proposals of the investor for future purchases or sales 
of issuer's stock or for any changes in th e issuer's management or board of directors 
etc.); iii) information on source and amount of funds used to acquire the securities; iv) 
arrangements to which the investor is a party relating to issuer's securities;  v) other.  
 
128 Respondents were relatively divided on this issue.  
Some favoured option i) with a simple di sclosure obligation. They did not express 
support for requiring investors to provide a deta iled narrative of investment intentions. It 
was argued that a more extensive obligation to  disclose intentions would represent an 
intrusion to the freedom and ownership right s of investors and would raise the question 
of how the accuracy of the di sclosure can be reviewed and which penalties would be 
linked to any false disclosure. Some res pondents supported the US system (declaring 
whether the investor is a passive investor or not). 
A similar number of respondents supported a na rrative disclosure with more substantial 
information on intentions rather than a box-ticking form. Some combined option ii) with options iii) and option iv).  
One respondent was not in favour of box ticking only, supported option iii) but was 
careful as regards option ii); the disclosure  requirement should not go too far in the 
direction of the information provided in  connection with a takeover bid. Another 
respondent explained that not all classes of investors should be required to disclose the 
same amount, or type, of information.  
Two respondents did not choose any of the options, but expressed diverging positions: 
one in favour of disclosure of intentions , one against. Some respondents expressed 
support for the French regime. 
Question 17 – Aggregation of holdings and voting rights . Should holdings of shares and 
voting rights171 be aggregated with holdings of financial instruments giving 
unconditional access to voting rights172 for the purposes of calculating the relevant 
thresholds that trigger the notification obligation?   
Almost all respondents to this question were in favour of aggregating holdings of shares 
and voting rights with holdings of financial instruments described in Article 13 of the 
Directive for the purposes of triggering the notification obligation. It was argued 
however that there was a need to coordina te with takeover bids rules and that a 
transitional period would be needed. Several respondents considered necessary that the notification identify the different categories of holdings. Several replies also supported a 
notification system similar to the one desc ribed in CESR reply (see also replies to 
question 12.1).  
Two respondents expressed no preference but requested an EU harmonised system. The 
need for harmonisation was also expressed by several respondents. For further details, 
see also question 19. 
Question 18 – Other cases of insufficient tr ansparency regarding corporate ownership . 
Are there other cases of potentially insufficient transparency regarding corporate 
ownership?  
                                                 
171  Articles 9 and 10 TD. 
172  Article 13 TD. 
 
129 Several respondents supported a system for id entification of shareholders by issuers 
through the central securities depositories (CSDs) , similar to those in place in France or 
in the UK. They believed however that shar eholder identification data via CSDs on a 
cross-border basis faced many obstacles and that there was no information available on 
beneficial owner behind the nominees. Some respondents made reference to the current 
work within Target 2 Securities, which was c onsidered to be an appropriate vehicle for 
identification of shareholders. In their view , without a harmonized EU-wide set of rules 
with respect to the disclosure by nominees of their participants (and ultimately the 
beneficial owner) there would be no common technical solution across the EU. Some of 
the respondents challenged the assessment ma de in Annex 11 of the Commission staff 
working document that accompanied the Commission report. 
However, there was a dissenting view which sp ecifically requested not to enact a system 
for the identification of shareholders. 
Respondents also identified other issues that would need to be addressed: gaps regarding 
disclosure of stock lending and repurchase c ontracts as well as the rules on acting in 
concert. One reply suggested that the Transp arency Directive needed to be adapted to 
capture and anticipate future innovation in fi nancial markets so that transparency was 
maintained.  
CESR suggested the need to revisit Article 12(1) of the Directive since Member States 
were already requiring more information than  was listed in that Article. One respondent 
explained that XBRL taxonomy could easily be developed to cover major holdings disclosures. 
Only few respondents considered that ther e were no cases of potentially insufficient 
transparency regarding corporate ownership. 
III. Ineffective application of the Directi ve because of diverging national measures 
and/or unclear obligations in the Directive (questions 19 to 23)  
Question 19 – Uniform EU Regime or ma ximum harmonisation: major holdings of 
voting rights . Would it be desirable to set up a uni form EU regime (e.g. by a directly 
applicable EU Regulation) for the notifica tion of major holdings of voting rights?   
A small majority of respondents to this question supported an EU Regulation for the 
notification of major holdings of voting rights.  In their view, a uniform regime would: 
avoid national differences; reduce administrative expenses linked to IT infrastructure and 
monitoring systems for equity positions of i ssuers based in different Member States; 
reduce uncertainty; enhance transparency; simplify cross-border investments; and 
increase attractiveness of EU capital markets.  Such a regulation would be an important 
step towards the EU single rule book. 
Two respondents supported a uniform “process” for the submission of major holdings 
notifications: it should be electronic, use a st andard form and be submitted to one central 
EU authority, from which issuers/markets w ould then receive the information for the 
purposes of dissemination.  
For some respondents, the uniform notifi cation regime should encompass: scope, 
exemptions, definitions, calculation methods (i ncluding aggregation), disclosure content, 
implementation methods, time-limits and sanctions. 
 
130 The question of the thresholds was however  secondary for more than one respondent. 
Some replies suggested leaving a degree of flexibility to the Member State in setting 
thresholds in order to take account of the specificities of national regulated markets, national company laws or companies' articles of association. 
Some however, expressed concerns about a possible levelling down of notification 
requirements to the lowest common denominator in a Regulation. One respondent advocated working towards a common regime th at would reflect the best aspects of the 
most developed ones. Others directly supported the UK system. 
A number of respondents were not in favour of a Regulation for notification of major 
holdings, although almost of all them recogni sed the need for further harmonisation in 
the Transparency Directive. As explained in replies to questions 12 and 17, there was 
some support for a harmonised regime base d on CESR’s proposal. However, several 
respondents believed that full harmonisation wa s not feasible nor appropriate. In their 
view, thresholds could not be harmonised, b ecause of the different national company law 
regimes. Minimum harmonisation allows national regulators to tailor disclosure requirements to national circumstances and i ndividual countries should not be prevented 
from establishing an environment for transparency that goes beyond the regime of other Member States. Also, Member States should be  free to react to market innovations in due 
time, to improve and adjust models to thei r own market, as there are big differences 
within the EU as regards the size of capital markets, market capitalisation of listed companies and level of fragmentation of ownership.  
A contribution from an academic respondent  developed the question of maximum vs. 
minimum harmonisation. This respondent was not  in favour of a uniform regime. First, 
imposing a uniform rule assumed that ther e was a single disclosure threshold which 
would be efficient for all securities markets across the EU. This may be so, but it was not 
obvious. Second, assuming there was a single effi cient disclosure rule across the EU, the 
EU legislative process had to be able to identify it. Again, this was not obvious. Finally, 
a uniform rule removed from Member States  the freedom to innovate, experiment and 
react quickly to evolving circumstances. Fo r understandable and unavoidable reasons the 
EU legislative process is slower than nati onal legislative mechanisms. Thus, there was a 
risk that, even if the EU c ould identify a uniform efficient rule, it would not be able to 
keep that rule up to date as circumstances changed. Consequently, the efficiency of EU 
legislation in this area would depend on the retention by Member States of the freedom 
to set more stringent rules where this was appropriate. 
Another respondent believed that new legisla tion would create new areas of uncertainty 
or would be unable to deal with the new situa tions that might arise in EU capital markets. 
This respondent suggested that identifyi ng the issues and providing guidance (e.g. 
through CESR) would be preferable. 
Finally, some respondents generally supporte d more harmonisation but were not fully 
clear as to whether they are in favour of a uniform regime or not. 
Question 20  – If a fully uniform EU regime is not possible because of insurmountable 
legal barriers, should Member States be prevented from adopting more stringent 
 
131 requirements than  those of the Transparency Directiv e regarding the notification of major 
holdings of voting rights173?  
A small majority of respondents to this ques tion considered that, if a fully uniform EU 
regime were not enacted, Member States s hould not be prevented from adopting more 
stringent requirements than those of th e Transparency Directive regarding the 
notification of major holdings of voting rights. Several respondents would like to 
maintain the transparency levels - in particul ar lower thresholds or stricter time-limits for 
disclosure,- in their countries174 and feared a possible reducti on of transparency that a 
harmonised regime may entail. 
Several UK and Irish respondents were in  favour of maintaining the UK regime 
regarding identification of shareholders  and Irish and UK regimes on takeovers. 
Concerning takeovers, some respondents explai ned that if the Transparency Directive 
were to become a maximum harmonisation dir ective, it should recognise the distinction 
between that regime and the takeover bids regi me and that it should specifically state that 
the maximum harmonisation measures were without prejudice to the Takeover Bids Directive and to the power of supervisory authorities in Member States to regulate 
takeovers under national law. Otherwise, there would be a risk of legal uncertainty. In 
addition, the Takeover Bids Directive was a minimum harmonisation directive recognising the need for flexibility in supervising takeovers.  
An important minority, however, supported maximum harmonisation within the 
Transparency Directive, thus preventing Me mber States from imposing more stringent 
requirements. One respondent claimed that issuers should be prevented from requiring 
more onerous disclosures via their c onstitutional documents. Another respondent 
requested that a database be created containing additional requirements that issuers add in their articles of associations: currently, this information was difficult to find out. Another respondent also requested that st ock exchanges be prevented from adopting 
more stringent requirements. 
Some made clear, however, that in their view any maximum harmonisation in the 
Transparency Directive should not affect the takeover bids regime. 
Question 21 – Uniform EU Regime or maxi mum harmonisation: disclosure by issuers . 
Would it be desirable  to set up a uniform EU regime (e.g. by a directly applicable EU 
Regulation) regarding issuers' disclosures175?  
The opinions on this question were split. A large number of respondents were not in 
favour of setting up a uniform regime regardi ng issuers’ disclosures. They did not see 
any problem with current requirements nor a need for further harmonisation. Moreover, 
they felt that Member States should be allo wed to set more stringent requirements when 
they had identified gaps in companies' disclosures or in their level of transparency. 
                                                 
173  For instance, if the Transparency Directive was to reduce its initial disclosure threshold from 5% to 
3%, should the Member States that have set a 2% threshold be required to raise it to 3%? 
174  In particular in the UK, but al so in Norway, France or Germany. 
175  Articles 4 to 8 TD. 
 
132 A significant number of respondents were, how ever, in favour of a uniform regime on 
this issue. In their view, a uniform regime, with normalization/standardisation of types of 
regulated information, would reduce costs for i ssuers,  ensure that investors had a clear 
understanding of the information that issuers were expected to provide and facilitate a 
level playing field across EU financial mark ets.  For one respondent, the harmonization 
of the information available to investors in the market was a key point in the investment 
process: in order to avoid any potentia l misunderstanding stemming from different 
formats or channels used by issuers to disclose  relevant information, it would be useful to 
fix, at European level, a disclosure process directly applicable in all Member States without any options/discretions in its implementation. 
Another group of respondents favoured a unifo rm regime regarding country-by-country 
disclosure of annual accounts and/or specifi c disclosure requirements for companies 
active in the extractive industry regarding the publication of payments to governments.  
Question 22 – Divergent rules: calculation of holdings . Could you please explain in what 
way national rules implementing the Directive result in different methods for aggregating 
holdings of voting rights (and where applicable financial instruments) for the purposes of 
calculating whether the relevant thresholds  triggering the notification obligation are 
reached or crossed by investors?   
Respondents mentioned different examples of divergent rules for calculation of holdings 
and underlined that these divergences implie d difficulties and costs for companies with 
cross-border activities.  
The issues mentioned concerned for exampl e stock lending, aggregation requirements, 
exemptions and differences in the legal entity  level to which disclosure duties applied. 
More detailed presentation of the issues is included in Annex 2. 
Question 23 – Unclear rules . Could you provide evidence of cases where unclear rules in 
the Directive ought to be clarified176?   
Respondents called for clarifications regardi ng most of the issues identified in the 
previous question. In addition, respondent s identified other potential areas where 
clarification of the Transparency Directive would be helpful, for example concerning the 
definition of "acting in concert". Moreover,  respondents underlined the need to ensure 
consistency between the Transparency Direc tive and other EU directives such as the 
Shareholders Rights Directive177, the Market Abuse Directive or the Prospectus 
Directive. Most areas where clarification was welcomed by the respondents are described 
in detail in Annex 2. 
IV. Other comments  (question 24)  
Question 24  – Do you have any other comments regarding the Transparency Directive? 
Financial reporting and Corporate Governance 
                                                 
176  See section 2.8 and Annex 6 to the Staff Working Document. 
177  Directive 2007/36/EC of the European Parliament and of the Council of 11 July 2007 on the exercise 
of certain rights of shareholders in listed companies, OJ L 184, 14.7.2007, p. 17–24  
 
133 A group of respondents requested that the Tran sparency Directive require the disclosure 
of annual accounts on a country-by-country basis and/or of payments made to 
governments by companies active in the extrac tive industry. They explained that recital 
14 of the Directive had not been implemented. These respondents identified the data to be disclosed and how this should be done (a udited, comparable, interactive data). They 
referred to recent US and Hong Kong legisl ation, to IASB work and to European 
Parliament calls. Some described the possible benefits to investors from these disclosures. 
One respondent suggested a comprehensive business reporting framework that would 
enable corporate management to express th eir company's own way of using intellectual 
assets and other non-financial elements for the purpose of creating value, and by pointing 
out also how the past and future financia l performances connected to non-financial 
elements. Economic and social governance (ESG ) was just a part of critical company 
non-financial information. The latter would also cover information on technological 
competences, organizational capabilities, human assets, business networks, risks etc. Non-financial information should focus on "sustainability" and "value creation capacity".  
Some respondents mentioned the need to esta blish a shareholder identification system 
(see also replies to questions 15 and 18), a lthough not necessarily in the Transparency 
Directive. 
Other respondents mentioned that corporat e governance disclosures should not be 
incorporated in the Transparency Direc tive or harmonized. This was a matter for 
company law. The same was true regarding the transparency provisions in the Takeover 
Bids Directive.  
Some respondents also mentioned that the Transparency Directive should not be the 
vehicle for ESG disclosure and that non-fina ncial disclosures should not be harmonized. 
Dissemination and storage of regulated information  Some respondents explained that they were not in favour of an EU OAM. It would be 
preferable to inter-connect national storage syst ems.  Recital 8 of the Directive should be 
preserved in order to maintain an appropriate level of transparency in listed companies but also to ensure that all investors, whet her individual or professional have an equal 
access to information without discrimination. 
Some respondents supported the use of XBRL for disclosures, in order to increase 
visibility and comparability and thereby encour age cross-border investment but also as a 
tool to deal with the language problem . Other respondents however opposed this 
proposal. 
One respondent claimed that there were problems in the way the dissemination rules 
were applied in some countries. For instan ce, regarding Article 12(7) in Sweden, the 
regulator had appointed a service provide r which owned the information. For this 
respondent, this would not be in conform ity with Article 21. This respondent also 
complained about the entrustment of stoc k exchanges with the OAM function (Finland, 
Norway), which allowed them to present them selves as "entrusted by the government" to 
handle regulated information in competition with service providers. In other cases, 
regulators (Spain, Portugal) disseminated the information themselves, but did not offer 
any integration path for service providers. This had the negative effect of blocking 
 
134 competitors from entering the local market fo r distribution of regulatory information and 
would be in contradiction with recital 25 of the Transparency Directive and recital 16 of 
the implementing Directive178. This respondent requested th at action should be taken to 
restore competition and avoid that OAMs abused their position.  
One respondent explained that issuers either  wished either to disseminate regulated 
information themselves (e.g. through their ow n websites) or to continue to use the 
services of data disseminators, if the provisi ons of the Transparency Directive remained 
unchanged. Issuers did not necessarily believe that regulators should play an active role 
in disseminating regulated information disclosed by issuers. 
CESR also raised a number of issues that need to be addressed (see Annex 2) 
                                                 
178 Commission Directive 2007/14/EC of 8 March 2007 laying down detailed rules for the implementation 
of certain provisions of Directive 2004/109/EC on the harmonisation of transparency requirements in 
relation to information about issu ers whose securities are admitted to  trading on a regulated market 
 
 
135 ANNEX 1 – LIST OF RESPONDENTS  
Action Solidarité Tiers Monde 
ABI 
ACCA 
AFEP 
AFG 
AFME 
AMAFI 
AMF 
Association of Foreign Banks in Germany 
Association of Investment Companies 
Assosim 
BBA 
BDI 
BNP Paribas 
Bond 
Business Wire Brussels 
BVI 
Central Chamber of Commerce of Finland 
CESR 
Christian Aid 
CMVM 
Concord Europe 
Confederation of Finnish Industries EK 
Confederation of Netherlands Industry and Employes (VNO-
NCW) 
Credit Agricole 
Czech Republic Ministry of Finance 
Danish Institute of State Author ized Public Accountants (FSR) 
Danish Insurance Association (DIA) 
Danish Shareholders Associa tion (Dansk Aktionærforening) 
Danish Shipowners Association 
Dansk AMP 
Denmark Ministry of Econom ic and Business Affairs 
Deutsche Aktieninstitut (DAI) 
Deutsche Bank 
Deutsche Börse Group 
Dutch Ministry of Finance 
EAPB 
EBF 
ECODA 
EFAMA 
Emisores Españoles 
ENPA 
Equinity 
ESBG 
Eumedion 
Euroclear 
Eurodad 
EuropeanIssuers 
Eurosif FAR (Swedish Institute for the Accountancy Profession) 
 
136 FEE 
Financial and Capital Mark et Commission of Latvia 
Finland Ministry of Finance 
France Treasury 
GC100 Group German Insurance Association (GDV) German Investor Relations Association (DIRK) 
Germany Ministry of Finance 
GlaxoSmithKline 
Global Witness Governance for Owners 
Grant Thornton 
Hermes Equity Ownership Services 
Hungary Ministry for National Economy ICAEW 
ICGN 
ICJCE (Instituto de Censores Ju rados de Cuentas de España) 
ICMA 
ICSA 
IMA 
Inspiraction Institute of Directors International Securities Lending Association Investors Relations Society 
Irish Stock Exchange 
Irish Takeover Panel Law Society of England and Wales 
London Stock Exchange Group Matheson Ormsby Prentice 
Maurice Macartney (Beyond Skin Global) 
MEDEF 
Middlenext 
Nasdaq OMX 
NBIM (Norges Bank I nvesment Management) 
Nordic Securities Association 
Norway Ministry of Finance 
NYSE Euronext OEKB 
Olvi Oyi 
ONE 
Oxfam International 
Professor P. Davies 
Publish what you pay 
PWC 
QCA 
Revenue Watch SIFA (Swedish Investme nt Fund Association) 
Smith & Nephew 
Société Générale 
Sweden Financial Supervisory Authority 
Swedish Bankers' Association  
Tax Research / Tax Justice Network 
The Hundred Group of Finance Directors 
Thomson Reuters 
 
137 UK HM Treasury & FSA 
UK Takeover Panel 
WICI 
WKO - Austrian Chamber of Auditors 
XBRL Europe ZKA 
An additional respondent requested confidential treatment. 
 
138 ANNEX 2 – DETAILED DESCRIPTION OF ISSUES THAT NEED CLARIFICATION /AMENDMENT 
ACCORDING TO REPLIES TO QUESTIONS 22, 23 AND 24. 
Divergent rules in the Member States con cerning calculation of holdings (Question 
22) 
• Different thresholds trigger disclosure in the Member States: for example thresholds 
are fixed at 2%, 3% and 5% in different Member States. 
• Differences in disclosure reporting deadlines. 
• Differences in determining the denominat or (total shares/voting rights): the 
denominator varies in the different na tional implementations. For example, the 
denominator consists of the total number voting rights in Germany; total share capital and total number of voting rights in France;  total number of voting rights (including 
treasury shares) and voting rights per cla ss in Greece; total number of voting rights 
(excluding treasury shares) and voting rights per class in the UK. In Finland, both the 
percentage of shareholdings as well as vo ting rights is required to be notified under 
article 9.   
• Differences in determining the notified holdi ngs (numerator) (see also the replies to 
Q23 below): 
– Financial instruments are considered differently in Member States. Some 
Member States require aggregation of shares with physically settled derivative instruments; others do not; some require reporting of these products by bucket; others do not. For derivatives, whether they are physically or cash-settled, there are two methods to take them into account: on a nominal or delta-adjusted basis; 
– Differences in the legal entity level to which disclosure duty applies: depending  
on the Member State, thresholds might n eed to be monitored and disclosed at 
group and/or entity level; 
– Differences in intra-group aggregation; 
– Different treatment of stock lending in Me mber States as explained in Annex 10 
to the Commission Staff Working Document; 
– Question the netting between long and short positions; 
– Implementations differ in Member States concerning the treatment of holdings of 
asset managers; 
– Different definition of market maki ng and of the method of claiming the 
exemption. There is inconsistent interpretation of definitions across Member States. 
• The events triggering a crossing of thres holds may differ from Member State to 
Member State – for example due to property law differences. 
 
 
139 Rules under the Transparency Directive identified by the respondents that require 
further clarification (Question 23): 
• Home Member State rule 
– There is a possible contradiction between the Home Member State rule and the 
wording of Article 8(2) of Directiv e 2001/34/EC as it provides for additional 
obligations and disclosures potentially required by Host Member State. Moreover, CESR notes inconsistencies between Articles 19(1) and 21(3): Article 19(1) requires issuers to file informati on with the competent authority of the 
home Member State. Article 21(3) on the other hand requires issuers to disclose 
information in accordance with host Member State rules if the issuer's securities 
are admitted to trading only in one host Member State and not in the home Member State. 
– Transparency Directive is unclear with  regard to which country is the home 
Member State for issuers who have to choose their home Member State according to article 2, paragraph 1, sub (i), (ii), but who have not done so. In this 
respect, CESR suggests to amend the Tr ansparency Directive to include an 
assumption of Home Member State for these issuers.  
– In addition, some flexibility could be a dded to the home Member State rule for 
third country issuers of shares and debt  securities with denomination per unit of 
less than EUR 1.000 for situations where an issuer delists from a regulated 
market in one Member State and later applies for admission to trading on a regulated market in another Member State. 
–  CESR also suggests that the home Member State rule should be clarified as 
follows: it should be stated that the three year period for the validity of issuer's 
choice of the home Member State no longer applies if shares or debt securities 
with denomination of less than EUR 1.000 of the same issuer are admitted to 
trading on a regulated market. 
– There should be a list established by CESR and available online of non-EEA 
issuers who have chosen a home Member State.  
– Further clarification would be helpful re garding issuers who are incorporated in 
one EEA state and have securities admitted to trading only in another EEA state. 
Currently they would be required to co mply with the requirements of their 
country of incorporation and announce re gulated information in that country 
rather than in the country where, arguably, their investors are likely to reside.   
– A revision of the Transparency Directive should ensure that the reporting of all 
listed companies are subject to enforcement in a Member State. It is important that the Transparency Directive in this matter in the future does not provide for any possibility to implement the rules in such a way that a listed company can operate without being under supervision of any Member State. 
• Accounting rules 
– Applicability of Article 4(3) to third count ry issuers: Article 4(3) states that 
where issuers are not required to prep are consolidated accounts, the audited 
financial statements shall comprise the accounts prepared in accordance with the 
 
140 national law of the Member State in which the company is incorporated. 
Clarification is required for cases where the issuer is incorporated in a third 
country but is listed on a regulated market in the EU.  
• New loans 
– The application of article 16, paragraph 3 of the Transparency Directive leads to 
the question of which additional inform ation is required by the issuer of 
securities admitted to trading on a regulated  market when issuing a new loan. In 
this respect, CESR proposes to abolish th e requirement to disclose all new loan 
issues. This requirement overlaps partia lly with the Prospectus Directive and 
Article 6 of the Market Abuse Directive. Reference to new loans is also unclear, 
as new loans are not defined in the Tran sparency Directive. For example, it is 
unclear whether issues of commercial pape rs or loans not admitted to trading on 
a regulated market should be disclose d. Some respondents considered that 
Article 16.3 should be deleted: the implem entation of article 16.3 is unclear and 
complex notably due to the absence of any materiality clause. 
• Need for standard forms to disclose holdings 
– Harmonized disclosure forms and wording w ould be useful in order to avoid, for 
example, diverging approaches with respect  to the disclosure of percentage of 
voting rights and/or share capital. 
– Some respondents would favour a common el ectronic form for notifications in 
the EU. 
• Aggregation methods  
– Clarity is needed on aggregation, specifica lly for asset managers (of the assets 
held on behalf of their clients by third party custodians, but controlled by the asset manager) and for groups of companies.  
– Rules on aggregation of shares with de rivatives should be clarified. The delta 
adjusted method for aggregation seems to be preferred as it is representative of the number of shares the person writing th e instrument would need to hold in 
order to perfectly hedge its exposure. 
– It would be necessary to have a clarif ied and harmonized regime on how baskets 
of shares and indexes are taken into account. 
– Basket and index instruments, if incl uded in the reporting of major holdings, 
should only have to be reported if the relevant share has at least a weighting of 1/3 in the basket or index (see also legislation in Switzerland and Hong Kong). 
– The treatment of stock loans and repurch ase transactions would need to be 
clarified. 
– Treatment of re-hypothecation of securities by agents, custodians and lenders as 
well as treatment of hedging by a market-maker need to be addressed. 
 
 
141 • Groups of companies 
– The definition of “controlled undertakings” in Article 10 (e) of the Transparency 
Directive should be clarified. Currently, Member States apply different control 
thresholds which may lead to different definitions of groups of companies, and thereby to different aggregation perimeters.  
– CESR guidance regarding corporate group disclosures would be desirable as 
there is divergence across Member States as to whether (i) it is mandatory for a 
parent company to make an aggregated disclosure of both its own shareholdings 
and those of its controlled undertakings, a nd (ii) if the parent does so, that the 
controlled undertakings are exempt from making their own individual applicable 
disclosures. The divergence of approaches  may be due, in part, to Article 12(3) 
of the Transparency Directive appearing to state that parent aggregation is 
permissive as opposed to mandatory.  
– CESR guidance regarding the approach on netting of holdings of voting rights 
would be desirable, as the Transparency Directive is silent on this issue, e.g. 
netting intra-group and at the parent level (where the parent is making a group disclosure). 
• Acting in concert  
– There should be a common definition of ac ting in concert i.e.: for investors to 
adopt, by concerted exercise of the vo ting rights they hold, a lasting common 
policy towards the management of the issu er. One respondent considered that the 
question of “acting in concert” which also  has an impact on the determination of 
the company’s control and therefore vari es across the European jurisdictions, 
should only be discussed at the Europ ean level in the context of a wider 
European consultation (for instance on the occasion of the review of the 
implementation of the Takeover Bids Dir ective).  Another respondent considered 
that it may be useful to clarify the principle of ‘lasting common policy’ referred to in Article 10(a) of the Transparency Directive. However, this respondent was opposed to the creation of any terminology th at relates to the definition of ‘acting 
in concert’ currently contained within the Takeovers Bids Directive, or employs 
the terminology of ‘acting in concert
’. CESR has discussed in this respect 
whether the concept of shareholders ag reeing to adopt a lasting common policy 
towards the management of an issuer (Article 10(a)) should be clarified in 
relation to major shareholding notificati on obligations. The purpose of this would 
be to provide clarity as to when the vo ting rights of shareholders would need to 
be aggregated as an indirect holding. CE SR considers that legal certainty for 
investors could be improved through ame nding the text at Level 1 and ensuring 
consistent application of major sharehol ding notification obligations at Level 3. 
However, any clarification to the Tran sparency Directive should not lead to 
loopholes being created nor interfere with the takeover rules. 
– There is a need to clarify whether in a situation where the voting rights held by a 
third party with whom a person or legal entity acts in concert are attributed to 
that person or entity for the purpose of notification requirements according to Art. 10 (a), the person or legal entity  has also an individual notification 
obligation (regarding its “own” voting rights), and whether the notification 
 
142 obligation is triggered as well by transf ers of voting rights within the group of 
persons acting in concert. 
• Stock lending 
– There is a need for a harmonized re gime concerning stock lending. Some 
respondents suggested that the lender shoul d not be required to report, as they 
have replaced the holding of the share w ith the holding of a right to recall the 
share. As they have the right to r ecall, and will at some stage do so, any 
disclosure on their behalf to the ma rket would swamp the market and be 
potentially misleading. Another respondent was in favour of transparency for both the lender and the borrower (subject to  an exemption for very short-term 
transactions) as this would be the cleares t way to ensure that no shares are double 
counted. A simple system could be possible if the same rule were to apply to all stock lending transactions, irrespective of contractual terms. This would eliminate diverging interpretations in different jurisdictions and according to deferring contractual arrangements which is otherwise problematic. CESR also 
suggested in this respect further harmonisation of major shareholding notifications relating to securities lending (e.g. right to recall lent securities) and 
repurchase agreements. 
• Exceptions to the notification of major holdings 
– A broad and consistent "market maker" definition would be welcome (Article 2).  
– Some clarifications would be welcome concerning the scope of the exceptions 
for shares acquired for the purpose of  clearing and settling and by custodians 
(Article 9(4) ). For exampl e, one CESR member stated that in its Member State it 
had been discussed whether the exemption also applied to positions acquired for a short period through underwriting
. 
–  Regarding the exception foreseen by Article 12(4), a clarification would be 
welcome concerning the scope of this exception and the question as to whether the exception applies to funds that do not fall within the scope of application of 
the UCITS-Directive (85/611/EC). Some respondents (including CESR) 
suggested that the UCITS exemption cont ained in Article 12(4) should extend to 
non UCITS management firms. Moreover, CESR suggested that it should be made clear that in case the second subparagraph of Article 12(4) is applied, all holdings managed by the management co mpany should be attributed to the 
holdings of the parent company (and not only the holdings of the fund where the 
parent company has invested in). 
– Clarification to the trading book exemption would be needed (Article 9(6)): It 
should be clarified, inter alia, whether th e 5 % threshold is calculated at group 
level or the level of an individual company. Moreover, it should be clarified how the different categories of holdings are aggregated when calculating the 
threshold. CESR proposed the threshold to be calculated at group level where 
disaggregation exemptions set out in Ar ticles 12(4) and 12(5) do not apply and 
that holdings of all instruments (Article 9, 10 and 13) are aggregated. Moreover, further clarification to subparagraph (b) should also be considered. The wording 
of the subparagraph should be more definite in order to more clearly prohibit credit institutions and investment firms applying the exemption from exercising 
 
143 voting rights held in their trading book a nd from using their shareholder positions 
to intervene in any way in the management of the issuer. 
– It should be analysed whether the scope of the trading book (Article 9(6)) 
exemption could include life insuran ce companies on an even footing. The 
analysis should target equivalent regula tion of such insurance companies vis-a-
vis credit institutions and investment firms. 
– In Article 8 (1) (b) concerning exemp tions: an interpretation of the word 
"exclusively" is needed. 
– Modification of Article 8(1) would be we lcome to ensure that issuers guaranteed 
by a State/province/municipality of OECD countries are exempted from presenting annual accounts. These issuer s benefit already from a simplified 
prospectus regime. Regarding 8(1)(b), the alignment between the Prospectus 
Directive (as amended) and the Transparency Directive is also required. 
• Notification duty 
– A harmonized approach is needed to align duties. For example: disclosure to 
whom? (which regulator); by which deadline (T+3) and by which methods (including form and language). 
– There is a need to clarify whether a no tification duty is triggered by a trade as 
such (most jurisdictions) or only by the settlement of the trade (Germany). Having different events (i.e. trade or  settlement) triggering the notification 
requires investors to maintain two separate monitoring systems, one supplying trade dates and the other supplying settlement dates.  
– Thresholds triggered by corporate actions: It is often difficult for investors to 
monitor notification obligations that are triggered by corporate actions (e.g. capital increases). A central database indicating the relevant total number of voting rights and on which the investor s can rely when determining their 
notification obligation would be helpful. Any such database should be in a format that allows the import of data by investors. 
– It would be useful to clarify the ques tion whether the underlying holders need be 
disclosed by portfolio managers. 
• Clarification of definitions 
– It would be useful to clarify the concept of "make public" in articles 4, 5 and 6. 
– It should be made explicit that the annual reports to be disclosed within the four 
month deadline cannot be those approved by the general meeting.  
– Applicability of Transparency Direc tive to depository receipts when the 
underlying shares are not admitted to trading on a regulated market: the 
applicability of different rules (especi ally Articles 9–13 and 16–18) to depository 
receipts and holders of depository receipt s or holders of underlying shares should 
be clarified. 
 
144 – It should be clarified that the requireme nt of Article 12(3) of the implementing 
Directive (Directive 2007/14/EC) providing for regulated information to be communicated to the media in "unedited full text", permits this information to be produced in PDF. 
– Terms used in Article 9 (2), "as a re sult of events changing the breakdown of 
voting rights", should be clarified. For exam ple, it could be clarified, as the FSA 
has done in the UK (see DTR5.1.2R(2)), that  where there is a notifiable switch 
(e.g. 1% for UK issuers) from a soft shar eholding to an absolute shareholding by 
the exercise of entitlements to acquire  shares, without affecting the overall 
percentage of the holding, a new disclosure  would be required. It could also be 
clarified that this particular provision does not necessitate a disclosure where a 
person has disclosed its holding of voting ri ghts, but then it subsequently changes 
the capacity in which it holds them. For example, where a person has disclosed its indirect holding of shares as a bene ficiary (and these shares are held by a non-
discretionary nominee), the person would not be required to disclose a change if it then takes those shares out of th e nominee account and holds the shares 
directly itself. 
– In Article 18(2), there is a need to clar ify the interpretation of the "financial 
institution".  
• Other issues  
– The Transparency Directive requires co mpanies listed on regulated markets to 
make public their audited financial statemen ts within 4 months of financial year 
end. However, if there was a disruption in the supply of audit services, for 
instance, along the lines of Andersen Accounting, some listed companies could 
be unable to contract an auditor in tim e to lodge audited accounts within this 
timeframe. Therefore, the Commission should consider whether a clause might be added to the directive to allow companies additional time to publish the 
audited accounts should there be a major disruption to the audit market
. 
– It would be useful to clarify the relati onship between Article 8 of the Prospectus 
Directive, which gives the competent authority the ability to authorise the omission of certain information from a prospectus, and the Transparency 
Directive provisions under Articles 4 and 5.  
– Solutions should be provided regarding th e way dividend information is given by 
issuers to the market. ESMA should require issuers to follow some basic rules regarding disclosure of dividend information. This reply identifies such rules. 
– Some respondents favoured lowering the initial threshold for disclosure of major 
holdings at 3%. But one respondent was e xplicitly not in favour of lowering such 
initial disclosure threshold to 3%. If  this were done, there should be an 
exemption for regulated investment managers that do not invest for control. 
– One respondent explained that if the cu rrent system of more stringent and 
additional rules prevailed, it would be e ssential to give at least a facilitated 
access to centralized (and regularly updated) information to any shareholder on the mechanisms existing in the 27 Member St ates in order to facilitate the life of 
the investors. Currently, it is really a burden for shareholders investing all over 
 
145 Europe to find in each Member State, in addition to the total number of the issuer 
voting rights, the threshold to declare, the way of notifying it, the deadline for 
notification, the addressee and the conse quences of a lack of notification. The 
complexity and the difficulty to find in formation on the above matters can be 
considered as an obstacle to invest in Europe while it seems important to 
preserve the attractiveness of the Single Market. Furthermore, some countries, like France, allow companies to insert in their articles of incorporation specific 
thresholds which the investors will have to find out also.  
– Article 17 of the Transparency Directiv e should be reviewed in the light of 
Directive 2007/36/EC on the exercise of cer tain rights of shareholders in listed 
companies. 
– Article 19(1) (2nd paragraph) should be deleted: this article requires an issuer to 
communicate any amendment of its instrument  of incorporation or statutes to the 
competent authority. This requirement may result in some confusion about the role of the competent authority. CESR pr oposes to abolish this requirement in 
order to reduce administrative burden fo r issuers. The Shareholders' Rights 
Directive already requires issuers ha ving shares admitted to trading on a 
regulated market to make the proposal a nd the invitation to general meeting of 
shareholders publicly available. Moreover, although the Shareholders’ Rights Directive does not apply to issuers having only other securities than shares admitted to trading on a regulated market , the Market Abuse Directive requires 
also these issuers to disclose information relating to the issuer which is likely to 
have a significant effect on the price of the securities admitted to trading. 
– There is a need to harmonise the rules regarding "equivalence" for third country 
issuers in the Transparency Directive (A rticle 23) and the corresponding rules in 
the Commission Directive 2007/14. 
• Reference is made to the replies made to CESR consultation in 2007. 
• In addition to the issues mentioned by the various respondents (including CESR), 
CESR raised the following specific issues:  
– Definition of regulated information: CESR  notes that currently some information 
required to be disclosed by listed companies, especially in relation to corporate governance and shareholders' meetings, is cl assified as regulated information in 
some Member States whereas it is not regulated information in others. In order to achieve further harmonisation it should be considered whether there disclosures should be classified as regulated information throughout the EU. 
–  Definition of an issuer: It seems that in some Member States there are issuers 
other than legal persons with securities admitted to trading on regulated markets. 
The definition of an issuer should therefore be aligned with the situation. 
– Communication of choice of home Member  State: It should be considered 
whether Article 2 of the implementing Directive would need to be amended so that EU issuers would also be requi red to communicate the choice of home 
Member State to the competent authority of the Member State where the issuer has its registered office (if different). 
 
146 – Possibility for binding standards on supervision of financial information: Article 
24(4)(h) lays out the general power of competent authorities to examine whether information referred to in the Transparency Directive is drawn up in accordance with the relevant reporting framework and to take appropriate measures in case of discovered infringements. The rule  is the foundation for supervision of 
application of IFRS standards in fina ncial statements. CESR has issued two 
standards relating to supervision of fina ncial information. In order to ensure 
consistent supervision of financial in formation throughout the EU it should be 
considered whether the proposed Europ ean Securities Markets Authority could 
propose binding technical standards on this issue.  
– Relationship between the Transparency Directive and the Market Abuse 
Directive: There seem to be some inc onsistencies between these two Directives 
(and their implementing measures) especially  in terms of disclosure mechanisms. 
CESR therefore considers that these inc onsistencies should be further analysed 
and abolished in connection with the review of the Directives. 
 
147  
ANNEX  11 
 
REPORT FROM THE COMMISSION TO THE COUNCIL, THE EUROPEAN 
PARLIAMENT, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS: 
OPERATION OF DIRECTIVE 2004/109/EC ON 
THE HARMONISATION OF TRANSPARENCY REQUIREMENTS IN RELATION TO 
INFORMATION ABOUT ISSUERS WHOSE SECURITIES ARE ADMITTED TO TRADING ON A REGULATED MARKET. (27.05.2010. COM (2010)243FINAL) 
 
 
148  
REPORT FROM THE COMMISSION TO THE COUNCIL, THE EUROPEAN 
PARLIAMENT, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE 
AND THE COMMITTEE OF THE REGIONS 
Operation of Directive 2004/109/EC on the harmonisation of transparency 
requirements in relation to information about issuers whose securities are admitted 
to trading on a regulated market 
1. I NTRODUCTION  
1. This report reviews the operati on of Directive 2004/109/EC179 on the 
harmonisation of transparency requireme nts in relation to information about 
issuers whose securities are admitted to trading on a regulated market (hereinafter the "Transparency Directive" ), in accordance with Article 33 of that 
Directive.  
2. The Transparency Directive requires issuers of securities in regulated markets 
within the EU to ensure appropriate transparency for investors through the disclosure of regulated information and its dissemination to the public throughout the EU. Such information consis ts of financial reports, information 
on major holdings of voting rights and info rmation disclosed pursuant to Article 
6 of the Directive 2003/6/EC on inside r dealing and market manipulation 
(market abuse)
180. 
3. The objectives pursued by the Transparency  Directive are important to financial 
markets and recognised by international standard setting bodies, such as IOSCO or the OECD. The current financial crisis  demonstrates that the disclosure of 
accurate, comprehensive and timely information about securities issuers is essential in order to allow an informed assessment of their business performance and assets and consequently to build sustained investor confidence in capital 
markets. 
4. This report describes the impact of th e Transparency Directive and how it has 
been complied with (section 2); identifie s the main issues emerging from the 
application of the Transparency Directive (section 3) and draws a number of conclusions (section 4). This report is  completed by a Commission staff working 
paper which provides further detail on th e issues described as well as on how 
information has been collected. 
                                                
 
179 Directive 2004/109/EC of the European Parliame nt and of the Council of 15 December 2004 on the 
harmonisation of transparency requi rements in relation to informati on about issuers whose securities 
are admitted to trading on a regulated market  and amending Directiv e 2001/34/EC, OJ L 390 of 
31.12.2004, p.38. See: www.ec.europa.eu/internal_market/secu rities/transparency/index_en.htm  
180 OJ L 96, 12.4.2003, p.16. 
 
149 2. I MPACT OF AND COMPLIANCE WITH THE TRANSPARENCY DIRECTIVE  
5. The External Study on the application of the Transparency Directive conducted 
on behalf of the Commission181 (hereinafter "the External Study") reflects that a 
strong majority of the stakeholders who pa rticipated in the survey consider the 
Transparency Directive to be useful fo r the proper and efficient functioning of 
the market. Stakeholders generally consid er that regulated information disclosed 
by issuers reaches investors, except perhaps for the case of information 
disclosed by smaller listed companies.  
6. In terms of economic impacts of the Transparency Directive on financial 
markets, research conducted so far is not  conclusive. It seems rather that the 
Transparency Directive is neutral: while perceived as a simplifying factor for primary market issuance, there is a lack of empirical evidence to back up this 
perception.  
7. A review of issuers' practices shows that  issuers generally comply with financial 
reporting obligations and that this is also the perception of stakeholders. 
Financial information disclosed is c onsidered useful and sufficient for 
investment purposes. Also, the simplif ication of language requirements for 
disclosure of financial information in troduced in 2004 has been particularly 
welcome.  
8. The cost of compliance with the obliga tions of the Transparency Directive
182 
does not appear, prima facie , particularly high183. This is also the perception of 
issuers, although small and medium sized listed companies are more concerned about the cost of compliance. The in troduction of the "Home Member State 
rule"
184 as well as the simplification of the language regime for financial 
disclosures in 2004 should, in principle, have contributed to reducing issuers' 
costs. However, there are increased costs for cross-border investors resulting from the insufficiently harmonised requirements of the Transparency Directive.  
                                                
 
181 Mazars (December 2009), Study on the application of selected obligations of directive 2004/109/EC 
on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market . Available at: 
http://ec.europa.eu/internal_market/company/ecgforum/index_en.htm
  
182 It should be noted that the bul k of the requirements on the conten t (e.g. accounting standards) of 
annual and half-yearly financial reports are not contained in the Transparency Directive. 
183 See Europe Economics (2008), Study on the cost of compliance with selected FSAP measures . 
Available at: www.ec.europa.eu/internal_market/finances/actionplan/index_en.htm  
184 According to the "Home Member State Rule" (cf.  Article 3(1)), issuers are only subject to the 
obligations set out by their Home Member State (normally the one of incorporation) but not to those of the Host Member State. This "Home Member  State Rule" should avoid the dual (or multiple) 
application of rules to issuers.  
 
150 3. T HE REVIEW OF THE OPERATION OF THE DIRECTIVE : EMERGING ISSUES  
9. A number of issues emerge from th e review of the operation of the 
Transparency Directive (see the Commission staff working document 
accompanying this report for further detail).  
10. First and foremost, the debate is raised  as to whether the transparency rules 
should be specifically adapted to sma ller listed companies with a view to 
maintaining and also increasing the attrac tiveness of regulated markets for this 
category of issuers185. While the scope for simplifi cation of the Transparency 
Directive rules for smaller listed companies, and therefore achieving savings, is limited, there are specific simplification measures which could be envisaged, 
without undermining investor protection, su ch as for instance: (i) providing for 
more flexible deadlines to the disclosure of financial reports; (ii) alleviating the 
obligation to publish quarterly financial information; (iii) harmonising the maximum content of reports; or (iv) fac ilitating cross border visibility of smaller 
listed companies towards potential investors and/or information intermediaries such as financial analysts
186, therefore increasing their attractiveness.  
11. Secondly, although the requirement to pr oduce quarterly financial information 
introduced in 2004 by the Transparency Di rective could contribute to a certain 
short-term vision of the issuers' performance by investors187, it is generally well 
perceived by market participants. Also, alleviating the obligation to disclose quarterly information would most likely only benefit smaller listed companies, since the large companies would presum ably continue to publish quarterly 
information. On the contrary, there is market demand for more detailed rules regarding the content of interim management statements so as to facilitate issuers' compliance and to allow for predictability of the information to be disclosed.  
                                                
 
185 It should be underlined that there are alternative markets to the 'regulated markets' (within the meaning 
of the Transparency Directive) where issuers ma y have their securities traded. Those alternative 
markets qualify as multilateral trading facilities (MTF s) within the sense of Directive 2004/39/EC. The 
Transparency Directive rules do not  apply to those alternative mark ets and according to the External 
Study, there is no stakeholder support for extending the application of this directive to those non-regulated markets. The Commission does not intend at this stage to propose extending the scope of the Transparency Directive to MTFs. A more detailed explanation is proposed in the Commission staff working document attached to the present report. 
186 See for instance, F. Demarigny, An EU-Listing Small Business Act , March 2010, available at: 
www.eurocapitalmarkets.org . According to this report, " on average, 93% of trading volumes on 
regulated markets are concentrated on 7% of the total number of companies listed in the EU ".  
187 Such short-term effect is at odds with recent Commission initiatives encourag ing financial institutions 
and issuers to establish incentives for a longer-term vision. The European Commission has, for instance, recommended that remuneration of directors in issuers and financial institutions takes into account the long term behaviour of companies: see European Commission Recommendation 2009/384/EC of 30.4.2009 on remuneration policies in the financial services sector  (OJ L 120, 
15.5.2009, p. 22) and Commission Recommendation 2009/385/EC of 30.4.2009 complementing 
Recommendations 2004/913/EC and 2005/162/EC as regar ds the regime for the remuneration of 
directors of listed companies  (OJ L 120, 15.5.2009, p. 28).  
 
151 12. Thirdly, the minimum harmonisation charact er of the Transparency Directive 
allows Member States to adopt more stringent requirements188. Thus the 
transposition of the Transparency Direc tive is relatively uneven as a result of 
different national regimes. More stringent  national requirements, in particular 
regarding the notification of major holdi ngs of voting rights, are perceived as 
problematic by stakeholders. This results  in real and costly implementation 
problems. This raises the question as to whether the current regime (i.e. 
minimum harmonisation) is appropriate to achieve an effective level of 
harmonisation of transparency requirements in the EU.  
13. Fourthly, it appears that the Transparency Directive's obligations need to be 
adapted to innovation in financial markets and increased transparency requirements should be introduced with rega rd to certain types of instruments. 
In particular, insufficient disclosure of  stock lending practices seem to have 
increased the risk of "empty voting" and lack of disclosure regarding cash-
settled derivatives has led to increas ed problem of "hidden ownership". 
Concerning the disclosure of information for corporate governance purposes, associations representing issuers in the EU are favourable to the introduction of 
mechanisms allowing issuers to identify the ultimate investor so as to be able to 
engage into real shareholders-issu ers dialogue. Additionally, even when 
shareholders with major holdings of  voting rights are well known, calls are 
being made to enhance the disclosure requirements for significant holdings. In 
some Member States, large investors are already requested to disclose their intentions as regards their holdings and how they financed their acquisition. The 
question of whether large (in particular institutional) investors should disclose 
their voting policies in listed companies is related to this issue too. 
14. Fifthly, in addition to the disclosure  of financial reports required by the 
Transparency Directive, EU law also requires (or, as appropriate, recommends) 
listed companies to make some periodic non-financial (but corporate governance-related) disclosures, generally in connection with the annual financial report, such as the so-called Corporate Governance Statement
189. The 
issue has been raised as to whether th e disclosure of non-financial information 
should be integrated into the Transparency  Directive regime in order to simplify 
the existing requirements.  
15. A related issue concerns disclosure of  Environmental, Social and Governance 
(ESG)190 data made by listed companies. Some stakeholders (non-governmental 
                                                 
188 The Commission staff examined the question of more stringent national requirements in 2008 and 
produced a specific document with detailed information on this matter, which should be regarded as a complement to this report. See Commission staff working document, Report on more stringent 
national measures concerning Directive 2004/109/EC on the harmonisation of transparency requirements in relation to info rmation about issuers whose secu rities are admitted to trading on a 
regulated market , SEC(2008)3033, 10.12.2008. 
189 Article 46a of Fourth Council Directive 78/660/EEC  of 25 July 1978 on the annual accounts of certain 
types of companies, as amended by Directive 2006/46/EC (OJ L 224, 16.8.2006, p.1).  
190 There is neither a precise definition of ESG for regulatory purposes, nor a clear delineation of its 
scope. It appears nevertheless that ESG disclosures would fit within the larger debate on Corporate 
Social Responsibility (CSR). CSR has been defined by the Commission as " a concept whereby 
companies integrate social and environmental concerns in their business operations and in their 
 
152 organisations, some investor organisati ons) are regularly requesting to improve 
and strengthen European legislation regarding ESG disclosure. In their view, the Transparency Directive could be an appropriate vehicle to integrate such disclosures alongside financial reporting ob ligations of listed companies, and to 
address some of the perceived short-co mings of current ESG disclosure rules 
and practice. 
16. Sixthly, the progress towards the establis hment of a pan-European system of 
storage of regulated information, with a view to facilitate investors' access to 
information, is slow
191 and the impact of the Directive in this area has been 
insufficient: interested parties need to go through 27 different national databases and the electronic network interconnecting them is only at an initial stage with 
rather modest results so far. This raises  the question as to whether the Directive 
storage mechanisms, as currently designed, ar e able to fulfil the role of "gate" to 
historical financial information on listed companies at pan-European level.  
17. Finally, while there are no major comp liance problems, the review of the 
operation of the Transparency Directive shows that some technical adjustments 
to the text of the Directive would be beneficial in the interest of improved 
clarity.  
4. C
ONCLUSIONS  
18. This review of the operati on of the Transparency Directive shows that there are 
areas where the regime created by this Directive could be improved, notably in 
relation to the simplification of the rule s applicable to smaller listed companies 
with a view to making capital markets mo re attractive to them. The cross-border 
visibility of smaller listed companies towards potential investors and analysts also needs to be improved with a view to ultimately achieve higher levels of 
trading on the securities of these smaller issuers. There are possible measures in the framework of the Transparency Dir ective which could contribute to this 
goal: e.g. providing for more flexible deadlines to the disclosure of financial reports by small issuers would enhance their visibility since they would no 
longer inform about their performance at the same time as large issuers; 
harmonising the maximum content and presentation of reports would facilitate reading and comparability by investors and an alysts. In this context, the review 
of the operation of the Transparency Di rective also shows that it would be 
desirable, in order to increase the visi bility and attractiveness of smaller listed 
companies, to further facilitate access by potential investors and information 
intermediaries at a pan-European level to financial information disclosed by 
                                                                                                                                                
 
interaction with their stakeholders on a voluntary basis ." See Communication from the Commission to 
the European Parliament, the Council and th e European Economic and Social Committee – 
Implementing the Partnership for Growth and J obs: Making Europe a Pole of Excellence on 
Corporate Social Responsibility , COM(2006) 136 final, 22.3.2006. 
191 See the Commission Recommendation 2007/657/EC of 11 October 2007 on the electronic network of 
officially appointed mechanisms for the central storage of regulated information referred to in Directive 2004/109/Ec of the European Parliament and of the Council, OJ L 267, 12.10.2007, p.16.  
 
153 small issuers and stored in the officially appointed mechanisms for the storage 
of regulated information. 
19. Additionally, the review of the operation of the Transparency Directive shows 
the need for greater convergence of the ru les on the disclosure of major holdings 
of voting rights and of financial instruments giving access to voting rights (including cash-settled derivatives) as well as the opportunity to simplify the reporting requirements for issuers in the broader corporate governance context. 
In this connection, this report also identified the concerns of some stakeholders regarding the disclosure of environmental and social information.