Proposal for a Directive of the European Parliament and of the Council on the harmonisation of transparency requirements with regard to information about issuers whose securities are admitted to trading on a regulated market and amending Directive 2001/34/EC
Date: 2003-03-26
Institutions: European Commission
Subjects: access to information, administrative transparency, approximation of laws, capital market, dissemination of information, financial institution, international standard, securities, standardised accounting system, stock-exchange listing

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 26.3.2003
COM(2003) 138 final

2003/0045 (COD)

Proposal for a

DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

on the harmonisation of transparency requirements with regard to information about
issuers whose securities are admitted to trading on a regulated market and amending
Directive 2001/34/EC

(presented by the Commission)

EXPLANATORY MEMORANDUM

1. 

INTRODUCTION

1.1. 

Context

Transparency  about  publicly  traded  companies  is  essential  for  the  functioning  of  capital
markets, enhancing their overall efficiency and liquidity. This proposal for a directive should
markedly  improve  the  information  made  available  to  all  investors  about  publicly  traded
companies on regulated securities markets within the European Union.  It will therefore help
integrate  further  Europe’s  securities  markets  by  reducing  or  eliminating  information
asymmetries, which  may hamper comparability  and  market  liquidity;  by  enhancing  investor
confidence in the financial position of issuers; and by reducing the cost of accessing capital.

The  current  initiative  is  one  of  the  priority  actions  in  the  Financial  Services  Action  Plan
(FSAP),  endorsed  by  Heads  of  State  and  Government  at  the  Lisbon  European  Council  in
March  2000.  The  aim  is  for  Member  States  to  have  successfully  implemented  the  agreed
directive by 2005 at the latest - a commitment affirmed by Heads of State and Government at
Stockholm in March 2001 and at Barcelona in March 2002.

Therefore, the proposal is part of a strategy for overhauling securities markets legislation, in
particular for achieving a  greater level of transparency  and information in respect  of issuers
whose securities are traded on regulated markets. The proposal belongs to a “disclosure and
transparency agenda” on which the European Institutions are currently moving forward:

(cid:1)  the Regulation on the application of International Accounting Standards (IAS)1, which will
make  mandatory  the  application  of  IAS  to  the  drawing  up  of  annual  accounts,  for  all
companies whose securities are admitted to trading on a regulated market and who prepare
consolidated accounts, as from 1 January 2005 (with limited exceptions given until 2007).
The present proposal is in line with this policy adopted by the EU. However, this does not
alter  the  procedure  introduced  by  the  IAS  Regulation  which  subjects  each  individual
standard  –  including  IAS  39  –  to  a  formal  decision  by  the  EU,  in  accordance  with  the
procedure in the Regulation, before the standard becomes legally binding in the EU. This
Directive does not pre-empt or prejudice in any way such decisions;

(cid:1)  the  Directive  on  Market  Abuse2,  which  will,  inter  alia,  require  issuers  to  publish  inside
information. The existing ad-hoc disclosure requirements of price sensitive information are
to be replaced thereby strengthening disclosure requirements;

(cid:1)  the future Directive on Prospectus3, which will deal with initial disclosure requirements at
the point of public offer of securities/its admission to trading on a regulated market. The
Directive should provide for an European passport for a prospectus. The current proposal

1

2

3

Regulation (EC) No 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the
application of international accounting standards, OJ No L 243 of 11.9.2002, page 1.
Directive No 2003/6/EC of the European Parliament and of the Council on insider dealing and market
manipulation (market abuse), adopted on 3.12.2002 not yet published in the OJ.
Amended Commission proposal for a Directive of the European Parliament and of the Council on the
prospectus  to  be  published  when  securities  are  offered  to  the  public  or  admitted  to  trading  and
amending Directive 2001/34/EC – COM (2002) 460 final of 9.8.2002.

2

                                                
already takes into account the Council political agreement of 5 November 2002 towards a
common position, which the Commission fully supports.

Successful  adoption  and  implementation  of  all  these  initiatives,  including  the  present  one,
represent  an  indispensable  contribution  to  the  overall  regulatory  framework  for  securities
markets. The proposed  Investment  Services  Directive  (ISD)4 will  only  work  effectively  and
be a success if this new set of regulatory transparency requirements are in place at the same
time.

1.2. 

Objectives of the current initiative

The  proposed  directive  envisages  to  impose  a  level  of  transparency  and  information
commensurate with the aims of sound investor protection and market efficiency.  In order to
achieve these aims, the current initiative should be consistent with all the legislative initiatives
mentioned  above:  its  scope  should  be  extended  from  official  to  regulated  markets,  thus
bringing  second  tier  markets  within  its  scope  (see  Section  3.1.),  it  should  ensure  greater
openness to the world of international finance in terms of use of languages; and also in the use
of modern information technologies (see Section 3.2). Finally, the proposal should constitute
an  appropriate  response  to  developments  in  the  US,  including  the  Sarbanes-Oxley  Act,  for
promoting European capital markets (see Section 3.3.).

The initiative reforms requirements in the form of standardised information at a certain point
(periodic information) or information on an ongoing basis. Its objectives are:

(cid:1)  To  improve  annual  financial  reporting  by  security  issuers  through  disclosure  of  an

annual financial report within three months (see Section 4.2);

(cid:1)  To  improve  periodic  disclosure  of  share  issuers  over  a  financial  year,  by  introducing  a
pragmatic  policy  mix  of  more  detailed  half-yearly  financial  report  and  less  demanding
quarterly  financial  information  for  the  first  and  third  quarter  of  a  financial  year  .  This
solution  is  in  the  middle  of  two  extreme  positions:  one  extreme  position  would  be  to
require  three  fully-fledged  quarterly  financial  reports  based  on  highest  international
standards, similar to the requirements in the US. The other extreme would be to stay at a
level of corporate transparency where the European Union has been for twenty years (prior
to the  Internal Market). Such  an  extreme  position would ignore  that  capital  markets now
act and react much faster, that the allocation of capital amongst publicly traded companies
is  subject  to  more  competition.  Finally,  investors  investing  in  several  Member  States
should benefit from more reliable and standardised financial information cycles instead of
solely relying on ad-hoc disclosure issued by companies. This does not mean that the new
rules on interim financial information should replace continuous disclosure obligations (see
Section 4.3);

(cid:1)  To introduce half-yearly financial reporting to issuers of only debt  securities who are
currently  not  subject  to  any  interim  reporting  requirement  at  all.  Again,  the  Commission
pursues a very pragmatic approach (see Section 4.4.);

4

Commission  Proposal  for  a  Directive  on  Investment  Services  and  Regulated  Markets,  and  amending
Council Directives 85/611/EEC, 93/6/EEC and European Parliament and Council Directive 2000/12/EC
of 19 November 2002, COM (2002) 625 final.

3

                                                
(cid:1)  To base on-going disclosure of changes to important shareholdings in issuers on proper
capital  market  directed  thinking.  This  should  lead  to  more  frequent  information  within
stricter disclosure deadlines (see Section 4.5);

(cid:1)  To  update  existing  Community  law  on  the  information  provided  to  security  holders
(holders of shares or debt securities) in general  meetings through proxies  and electronic
means. This aspect is particularly important for investors resident abroad (see Section 4.6.).

The  current  initiative  will  ensure  sound  investor  protection  and  the  properly  functioning  of
financial  markets.  As  a  consequence,  it  should  lead  to  the  effective  removal  of  national
barriers for issuers seeking access to regulated markets not only in their home Member State,
but  also  in  other  Member  States.  Member  States  would  not  carry  any  justifiable  risks  of
undermining their national investor protection because Community law would already ensure
robust requirements. However, the issuer’s home Member State should be allowed to impose
more stringent disclosure requirements (see Section 4.1).

2. 

A NEW WAY OF REGULATING SECURITIES AT COMMUNITY LEVEL

2.1. 

Two rounds of open and public consultation

The European Council invited the European Commission, in its Resolution of 23 March 2001
on more effective securities markets regulation, “to make use of early, broad and systematic
consultation  with  the  institutions  and  all  interest  parties  in  the  securities  area,  in  particular
strengthening  its  dialogue  with  consumers  and  market  practitioners”.  This  should  facilitate
adoption of legislative measures and allow their timely implementation by 2005.

The  Commission  has  met  its  part  of  the  bargain.  Its  Internal  Market  Directorate  General
carried out two written consultations before bringing forward this proposal. On 11 July 2001,
it invited reactions from interested parties to a consultation document in which it presented its
preliminary views. There were 91 responses from all the Member States, but also from third
countries.  In  December  2001,  it  published  a  summary  of  the  replies  received.  The  Internal
Market  Directorate  launched  a  final  consultation  on  8  May  2002.  In  this  round,  it  revised
particular aspects, such as interim financial reporting, and presented a detailed outline of its
ongoing  work  on  a  possible  proposal.  Again,  it  received  93  replies  from  all  Member  States
and from third  countries.  The  arguments  presented  are  reviewed  below.  The  184  responses
received in the two consultation rounds cover a broad spectrum of interests:

Others
10%

Issuers
33%

National authorities (incl. 
Regulators)
14%

Investors
13%

Auditors/ Accountants
10%

Stock Exchanges
11%

4

Market Participants
9%

2.2. 

A directive containing essential principles, not technical details

A serious reform should be brought about on the basis of a new way of regulating securities
markets at Community level. Adoption of this Directive should indeed be easier by virtue of
the  fact  that  the  proposal  is  built  on  the  recommendations  in  the  Final  Report  of  the
Committee  of  Wise  Men,  chaired  by  Alexandre  Lamfalussy,  of  February  2001.  Its
recommendations centred on  a new  four level  approach for regulating securities markets, so
as to be able to complete the FSAP by 2005.

The report recommends that Community legislation, adopted using the co-decision procedure,
should focus on essential principles and policy options, but no longer on all technical details
(“Level  1”).  Technical  implementing  rules  at  Community  level  are  adopted  by  the
Commission (relying on the technical advice and expertise of national securities supervisors)
according  to  the  existing  comitology  procedures,  whereby  the  Commission  is  assisted  by  a
“Regulatory  Committee”  (the  European  Securities  Committee  (ESC5)  “Level  2”).  Co-
operation  amongst  national  securities  supervisors  in  the  Member  States  on  the  day-to-day
implementation  of Community law should be  reinforced, notably through  the  Committee  of
European  Securities  Regulators6  (“Level  3”).  Enforcement  of  Community  law  by  the
European Commission should also be strengthened (“Level 4”).

The four-level approach was expressly endorsed by the European Council in its Resolution of
23  March  2001  on  more  effective  securities  market  regulation  in  the  European  Union.
Equally, the European Parliament supported such a regulatory reform in its Resolution on the
implementation  of  financial  services  legislation  of  5  February  2002  in  the  light  of  the
declaration  made  by  the  President  of  the  European  Commission  at  that  day.  The  current
initiative is based on this new approach and accordingly aims at allowing a split between level
1  and  level  2  legislation.  Section  5  explains  how  the  Commission  believes  that  technical
details should be left to “level 2 legislation”.

3. 

CONSISTENCY WITH OTHER SECURITIES MARKETS INITIATIVES UNDER THE FSAP

3.1. 

Community legislation covering regulated markets

The IAS-Regulation, the recently adopted Directive on Market Abuse, the future Directive on
Prospectus, and the proposal for a revision of the Investment Services Directive - all concern
issuers whose securities are admitted not only to official listing, but to regulated markets, thus
covering second tier markets7. Along the same lines, periodic financial reporting, information
through  general  meetings  of  security  issuers  for  security  holders,  information  about  major
changes  to  shareholdings  as  well  as  other  ongoing  information  should  be  regulated  with
regard to not only official, but also regulated markets at Community level.

5

6

7

This Committee  has already been established by Commission Decision No 2001/528/EC of 6.6.2001,
OJ No L 191 of 13.7.2001, p. 45. It only acts in an advisory capacity. In this respect, it has also been
consulted on the present initiative.
Established by Commission Decision No 2001/527/EC of 6.6.2001, OJ No L 191 of 13.7.2001, p. 43.
such  as  the  Second  Marché  and  the  Nouveau  Marché  in  Paris,  the  Alternative  Investment  Market  in
London,  the  Geregelter  Markt  and  the  Neuer  Markt  in  Frankfurt,  the  Mercato  Ristretto  in  Milan,  the
Nuevo Mercado in Spain or the Nouveau Marché in Belgium.

5

                                                
During  the  two  consultations,  some  parties  asked  for  clarification  on  situations  where  an
issuer has never requested or approved admission of its securities to trading on regulated
markets in any Member State. This issue will primarily be addressed in the framework of the
proposed  new  Directive  on  investment  services  and  regulated  markets  –  the  initiative
harmonising the requirements for regulated markets to admit securities to trading on regulated
markets8.  The  Commission  proposes  to  link  expressly  mutual  recognition  of  regulated
markets under that Directive with the need for issuers to comply with all securities legislation
at Community level.(. The current proposal only covers a specific aspect which cannot be left
to operators of regulated markets: Issuers who have never requested or approved admission of
its securities to  trading  on  a  regulated  market  may  not  be  required  to  provide  translation  of
periodic financial reports under a specific language regime. In such a case, these obligations
will  be  incumbent  on  any  third  party  who  has  asked  for  such  admission  (see  the  proposed
Article 16 (4)) .

3.2.  More openness to the world of international finance

3.2.1.  Use of a language customary in the sphere of international finance

At  present,  each  Member  State  may  insist  that  information  be  disclosed  to  the  public  in  its
official  language(s).  Reactions  to  two  consultations  demonstrated  that  this  is  costly  and
burdensome for issuers whose securities are admitted to trading in several Member States.

Further  integration  of  financial  markets  in  the  EU  will  make  the  language  issue  more
important.  It  is  necessary  to  provide  for  a  system  which  would  counter  these  problems.  An
unsatisfactory  solution  would  also  undermine  the  value  added  by  the  future  Directive  on
prospectuses. For the same reasons, the proposed language regime under this Directive would
also  apply  to  information  that  is  to  be  disclosed  on  an  ad-hoc  basis  under  Article  6  of  the
Market  Abuse  Directive.  Finally,  the  proposal  deals  with  information  to  be  supplied  by
investors to the issuers. In order to enhance not only cross-border acquisition of shares within
the EU but also in order to attract more third country investors as well, the proposal provides
that  investors  should  be  able  to  notify  changes  to  their  shareholdings  to  the  issuer  in  a
language customary in the sphere of international finance.

The Commission proposes that issuers whose securities are admitted to regulated markets in
more than one Member  State may also opt for a  language customary  in the  international
sphere of finance. For wholesale markets, issuers may always choose such a language.

The  present  proposal  contains  a  marked  difference  compared  to  the  future  Prospectus
Directive:  it  would  not  allow  Member  States  to  require  issuers  to  make  available  periodic
financial reports or ongoing information in its official language. It is recalled that the future
Prospectus Directive still allows Member States, if they wish so, to require the translation of a
summary of a prospectus into their own languages.

That said, the current proposal would not lead to a system where host Member States could
request a translation. Indeed, the proposal does not affect the right of a host Member State to
impose  appropriate  publication  of  a  certified  translation  of  accounts  by  publicly  traded

8

Commission  Proposal  for  a  Directive  on  Investment  Services  and  Regulated  Markets,  and  amending
Council  Directives  85/611/EEC  and  93/6/EEC  and  European  Parliament  and  Council  Directive
2000/12/EC  of  19  November  2002,  COM  (…)  2002,  see  Article  37  (5)  thereof.  According  to  this
provision, the issuer’s consent is no longer necessary in the case where securities should be admitted to
trading on a further regulated market.

6

                                                
companies, provided such companies open a branch on its territory. This right is already laid
down  in  the  Eleventh  Company  Law  Directive.  Moreover,  the  current  proposal  should  not
prejudice language requirements in judicial procedures before courts. Finally, it differs from
the  solutions  established  for  a  prospectus  in  cases  where  an  issuer’s  securities  are  only
admitted to trading on a regulated market in a single host Member State, but not in its home
Member State to avoid a kind of “forum shopping” or even “language shopping”.

For further details, please see the explanations to the proposed Article 16 in Section 5.

3.2.2.  Reaping the benefits of modern information and communication technology

–  Single source of information about an issuer throughout the European Union

At  present,  Member  States  are  free  to  require  which  dissemination  means  an  issuer  should
make use of. This led to an enormous diversity of information channels because each Member
State may pursue its own policy. Three different models are basically used: dissemination is
organised by the national supervisory authority itself, by operators of regulated markets, or by
other  competing  financial  information  providers9.  In  addition,  Article  102  of  Directive
2001/34/EC allows issuers to publish their information on their own initiative via the press.

This has led to complexity in the ways information is disseminated throughout the European
Union. In many Member States, information about the same issuer cannot be found from the
same source. The three models vary according to the type of information to be provided. As
an important first step, it is important to establish under Community Law that Member States
should  no  longer  impose  the  use  of  operators  established  on  their  territory  or  the  use  of
different  media  for  different  types  of  information  about  the  same  issuer.  The  overall  goal
should  be  that  an  investor  should  find  all  periodic  and  ongoing  financial  information
(including those published on an ad-hoc basis) in relation to a particular issuer from a single
source.

–  The issuer’s Internet site accompanied by an efficient electronic alert system

Dissemination  of  information  through  the  Internet  sites  of  the  issuers  is  currently  not  be
considered as a sufficient appropriate method on its own. This should change with respect to
issuers whose securities are admitted to trading on more than one Member State. Such a use
would however not be sufficient on its own, but must be accompanied by an efficient e-mail
alert mechanism which a company is to set up to inform all interested parties on a real-time
basis of any change to information presented on its Internet sites. The technical details of such
a  system  should  be  laid  down  in  implementing  rules  to  be  adopted  in  accordance  with  the
comitology procedure.

If the use of the issuer’s Internet sites were not addressed under this initiative, Member States
might be tempted to stick to their existing national systems. The means which Member States
may impose for effectively disseminating information are not only technicalities falling under
the  principle  of  subsidiarity.  National  differences  in  the  dissemination  requirements  for
issuers  must  be  seen  as  a  further  obstacle  in  the  whole  chain  of  barriers  preventing  issuers
from  seeking  access  to  the  regulated  markets  in  several  Member  States.  These  national
differences also impede investors’ decision-taking across Member States.

For further explanations see comments to Article 17 in Section 5, but also section 4.5.

9

Model chosen by UK concerning the so-called primary service providers (PIPs).

7

                                                
–  Electronic  networks  across  Member  States  to  further  simplify  the  investor’s  access  to

information

The  situation  in  Europe  stands  in  marked  contrast  to  the  situation  in  the  US  where  the
EDGAR  system10  allows  simple  access  for  information  about  issuers.  One  Member  State
(UK) recently started a system ensuring that all regulatory information on a particular issuer is
channelled  through  regulatory  news  services.  Other  Member  States  seek  improvements
through publication on the web site of their national securities regulators.

The  proposed  Directive  would  make  sure  that  each  Member  State  operates  a  system  for
disseminating information on a particular issuer at a single source. Such a source may also be
the issuer’s Internet sites, accompanied by an efficient electronic alert system. However, this
does not offer a solution on how to connect national systems throughout the European Union
or across a maximum of Member States. It should be up to the national securities regulators to
establish an inventory of financial information, for which Community-wide solutions should
be  sought  through  guidelines.  The  guidelines  could  usefully  be  drawn  up  as  Level  3  type
measures under the Lamfalussy process and should aim at establishing electronic networks to
which investors throughout  Europe  could  have  real-time access. Any system leading  to  one
stop shop solutions across all or lots of Member States or a system of mutual recognition of
the means which each Member State has recognised as appropriate at national level should be
left  to  national  regulators  at  this  stage.  This  soft  law  approach  should  lead  to  practical
solutions designed for the benefit of investors. By 31 December 2006, the Commission will
review  how  these  measures  are  working  in  practice  and,  if  necessary,  propose  Level  2
legislation.

For further details, see the explanations given on the proposed Article 18.

3.3. 

Developments in the US

US  legislation  on  transparency  sets  the  scene  for  the  most  important  capital  markets  in  the
world. US stock markets cover about 60%  of the  world  stock  market  capitalisation  whereas
European  markets  only  half  of  it  (30%).  The  collapse  of  US  companies  like  Enron  and
Worldcom have added fuel to the debate in Europe. The Sarbanes-Oxley-Act adopted in July
2002 led to the most profound reform of US securities markets legislation for the last decades.

It  is  also  accompanied  by  measures11  taken  by  the  US  Securities  Exchange  Commission
(SEC)  which  further  strengthen  investor  protection:  Directors  (and  their  financial  officers)
have  to  certify  that  every  future  quarterly  and  annual  financial  report  does  not  contain  any
untrue  statement,  but  fairly  represent  the  financial  conditions  of  the  issuer,  including  the
maintenance and certification of an internal control system. This is the legislative response to
widespread criticism that financial statements were subject of manipulation, even fraud. The
certification  requirement  will  also  apply  to  foreign  securities  issuers.  Moreover,  US
companies whose equity public float is $75 million or more and who are subject to the SEC
for  at  least  12  month  will  face  an  acceleration  of  its  filing  requirements  of  quarterly  and
annual reports12 and will be required to publish their reports on the Internet.

10

11

12

EDGAR  is  the  abbreviation  for  Electronic  Data  Gathering,  Analysis,  and  Retrieval  System  and  was
introduced in 1993.
SEC Decision of 27 August 2002.
At present, all US domestic security issuers are required to publish the annual financial report (form 10-
K) by 90 days after a fiscal year end. The companies concerned should accelerate this during a period of
two years (75 days after the fiscal year ending in 2003 and thereafter 60 days after the subsequent fiscal

8

                                                
These  measures  do  not  only  impact  on  European  companies  having  a  dual  listing  on  US
securities markets. They set a pace against which Community legislation must find a proper
response  for  promoting  European  capital  markets  at  international  level.  The  Commission
proposal  indeed  addresses  these  issues:  First  it  overhauls  the  requirements  for  annual  and
interim  financial  reporting  (see  sections  4.2.  to  4.4.  below).  In  addition  and  along  the  same
lines as in  the  future directive on prospectus, the Commission proposes  that Member  States
have  in  place  adequate  rules  on  identification  of  the  responsible  persons  and  bodies  in  a
company and their liability for false information (see for further explanations given to Article
7 in Section 5).

4. 

KEY ELEMENTS OF A REFORM OF DISCLOSURE REQUIREMENTS

4.1. 

Community-wide investor protection and removal of national barriers

4.1.1. 

Striking a balance between issuers and investors

The  envisaged  transparency  requirements  are  placed  in  the  context  of  integrated  European
capital  market.  This  should  not  only  protect  investors  and  improve  market  efficiency.
Upgraded requirements throughout the European Union should lead to fewer national barriers
for  issuers  seeking  access  to  regulated  markets  in  Member  States  other  than  their  home
Member State. Forging a link between effective removal of national barriers to market access
with appropriate investor protection at Community level is the way in which there has often
been successful integration of financial markets – and it should also be the way forward.

This implies high level – rather than full – harmonisation, whereby the issuer’s home Member
State  may  continue  to  impose  more  stringent  periodic  or  ongoing  disclosure  requirements.
However,  other  Member  States  where  issuers  also  wish  to  raise  capital  through  securities
admitted  to  trading  on  a  regulated  market  should  not  be  allowed  the  same.  Otherwise,
companies  wanting  to  be  quoted  in  several  Member  States  would  certainly  be  discouraged
through diverging national disclosure requirements.

This balance between investor protection and removal of national barriers for issuers responds
to concerns and wishes expressed in the two consultations. On the one hand, investors  from
some Member States and from third countries asserted that the appropriate way would be full
harmonisation throughout the European Union. On the other hand, security issuers and market
participants advocated that the Member States should retain some discretion.

For further details, see the explanations to Article 3 in Section 5.

4.1.2.  Filing system in the home Member State

To  build  investor  confidence,  the  home  Member  State  would  be  responsible  for  enforcing
Community  disclosure  requirements  through  a  system  requiring  companies  to  file  their
information  with  the  national  securities  regulator.  During  the  two  consultations,  investors,
national securities regulators, and stock exchanges supported this idea, provided delegation to
the operators of regulated markets remains possible. Market participants and issuers, however,
asked for further clarification of the exact objective of such a filing system.

years for ). The quarterly financial report (form 10-Q) should be published in 45 days. The companies
concerned by the new rules should speed publication up to 40 days as from 2005 and 35 days as from
2006.

9

                                                                                                                                                        
The  repository  function  that  a  national  securities  regulator  (or  the  operator  of  a  regulated
market to which this could be delegated) should therefore fulfil would work as follows: filing
at  the  date  of  the  effective  disclosure  should  for  instance  ensure  that  mandatory  disclosure
deadlines are respected. The proposed filing system would not necessarily imply a scrutiny of
the  information  with  respect  to  its  completeness,  accuracy,  and  comprehensibility.  On  the
other  hand,  the  supervisory  authority  in  the  home  Member  State  should  possess,  as  a
minimum, the right to react to any violations of disclosure requirements.

The repository function of a competent authority would not mean that it also takes over  the
role of disclosing  the  filed information  to the public  on  a  real-time basis.  It  would be up to
each  competent  authority  to  decide  if  they  wish  to  offer  such  a  service.  If  so,  such  a
disclosure function should embrace disclosure of all periodic and ongoing information which
a particular issuer must disclose under this Directive and under the Market Abuse Directive.
Thus, a national regulator would also be required to offer a single source of information about
a particular issuer.

For further details, see the explanations given on the proposed  Articles 15, 17 and 20 under
Section 5.

4.1.3.  Determination of the home Member State

According to existing Community Law, the issuer’s home Member State is the Member State
the  law  of  which  governs  it13.  During  the  two  consultations,  some  market  participants
expressed a preference for a free choice of the home Member State by the issuers, at least in
certain cases. The solution that the Commission proposes follows, to the extent possible, the
solution agreed by the Council on 5 November 2002 in the context of the proposed Prospectus
Directive.

–  The need for consistency with the future Prospectus Directive

Disclosure  requirements  for  secondary  markets  and  efficient  supervision  of  issuers  in  this
respect  should  –  as  a  first  rule  –  not,  as  a  matter  of  principle,  be  left  to  Member  States
different from those responsible for approving a prospectus. Otherwise, the positive effects of
a  European  passport  for  issuing  a  prospectus  could  be  put  into  question,  in  particular  with
respect  to  the  use  of  languages.  The  publication  of  an  annual  financial  report  under  this
proposal  and  of  an  annual  information  to  the  prospectus  is  a  further  prominent  example
underlying  the  need  for  consistency.  If  for  instance  the  home  Member  State  was  the  State
where  the  issuer’s  securities  are  mainly  traded  on  a  regulated  market,  the  advantages  for
issuers under the future Prospectus Directive would be defeated through the back door of this
proposal.

–  The need for consistency beyond the Prospectus Directive

However, the solution used in the forthcoming Prospectus Directive cannot simply be copied.
The  example  of  an  issuer  whose  shares  are  admitted  to  trading  on  a  regulated  market  in
Member  State  A  whilst  it  issues  debt  securities  only  in  the  Member  State  B  illustrates  the
problem.  Copying  the  solution  under  the  Prospectus  Directive  would  lead  to  two  home
Member States for the same issuer: one for shares and one for debt securities. Having several
home Member States would however prevent an efficient supervision across Europe, but also

13

Articles 105 and 11 of Directive 2001/34/EC.

10

                                                
confront  issuers  with  several  sets  of  national  requirements  going  beyond  the  Community
requirements under this proposal.

As a conclusion, there is a need for consistency and co-ordination beyond the forthcoming
Prospectus Directive. The only way forward to ensure such consistency is – as a second rule
- not to fix a home Member State according to the type of security admitted to trading on a
regulated market, but according to the issuer. Thus, the company which issues shares and debt
securities  would  not  have  two  home  Member  States,  but  a  single  one.  The  same  applies  to
issuers of different types of securities; if an issuer issues debt securities with a denomination
per unit both beyond EUR 50.000 and below EUR 50.000, there can only be a single home
Member State. In brief, the home Member State would not  be  determined  according to
the particular type of security, but according to the particular issuer.

–  Criteria for establishing a link between the issuer and a home Member State

The  home  Member  State  should  be  the  country  where  according  to  the  type  of  security  the
highest level  of  investor protection  must  be  enforced.  The  current  proposal  indeed  provides
for higher transparency requirements for share issuers compared to debt security issuers (such
as  quarterly  financial  information,  but  also  disclosure  of  the  capital  structure  in  the  case  of
changes  to  major  shareholdings  etc).  If  the  future  prospectus  directive  and  the  current
proposal  are  taken  together,  share  issuers  and  issuers  of  debt  security  not  reserved  for
wholesale markets face  higher  disclosure obligations  aiming  at  a  higher  investor  protection.
The principles for determining the home Member State with regard to such securities should
therefore apply to the issuer of such securities even if such issuer also issued debt securities
for wholesale markets.

–  How to deal with issuers of only debt securities, who may choose its home Member State?

A  specific  case  concerns  issuers  of  only  high  value  debt  securities  (under  the  forthcoming
Council common position securities with a denomination per unit equal or more than € 5000)
who  will  benefit  under  the  future  Prospectus  Directive  from  a  choice  amongst  several
Member States. The possibility to choose the home Member State should in principle not be
taken away. However, the  emphasis on investor protection  and  market  efficiency under  this
proposal  lies  on  ongoing  and  periodic  requirements;  i.e.  supervision  of  compliance  of
transparency requirements over a certain time. As a consequence, such debt securities issuers
should have the choice, but may alter their choice only after a  certain  period. The proposed
three years period would be consistent with the current and the future requirements for issuers
to  have  a  three-years  trade  record  in  form  of  annual  accounts  preceding  any  request  for
admission to trading on a regulated market14.

–  Extending  the  approach  to  also  establish  a  home  Member  State  with  respect  to  the

disclosure of ad-hoc information under the Market Abuse Directive

There is no doubt that the Market Abuse Directive allows each Member State to intervene on
grounds of  insider  dealings  on  its  regulated  markets.  However,  the  Market  Abuse  Directive
does not address in which Member State an issuer must disclose its information and in which
language. The solution cannot be that the issuer should simply do so in all languages where its
securities are traded on a regulated market and according to dissemination means prescribed
in  each  of  these  Member  States.  A  determination  of  the  home  Member  State  under  this

14

See at present Article 44 of Directive 2001/34/EC which will not be changed by the future Prospectus
Directive.

11

                                                
Directive will be pivotal to address these two questions. Since the current initiative also deals
with ongoing information, the home Member State should be the same.

For further details, see the explanations under Articles 2 (1) (i) under Section 5.

4.2. 

Periodic reporting: the annual financial report

4.2.1.  An annual financial report

During the two consultations, all parties concerned agreed in principle with the objectives of
introducing a single document providing all information for a particular financial year under
the  title  “annual  financial  report”,  and  the  principle  of  a  deadline  by  which  the  annual
financial report should have been published. Issuers sought clarification of the status of such a
document.  On  the  one  hand,  the  annual  financial  report  should  not  be  the  final  version
approved by shareholders in the annual general meeting. On the other hand, it should not offer
limited information on the basis of abridged balance sheets for SMEs as under article 47 (2)
of  the  Fourth  Company  Law  Directive  nor  should  it  offer  a  preliminary  information  for
financial markets which has not already been audited.

The  annual  financial  report  should  constitute  a  complete  source  of  financial  information,
comprising  the  financial  statements  and  a  management  report.  It  should  represent  reliable
information approved by the issuer’s responsible persons or bodies (board of directors – or in
countries  with  a  dualistic  structure  –  also  seen  by  the  supervisory  board).  It  should  also  be
subject to an audit report.

4.2.2.  Three months to publish the annual financial report

Existing Community Law requires publicly traded companies to make available to the public,
as soon as possible, its most recent annual accounts and its last annual reports, in accordance
with  standards  laid  down  under  the  Company  Law  Directives.  However,  the  timing  for
publishing annual financial information differs from Member State to Member State. In some
Member States, issuers already have a deadline for the publication of the financial year end-
results15, whereas others ensure timely information for securities markets either by publication
of  preliminary  or  abridged  annual  results16  or  by  a  further  interim  report  at  the  end  of  a
financial  year17.  In  effect,  Community  legislation  does  not  recognise  annual  reporting  as  a
capital market directed tool. The introduction of a maximum publication period would enable
investors to oversee company performance across Member States.

The  final  deadline  for  disclosing  an  annual  financial  report  to  the  public  should  be  three
months. In the light of the views expressed in response to the consultation, the Commission
believes  that  this  is  the  best  solution.  Initially,  the  Commission  services  explored  with  the
public the deadline of two months. In the second consultation it considered a deadline of three
months, provided that an interim report for the last quarter of the financial year had previously

15

16

17

such  as  in  German  law,  requiring  directors  to  produce  a  report  in  three  months  (national  corporate
governance code even requires a publication in three months), or France, requiring a publication within
4 months except for publicly quoted companies which envisage to publish a prospectus and which are
required to publish financial statements within three months.
in the shape of preliminary accounts, such as in BE (3 months), DK (3 months), SW (2 months), FIN (3
months)  or  UK  (4  months  -  although  the  Department  for  Trade  and  Industry  suggested  making
mandatory publication of the annual financial statements and reports within a period of four months in a
White Paper of July 2002).
either a fourth quarterly report (IT) or a second half yearly report (ES).

12

                                                
been produced. However, that idea of a fourth quarterly report was dropped to avoid creating
disproportionate burdens in relation to the overall objective of bridging the  gap between the
last interim report (e.g. quarterly information to be published at the latest in November) and
the annual financial  report  (e.g.  at the latest at  the end of March).  Longer  reporting  periods
would expose the public to a long period of uncertainty and would considerably increase the
risk  of  selective  disclosure  between  certain  issuers  and  analysts.  A  period  of  four  months
would bear the risks that publicly traded companies may wish to “manage earnings” since the
annual  financial  report  should  only  be  published  in  a  period  during  which  the  proposed
quarterly  financial  information  related  to  the  subsequent  financial  year  should  already  be
drawn up and published.

For further details (including transitional arrangements), please see the explanations given to
Articles 5 and 26 under Section 5.

4.3. 

Quarterly financial information/half-yearly financial reports for share issuers

The  Commission  believes  that  a  mix  of  less  demanding  quarterly  financial  information  and
more demanding half-yearly financial reports is the right way forward at this stage. There is
no evidence that such a mixed policy approach will increase volatility on stock markets. This
mix focuses on disclosure of historical facts and trends, and will not, per se, give rise to short-
termism.  Short-termism  can,  inter  alia,  be  provoked  by  companies  who  post  forecasts  with
analysts,  or  promise  growth  in  earnings  per  share  (“earnings  guidance”)  at  certain  intervals
and  then  modify  them  later.  This  is  not  the  intent  or  the  substance  of  the  Commission
proposal. Critical voices in the US18 where this practice is widely used have already invited
market participants to stop it.

4.3.1.  Half-yearly financial report after the first six months

The half-yearly report which is at present required under Community law would therefore be
upgraded  to  an  interim  report  composed  of  a  condensed  set  of  financial  statements  to  be
established  following  IAS  34  and  a  management  report  on  the  company  activities.  The
management report should only contain an update of the data contained in  annual report, as
required  under  the  Fourth  and  Seventh  Company  Law  Directives.  In  line  with  IAS  34,  the
half-yearly  financial  report  should  then  be  published  after  two  months  (rather  than  four
months as today).

During  the  consultations,  some  issuers  perceived  an  interim  management  report  as  a
requirement  only  replicating  for  a  reference  period  of  six  months  what  they  should  already
produce on an annual basis at national level. This assumption is not correct. The Commission
is proposing is merely an  update, not a recasting of the last annual management report. The
details  of  such  update  should  be  laid  down  in  implementing  rules  in  accordance  with
comitology rules.

A  major  concern  which  issuers  expressed  in  the  consultation  relates  to  the  phasing  in  of
reporting  according  to  IAS  in  the  first  relevant  year  -  2005.  In  order  to  facilitate  this,  the
Commission  proposes  allowing  Member  States  to  exempt  their  security  issuers  from  the
application of IAS in the half-yearly financial report due in 2005. As a consequence, the first
document that an issuer should prepare in accordance with international accounting standards
would be the annual financial report following the financial year starting in 2005. In addition,

18

See the report of the Conference Board, Commission on Public Trust and Private Enterprise, Findings
and Recommendations of 9 January 2003

13

                                                
exemptions for some issuers to start applying IAS at  a later  stage (in 2007) would be taken
into account.

For further details, see also the explanations given for Articles 5 and 26.

4.3.2.  Quarterly financial information

At present, Community law only requires half-yearly reports to be published on a company’s
profits  and  losses  during  the  first  six  months  of  each  financial  year.  However,  ten  Member
States already have stricter requirements. This demonstrates that the Community’s disclosure
requirements lag behind, no longer reflect best practice and are clearly outdated.

–  Why move to quarterly frequency in interim reporting?

Eight Member States (AUT, BE, ES, FR, FIN, GR, IT, PO) have made mandatory a quarterly
frequency in interim reporting or interim information on all or certain regulated markets. Two
Member  States  require  quarterly  reporting  for  young  companies  with  a  track  record  of  less
than three years (LUX, UK) and for investment companies holding strategic minority stakes
in other companies (UK). In two other Member States (DE and SW19), stock exchange rules
have introduced de facto quarterly reporting, in a further Member State (NL), stock exchange
rules  will  do  so20.  Once  introduced,  nobody  ever  returned  to  a  system  of  only  half-yearly
reporting.

About 1100 out of 6000 publicly traded European companies21 provide interim reports on a
quarterly  basis  following  high  international  standards  for  each  quarterly  report  (national
GAAP,  IAS  or  US-GAAP),  many  more  publicly  traded  companies  provide  at  least
information in a quarterly frequency. Although being a minority amongst all publicly traded
European  stocks,  European  companies  producing  quarterly  financial  reports  dominate  stock
indices in important Member States (DAX, MIB, IBEX, CAC, and also the techMark segment
on the LSE).

In  addition,  it  is  undeniable  that  European  securities  markets  very  much  depend  on  US
securities markets, where quarterly financial reporting has been required since 1946. US stock
markets cover about 60% of world stock markets’ capitalisation whereas European securities
markets account for only 30%. Trends on European markets highly depend on developments
in  US  markets.  Many  European  publicly-traded  companies  having  doubts  about  quarterly
reporting  should  be  aware  that  trends  on  US  markets,  strongly  influence  developments  in
European  securities  markets,  more  so  than  the  performance  of  European  companies.
Introducing  quarterly  financial  information  should  be  part  of  our  efforts  to  persuade
international investors to diversify further their investments across world stock markets.

The provision of quarterly financial information to the public offers issuers the opportunity to
enhance  their  own  stock  performance.  Were  this  the  only  argument  in  favour,  however,  it
would point towards leaving companies to do so on a voluntary basis. But beyond this reason,
mandatory  quarterly  financial  information  should  provide  better  investor  protection,  since
investors are likely to monitor publicly traded companies’ debt more closely. In the Member

19

20

21

under the rules of the Deutsche Börse for all DAX, M-DAX companies (as from 2003, this should be
the rule for all companies quoted in the new prime segment) and those traded on the Neuer Markt and
under the rules of the Stockholm Stock Exchange.
under Euronext rules for the segments Next Economy and Next Prime as from 1 January 2004.
According to Bloomberg data in 2002.

14

                                                
States, company indebtedness as a proportion of  GDP has risen considerably risen  in  recent
years22. Moreover, the availability of more structured and reliable information over a financial
year would increase market efficiency and  competition, as  capital would be allocated to  the
best-performing  companies.  Companies  could  in  addition  be  judged  on  the  basis  of  readily
comparable  publicly  available  information,  rather  than  the  investor  being  left  to  rely  on
financial analysts’ forecasts. There is no empirical evidence pointing toward a link associating
mandatory quarterly financial information with increased stock-market volatility.

–  Outcome of the consultation

During the two consecutive consultations, the quarterly frequency in interim reporting was the
issue  dividing  issuers  and  investors  in  particular.  It  should  be  noted  that  a  minority  of
companies who are not yet subject to mandatory quarterly reporting agree with the principle
while a minority of investors have cast doubt on the use of quarterly reporting:

Some issuers who do not already report on a quarterly basis fear that such frequency would
undermine  their  long  term  investment  strategy  –  a  view  which  was  not  supported  by  those
companies already reporting on a quarterly basis. The Commission also believes that this fear
is not justified.  Instead, publicly-traded  companies  which  do  not  report  on  a  quarterly  basis
will  essentially  be  driven  by  other  market  forces,  although  improved  business  performance
might be the reward as a result of generated investor confidence. Many companies suggested
leaving  quarterly  reporting  to  the  discretion  of  each  company  concerned.  However,  the
Commission  is  of  the  opinion  that  given  the  growing  importance  of  corporate  governance,
transparency rules should no longer be shaped in a way allowing companies free choice over
whether they wish to stick to the principle of transparency or not.

Some parties asserted that disclosure of price sensitive information on an ad hoc basis (ad hoc
disclosure)  would  be  far  better  adapted  to  the  information  needs  of  investors.  However,
periodic reporting and ad hoc disclosure of inside information (under the future Market Abuse
Directive) are different ways of informing the public and not substitutes. Disclosure of inside
information  to  the  public  on  an  ad-hoc  basis  is  left  to  the  discretion  of  the  issuer,  e.g.  it  is
considered as legitimate (and represents widespread practice) not to divulge the consolidated
figures  or  even  internal  reporting  results  usually  established  within  companies.  In  contrast,
periodic reporting requirements provided for under legislation or under stock exchange rules
entitle investors to receive standardised and hence comparable information (such as profit and
loss before and after tax) from issuers.

Advantages  for  investors  must  in  particular  be  measured  depending  on  their  location  in
Europe or in a third country. Investors who are situated in the same country where the issuer’s
securities  are  admitted  to  trading  on  a  regulated  market  need  less  standardised  information
published  at  a  pre-fixed  date.  Investors  situated  abroad  would  have  a  simpler  access  to
information about issuers the more standardised the reporting periods are. Quarterly reporting
offers therefore clear benefits to investors situated abroad.

Some stock exchanges (but not the majority) also suggested leaving this issue to the operators
of  a  regulated  market.  However,  quarterly  reporting  is  a  quality  property  at  a  world  wide
level, real differences between stock markets only exist on the modalities, such as the format
and time limits for a quarterly financial report. More importantly, ten Member States already

22

See  in  particular  the  recent  report  of  the  Conseil  des  Marchés  Financiers  of  December  2002
“L’augmentation de la volatilité du marché des actions”

15

                                                
have taken legislative action. It is difficult to conceive a scenario that Member States would
admit issuers’ securities to its regulated markets, or that investors in those countries would be
interested in such issuers, without reliable quarterly financial information. Fragmentation, and
not integration, of regulated markets would be the result if the Community failed to address
this issue.

In  its  second  consultation  document,  the  Commission  services  also  launched  the  idea  of  a
different regime for smaller security issuers based on their annual turnover. Some argued that
an SME regime could be better based on market capitalisation. Certain stock exchanges even
favoured  a  total  exemption  for  SMEs,  the  scope  of  which  might  be  defined  by  investors,
auditors  and  accountants.  However,  institutional  and  retail  investors,  auditors,  and
accountants  opposed  that  idea  .  The  reward/risk  profile  of  smaller  companies,  in  particular
start-up companies, would not justify this.

It must be borne in mind that publicly quoted companies are not micro-enterprises, either with
respect to their size, their activities, or their market capitalisation. Moreover, they are built on
capital which they have received from the public, i.e. from institutional or retail investors.  A
reliable  internal  accounting  system  is  pivotal  for  the  credibility  and  the  competitiveness  of
SMEs.

In  general,  capital  markets  consider  investments  in  SMEs  as  risky.  This  is  a  clear  message
from  the  consultation  carried  out  by  the  Commission.  Providing  reliable  information  on  a
quarterly basis has therefore clear benefits for SMEs: this will help to create more market and
investor confidence.  This may be particularly so with regard to cross-border investors.  For
example, in France, statistics show that a non resident investor holds shares on average only
for five months (compared to eleven months for resident investors23.

–  The proposed solution: quarterly financial information

The  Commission  follows  an  idea  that  many  respondents  put  forward:  quarterly  financial
information composed of those key data currently required under existing Community law for
half  yearly  reporting  (net  turnover,  profit  and  loss  before  or  after  deduction  of  tax),  plus  a
trend  information  on  the  future  company  development.  Such  information  should  enable
investors not only to judge  on  the  basis  of  achieved results, but  also to take due  account of
any long-term strategy, which an issuer currently pursues. It cannot be ignored that a demand
for  information  on  the  future  company  performance  exists.  However,  there  is  no  public
interest  in  promoting  a  kind  of  “earnings  guidance”  leading  to  short  termism  and  undue
pressure by analysts and fund managers. Instead, the trend information which is optional for
companies  would  allow  them  to  update  their  views  on  the  company  strategy  and  the
development  of  its  activities.  The  maximum  publication  deadline  for  such  a  quarterly
financial information should at this stage not go beyond two months. If investors wish more
detailed information or the same information more swiftly, issuers and operators of regulated
markets would still retain the possibility to find a response to this.

The proposed solution would not involve extensive costs for companies, in particular since it
does  not  require  the  establishment  of  cash  flow  statements  on  a  quarterly  basis  or  the
involvement of an auditor to audit or review the accounts. In addition, issuers have the choice
between  an information about  the  profit  and  loss  before  or  after  tax  so  that  an  issuer  is  not

23 

Banque de France, Bulletin de la Banque de France, No 106 – October 2002 concering the duration of
holdership of shares between June 2001 and June 2002

16

                                                
required to make tax estimates over a financial year.  The turnover and profit and loss figures
are  maintained  and  updated  on  a  regular  basis  (at  least  monthly)  for  operating  purposes,
therefore, this information should be readily available.

A  quarterly  frequency  of  information  about  profit  and  loss  offers  a  tool  for  measuring  any
fraudulent practices in all periodic reports.  However, it will not, of itself, combat fraudulent
accounting  practices  within  companies.    Further  measures  have  been  suggested  in  the  Final
Report  of  the  High  Level  Group  of  Company  Law  Experts24.  The  Commission  intends  to
follow-up  on  these  suggestions  in  the  coming  months  in  an  Action  Plan  on  Corporate
Governance and a Communication on Statutory Audit.

Information on profit and loss before or after tax in addition to turn-over, is a key element for
investors.  Such information provides a reliable insight into the financial situation and health
of  a  publicly  traded  company.    Information  on  the  net  turnover,  as  such,  does  not  suffice
because it does not allow an assessment of the debt situation of a company.

The  proposed  solution  does  not  follow  the  highest  existing  national  standards  on  quarterly
reporting.  At present, in  EL, UK,  LUX, PO the mandatory quarterly report  comprises not
only  net  turnover  and  profit  and  loss  before  or  after  tax,  but  a  financial  statement  which
includes a cash flow statement, as well as a management report. Stock exchange rules in AUT
(Vienna  Stock  Exchange),  DE  (Deutsche  Börse),  FIN  (Helsinki  Stock  Exchange),  SW
(Stockholm  Stock  Exchange)  also  require  such  financial  statements  on  a  quarterly  basis;  as
from Jan 2004, Euronext will introduce the same high level requirements with an impact on
the companies quoted in FR, BE, NL. France already requires quarterly information on turn-
over, but not on profit and loss. The Commission proposal does not seek to adapt the current
acquis to the highest international standards, but merely bridges what is currently a significant
gap  between  1100  companies  in  Europe  which  comply  with  the  highest  international
standards with shorter publication deadlines and the remaining 4900 companies.

For further explanations, see the comments to the proposed article 6 under section 5.

4.4. 

Only half-yearly financial reporting for issuers of securities other than shares

Issuers  of  only  debt  securities  are  not  subject  to  any  interim  reporting  under  existing
Community Law. This should be changed. A half-yearly financial report should be required,
the  contents  of  which  should  correspond  to  those  required  from  share  issuers.  Indeed,  it
should not be underestimated that insolvency has adverse effects both for an investor in shares
and for one in debt securities. Therefore, some action is needed to protect those investing in
such issuers’ debt securities and  to maintain  a level  playing field between share issuers  and
debt securities issuers. As widely supported in the two consultation rounds, it is proposed to
impose fewer requirements compared to those for share issuers. A half-yearly financial report
should  not  be  imposed  on  companies,  which  only  issue  debt  securities  with  a  high
denomination  per  unit,  in  particular  issuers  of  Eurobonds.  There  is  not  the  same  need  for
investor  protection  along  the  same  lines  and  for  the  same  reasons  as  in  the  amended
Commission proposal for a prospectus directive.

During  the  two  consultations,  some  argued  that  the  current  system  of  disclosure  of  price
sensitive information would be sufficient to protect investors. The Commission does not share
this view, in the same way that it does not in the case of quarterly financial information for

24 

Report of 4 November 2002

17

                                                
share issuers. Half-yearly financial reports represent important information for capital markets
beyond ratings offered by rating agencies. In the United States, debt security issuers are even
subject to quarterly financial reporting  requirements.  The  Commission  also  feels  unjustified
requests for exempting subsidiaries from half-yearly reporting. It should be borne in mind that
such  subsidiaries  act  as  proper  issuer  of  debt  securities  on  regulated  markets  and  that  the
consolidated accounts of the parent undertaking only provide information on the performance
of the entire parent undertaking, but not on the performance of such a subsidiary acting as a
genuine debt securities issuer on its own.

For further details, see the explanations to the proposed articles 5 and 8 under section 5.

4.5. 

Disclosure of changes to major shareholdings in security issuers

4.5.1.  More disclosure thresholds to further integrate European securities markets

The existing Community law provides that a person acquiring or disposing of shares so that
its holding with a publicly traded company reaches, exceeds or falls below certain thresholds
informs  the  company,  which  is  in  its  turn  responsible  for  disclosing  this  information  to  the
public. Those thresholds are currently 10%, 20%  and 1/3 (or, at the Member State’s  choice,
25%  instead  of  those  two  last  thresholds),  50%,  and  2/3  (or,  again  at  a  Member  States’
discretion, 75% instead of 2/3). These thresholds are shaped in a way reflecting differences in
national  company  law  on  issues  such  as  the  thresholds  necessary  to  represent  blocking
minorities on annual shareholder meetings,  to  achieve  changes  to  the  company’s  statutes  or
exercising special rights, such as nomination of special auditors, etc.

Twelve  Member  States  have  meanwhile  introduced  further  thresholds.  Indeed,  only  three
Member  States  (LUX,  PO  and  SW)  abide  by  requiring  a  transparency  level,  which  persists
still  at  Community  thresholds,  established  15  years  ago.  The  Committee  of  European
Securities  Regulators  (CESR)  also  launched  a  discussion  for  overhauling  Community
thresholds25,  which  the  Commission  carried  forward  in  its  proper  consultations.  During  the
consultations, interested parties requested an update, even an overhaul of these requirements.

The  Commission  now  proposes  introducing  a  transparency  system  on  the  basis  of  steps
starting  at  a  first  threshold  of  5%26,  continuing  at  intervals  of  5%  until  30%  of  the  voting
rights  or  the  capital  or  both.  This  system  would  reflect  not  only  the  actual  influence  an
investor on securities markets may take in a publicly traded company, but more generally its
major  interest  in  the  company  performance,  business  strategy  and  earnings.  Already  seven
Member States apply such a more securities market directed transparency regime at national
level. Six of them (AUT27, DK, ES28, FIN, GR29, IT30, and UK31) introduced this by law or

25

26

27

28

29

30

CESR paper on “Measures to promote market integrity – a follow-up to CESR paper on market abuse
of 31 January 2002 (FESCO/01-052h of 31 January 2002).
This threshold must already be respected in 12 Member States (AUT, BE, DK, DE, ES, FIN, FR, GR,
IRL, IT, NL, and UK).
Transparency requirements start at 5%, continues in  steps of 5% until an investor reaches 50% of the
voting rights.
Transparency is required in the case of a shareholding starting at 5% and continues to apply whenever a
holding reaches, exceeds or falls below a subsequent 5% threshold.
During the first 12 months of trading shares admitted to a regulated market, changes in shareholdings at
intervals of 1.5% should be reported.
Transparency  requirements  start  at  2%  and  continue  for  shareholdings  subsequently  increasing  or
decreasing of more than 5%, 7.5%, 10%, and any further 5% step.

18

                                                
regulations, the seventh apply this through recommendations by the stock exchange (SW). A
further – eighth - Member State (NL32)  is about to  follow  the same  route.  The  Commission
proposal would align the situation amongst Member States whilst allowing those which wish
to do so to require disclosure of ownership already at an earlier stage (2% in IT or 3% in UK)
or at closer intervals. Other Member  States  may  also  maintain  further  thresholds  at  national
level, such as 1/3 of the voting rights.

For  further  information,  please  see  the  comments  on  the  proposed  Articles  9  and  10  under
Section 5.

4.5.2. 

Shortening time limits for shareholders and issuers to act

Shortening notification and disclosure  deadlines  is  also  in  line  with  wishes  expressed  in  the
consultation.  At  present,  the  shareholder  is  required  to  inform  the  issuer  and  the  competent
authority in seven calendar days, and subsequently the issuer should inform the public in nine
calendar days, or in specific circumstances in 21 calendar days. In contrast to the five calendar
days initially envisaged, the Commission now proposes a time limit of five business days for
investors  and  a  time  limit  of  three  business  days  for  issuers  which  effectively  dispose  of
information on important changes on shareholders share acquisitions or disposals to disclose
these modifications (see also the explanations to the proposed Article 11 under section 5).

4.5.3.  Transparency also about holdings in securities giving access to shares

Influence may be directly exercised on companies through shares, but also indirectly through
financial  instruments  conferring  the  right  to  acquire  or  sell  shares,  such  as  warrants  or
convertible bonds if the holding of such financial instruments reaches important thresholds. In
the responses to the consultations, there was support for the idea of including such a situation
in the general transparency system. However, there were particular concerns on the inclusion
of  call  and  put  options.  Moreover,  a  minority  of  investment  companies  requested  higher
thresholds compared to other investors. To meet these concerns, the Commission proposes to
take the following line:

The  overall  goal  of  moving  towards  more  capital  market-oriented  thinking  should  not  be
undermined  by  exceptions  for  investment  companies.  Companies  have  a  strong  interest  to
know which investment companies invest in them and what their position is, for instance in
shareholder  meetings.  The  notification  requirement  would  therefore  make  it  easier  for
companies to identify the ownership or the persons acting on behalf of owners. That said, in
general,  the  Commission  considers  it  acceptable  to  allow  each  Member  State  to  decide
whether  it  sets  10%  as  the  first  threshold  where  investment  companies  (but  also  other
investors) only acquire covered warrants or convertible bonds. The same proportionality rule
would  apply  to  life  interests  linked  to  shares.  In  addition,  the  notification  and  disclosure
regime  would  be  limited  to  derivative  securities,  but  not  all  kind  of  derivatives,  such  as
options.

For more explanations please see the comments on Articles 2 (1) (e) and 9 under Section 5.

31

32

Transparency  requirements  start  at  3%  and  continue  for  shareholdings  subsequently  decreasing  or
increasing through a whole percentage figure.
The Dutch Ministry of Finance plans to propose amending the “Wet melding zeggenschap in ter beurze
genoteerde vennootschappen” of 1996, including a new threshold structure (5%, 10%, 15%, 20%, 25%
and in case of a holding of more than 25% the obligation to notify each transaction).

19

                                                                                                                                                        
4.6. 

Information of security holders on general meetings

4.6.1.  Why is the issue covered under this initiative?

This issues is already covered by Community legislation on securities markets, rather than by
Company Law Directives33, and need modernising in three ways:

Firstly,  the  use  of  proxies  should  be  facilitated.  Allowing  shareholders  to  act  via  proxies
would  enhance  shareholder  involvement  in  general  meetings.  It  would  in  particular  help
investors  situated  abroad,  and  which  are  not  in  the  same  position  as  domestic  investors  to
travel,  to  exercise  their  rights.  The  responses  to  the  consultation  were  clearly  in  favour  of
allowing proxy voting through a Community measure across all the Member States. However,
the present proposal only deals with the transparency aspects.

Secondly,  the  use  of  electronic  means  should  be  facilitated.  Allowing  the  provision  of
information by electronic means is strongly linked to the capacity of all the Member States to
take account of the advantages of modern information and communications technology. The
Commission  suggests  that  each  publicly  traded  company  should  receive  the  necessary
regulatory support to submit this important question to its shareholders, who should decide on
the modalities for online information in a general meeting.

For further explanations, see the comments to Articles 13 and 14 under section 5.

5. 

COMMENTS ON SPECIFIC ARTICLES

The current information requirements are laid down in Directive 2001/34/EC34 transparency,
which codified amongst others Community rules which have been in force for more than 20
years  (on  annual  financial  reporting  and  on  shareholder  meetings35),  nearly  20  years  (on
interim financial reporting36), or at least nearly 15 years (on disclosure on the acquisition or
disposal of major holdings37). However, this codification did not require any amendments in
the laws and regulations in the Member States compared to the past.

5.1. 

Recitals

Recitals 19 to 24 recall the new way for regulating securities markets (cf. section 2.2
above).

5.2. 

Chapter I: General provisions

5.2.1.  Article 1 – Subject-matter and scope

The  current  exemption  for  undertakings  for  collective  investment  in  transferable
securities  (UCITS)  is  maintained  in  Article  1  (2),  in  particular  since  specific

33

34

35

36

37

see Articles 65, 78 and 83 of Directive 2001/34/EC for issuers of shares, corporate and sovereign debts.
Directive 2001/34/EC of the European Parliament and of the Council of 28 May 2001 on the admission
of securities to official stock exchange listing and on information to be published on those securities, OJ
No L 184 of 6.7.2001.
Articles  64  to  69  and  78  to  84  respectively  replaced  the  former  Schedules  C  and  D  of  the  Directive
79/279/EEC.
Articles 70 to 77 and 102 to 107 respectively replaced the former Directive 82/121/EEC.
Thus, Articles 85 to 97 replaced Directive 88/627/EEC.

20

                                                
requirements are laid down elsewhere38. Articles 2 (2), 3 (2), and 85 (3) of Directive
2001/34/EC already provide for such exemption under the existing acquis.

5.2.2.  Article 2 – Definitions

5.2.2.1.  Article 2 (1)

On (a): The definition of securities builds on the solution that the Council agreed on
5  November  towards  the  common  position  on  the  future  prospectus  directive.  It
therefore excludes money market instruments which may remain subject to national
legislation.

On  (b):  A  definition  is  necessary  to  ensure  that  issuers  of  convertible  or
exchangeable  bonds  are  not  required  to  hold  general  meetings  under  the  proposed
Article 14. In contrast, the Commission does  not see any need  for  the definition of
“equity securities” or even “shares”. It is certainly necessary to differentiate between
equity and non-equity securities under the future Prospectus Directive with regard to
derivative  securities  (e.g.  convertible  bonds  would  fall  under  equity  securities
whereas exchangeable bonds would be treated as non-equity securities in the future
Prospectus Directive). That said, such a need does not exist for the present proposal.
Indeed,  a  publicly  traded  company  which  issues  only  derivative  securities  on
regulated markets, but not the securities (shares and debt securities) from which such
derivative securities flow from is not possible.

On c): see already Section 3.1

On (d): the definition includes the entire range of security issuers, including issuers
of  sovereign  debts  and  issuers  of  certain  bonds  (including  Eurobonds)  for  which,
however, important  exemptions from  periodic  disclosure requirements  are  provided
for in Article 8. In addition, it clarifies the treatment of depository receipts thereby
incorporating Article 6 (3) of Directive 2001/34/EC.

On  (e):  The  definition  of  “security  holder”  has  been  introduced  to  clarify  who  is
responsible  for  notifying  changes  to  major  shareholdings  with  security  issuers,  but
also  to  clarify  rights  of  equal  treatment  in  the  context  of  general  meetings.  The
second  sub-paragraph  builds  on  Article  92  (a)  of  Directive  2001/34/EC  and  covers
the  case  of  custodian  banks  and  investment  funds  holding  securities  in  their  own
name,  but  on  behalf  of  their  clients.  The  third  sub-paragraph  clarifies  the  situation
with  respect  to  depository  receipts  and  thus  integrates  Article  85  (2)  of  Directive
2001/34/EC. The fourth sub-paragraph extends the definition to holders of derivative
securities,  such  as  convertible  or  exchangeable  bonds  (but  not  options  –  see  also
section 4.5.3 above); this extension is of important for disclosure of changes to major
shareholdings.

On (f) and Article 2 (2): This definition should be seen in the context of disclosure of
changes to major shareholdings with issuers. The overall objective must be to ensure
that the parent undertaking is required to inform about its own holdings,  as well as

38

Council  Directive  85/611/EEC  of  20.12.1985  on  the  co-ordination  of  laws,  regulations  and
administrative provisions relating to the undertaking for collective investment in transferable securities
(UCITS), as last amended by Directives 2001/107/EC and 2001/108/EEC of the European Parliament
and of the Council of 21 January 2002 (OJ No L 41, 13.2.2002, p. 20 and 34 respectively).

21

                                                
the  holdings  of  its  controlled  undertakings.  The  current  definition  of  “controlled
undertaking” in Article 87 of Directive 2001/34/EC should be extended to take into
account views expressed in the second consultation.

On ( i ), see already Section 4.1.3. above.

On  (k),  the  definition  of  “regulated  information”  is  of  particular  relevance  for
Articles 15 to 17.

On  (l),  the  definition  of  “electronic  means”  builds  on  the  definition  already
established under Directive 98/34/EC, as amended by Directive 98/48/EC39. It does
not  include  off-line  communication,  such  as  distribution  of  CD-ROM’s,  or
communication  not  provided  by  electronic  processing,  such  as  telephony  services,
telefax  or  telex.  Delegation  should  be  given  to  the  Commission  to  clarify  the
definition along these lines.

5.2.3.  Article 3 -

Integration of securities markets

Acceptance of these provisions should be the proof where the present initiative leads
to more integrated securities markets (cf. Section 4.1.1. above).

At  present,  Article  8  (2)  of  Directive  2001/34/EC  allows  any  Member  State  to
introduce more stringent disclosure requirements, unless this leads to discriminations
of  foreign  issuers.  In  contrast,  the  20  years-old  acquis  still  recognises  that
compliance with Community transparency requirements does not necessarily provide
guarantees enabling Member States to lift further national restrictions.

In future, only the home Member State should be able to continue to block admission
of securities to trading on a regulated market in internal situations where any cross-
border dimension on the issuer’s side is missing. On the other hand, investors should
continue to be protected – as under the existing Community law (see Article 8 (3) of
Directive  2001/34/EC  -  in  that  no  Member  State  may  in  general  exempt  issuers  or
security  holders  from  Community  requirements  or 
less  stringent
requirements.

introduce 

Following wishes and concerns expressed in the consultation, the proposed wording
in Article 3  (2) also  clarifies the value  added  of  the  harmonisation  of  disclosure  of
price  sensitive  information  under  the  future  Market  Abuse  Directive:  if  an  issuer
complies with these provisions, there is no overriding reason for preventing it from
access to regulated markets in other Member States.

Integration  of  securities  markets  should  be  promoted  along  the  same  line  for
disclosure  of  major  shareholdings  (see  Article  88  of  Directive  2001/34/EC).
However,  the  security  issuer’s  home  Member  State  may  continue  to  provide  for
additional  thresholds,  closer  notification  and  disclosure  deadlines,  or  other  stricter
rules than those required under the proposed Directive.

39

Directive 98/34/EC (OJ No L 204, 21.7.1998, page 37), as amended by Directive 98/48/EC (OJ No L
217, 5.8.1998, page 18)

22

                                                
5.3. 

Chapter II: Periodic information

5.3.1.  Article 4 – Annual financial reports

The objectives of this provision are explained in section 4.2. The proposed wording
would  replace  Articles  67  and  75  of  Directive  2001/34/EC  with  regard  to  the
following technical aspects:

–  It  intends  to  clarify  terminology  in  line  with  international  accounting  standards.
The  so-called  annual  financial  report  should  have  two  components:  financial
statements  (the  so-called  annual  accounts  under  the  Fourth  and  Seven  Company
Law  Directives)  and  the  management  report  (which  carries  the  denomination  as
annual report under the same Company Law Directives).

–  The financial statements should be subject to an auditor’s report. The position of
the auditor should be reproduced. The proposed wording is in line with the Fourth
and Seventh Company Law Directives.

–  The annual financial report should allow appropriate identification of the persons
responsible.  Investors  should  be  put  into  the  position  to  know  who  effectively
bears the final responsibility for the information given. This forges a strong link
with Article 4 (see also Section 3.4.)

5.3.2.  Article 5 – Half-yearly financial reports

See Sections 4.3.2 for share issuers and 4.4. for debt securities issuers

This  provision  applies  to  issuers  of  all  kind  of  securities.  It  does  not  include  an
obligation  for  issuers  to  let  such  reports  review  by  auditors.  At  this  stage,  the
Commission  follows  a  majority  of  the  responses,  which  do  not  see  an  immediate
need  to  make  it  mandatory  at  Community  level.  The  issuer’s  home  Member  State
may impose it according to the proposed Article 3 (2).

That said, the Commission should be  allowed  to  take  action  if  necessary  under  the
comitology procedure. The fast track procedure recommended by the Committee of
Wise  Men,  chaired  by  A.  Lamfalussy,  should  be  used  to  enable  the  European
Institutions to rapidly restore investor confidence in critical phases once the proposed
corporate interim reporting does not ensure reliability on its own.

5.3.3.  Article 6 – Quarterly financial information

See the general explanations given under Section 4.3.1.

The quarterly financial information does not need to comply with IAS 34. Therefore,
the  text  no  longer  refers  to  a  quarterly  financial  report  or  financial  statements  –  a
term  reserved  for  interim  reports  based  on  IAS.  The  comitology  procedure  should
again enable the European Commission, in co-operation with the European Securities
Committee and upon the advice of the Committee of European Securities Regulators,
to  clarify  for  issuers,  market  participants  and  investors  the  contents  of  a  quarterly
financial  information,  to  set  deadlines  for  keeping  published  information  available
for  the  public  and  to  clarify  what  type  of  review  carried  out  by  auditors  upon  the
issuer’s request requires public disclosure.

23

5.3.4.  Article 7 -

Responsibility and liability

Similar  provisions  are  provided  for  in  the  Commission’s  amended  proposal  for  a
directive on  prospectus. See  also section  3.4.  Liability  for  misleading  or  inaccurate
information  to  be  disclosed  on  an  ad-hoc  basis  under  the  future  Market  Abuse
Directive remains within the realm of national law.

5.3.5.  Article 8 – Exemptions

Sovereign  debts  issuers  should  be  subject  to  a  lighter  transparency  regime  because
periodic  reporting  requirements  would  not  apply  (see  already  Article  2  (2)  (b),
Article 3 (2) (b) and Article 4 (3) of Directive 2001/34/EC). However, they should
both  benefit  and  be  subject  to  overall  general  disclosure  provisions,  such  as
prohibition  of  the  imposition  of  further  requirements  on  them  by  Member  States
other than the home Member State (Article 3) or the need for guaranteeing effective
and simultaneous disclosure of any information to be disclosed according to Article
17. They also remain required to ensure equal treatment of holders of debt securities
ranking  pari  passu  as  proposed  in  Article  14  (see  also  Article  83  of  Directive
2001/34/EC).

Along  the  same  line,  limited  investor  protection  is  foreseen  for  companies,  which
solely  issue  securities  more  particularly  intended  for  professional  investors  (as
determined  by  the  par  value  of  at  least  EUR  50.000).  Thus,  the  Commission  is
following the political agreement reached by the Council on 5 November towards a
common position on the future Directive on prospectuses.

5.4. 

Chapter III: Ongoing information

5.4.1.  Article 9 – Notification of the acquisition or disposal of major holdings

The  objective  for  providing  a  more  stringent  notification  regime  based  on  a  higher
number  of  thresholds  was  already  explained  in  Section  4.5.1.  In  the  light  of  the
reactions  received,  the  Commission  decided  not  to  propose  ten  thresholds  as  in  its
consultation document, but eight. Member  States  remain free  to provide for further
thresholds, in particular lower ones (such as in the UK (3%) or in IT (2%)). Article
89 (1) of Directive 2001/34/EC allows Member States to decide whether a company
must  also  be  informed  in  respect  of  the  proportion  of  capital  held  by  an  investor
where a Member State does not apply the principle of “one share, one vote”.

On (a):  Some responses  cast  doubt where derivatives allowing  to  acquire  or  to  sell
shares  should  be  included  in  the  notification  regime.  The  Commission  therefore
limits the notification requirements to  derivative  securities. As  a result, warrants or
convertible  bonds  are  included  whereas  options  remain  outside  (see  also  Section
4.5.3. and Article 2 e)). In addition, it proposes to Member States to decide whether
they want to set notification requirements already at a threshold of 5%. In the light of
individual  reactions  received  from  national  authorities,  this  possibility  should  also
apply to life interests related to shares (see also Article 10).

Points  b  and  c  allow  Member  States  to  adapt  two  thresholds  to  their  national  rules
allowing  blocking  minorities  or  qualified  majorities  in  general  meetings,  but  limit
much more the discretion of Member States compared to Article 89 (1) (a) and (b) of
Directive 2001/34/EC).

24

5.4.2.  Article 10 – Determination of the voting rights

–  Article 10 only specifies persons who may – legally or actually - exercise voting
rights  on  behalf  of  securities  holders.  Whereas  the  holdings  of  an  individual
security  holder  might  not  necessarily  meet  the  thresholds  provided  for,  the
situation  may  considerably  differ  with  regard  to  custodian  banks,  investment
funds, proxies and others who may exercise voting rights on behalf of numerous
security holders.

–  This provision is  important for two reasons: first,  publicly  traded  companies  are
informed  not  only  about  security  holders,  but  also  about  those  who  may
effectively  exercise  lots  of  influence;  second,  the  provision  aims  at  facilitating
information  between  companies  and  security  holders  in  the  context  of  general
meetings (see Articles 13 (3) and 14 (3)).

–  This  provision  is  essentially  the  same  as  Article  92  of  Directive  2001/34/EC,
subject to the following amendments in the light of the comments received in the
consultation rounds.

–  Limiting the definitions to those persons entitled to vote on behalf of shareholders
requires  deleting  the  current  Article  92  (a),  which  is  now  incorporated  into  the
definition  of  security  holders  under  Article  2  (e)  second  indent.  Article  10  a)
corresponds  to  Article  92  c)  of  Directive  2001/34/EC.  Equally,  Article  10  b)
reflects  the  current  Article  92  d),  Article  10  c)  Article  92  e)  -  whereby  the
emphasis  is  placed  on  those  to  whom  collateral40  is  given  –  and  Article  10  d)
Article 92 (f).

–  Following  numerous  requests,  the  determination  of  situations  in  which  voting
rights which may be exercised on behalf of controlled undertakings is much wider
in Article 10 (e) compared to the current Article 92 (b). This is possible due to a
wider definition laid down in the proposed Article 2 (f).

–  The wording of Article 10 (f) corresponds to Article 92 (h). Article 10 (g) remains

unchanged compared to Article 92 (g).

–  The  only  new  provision  relates  to  proxies  (Article  10(h)).  Since  proxy
participation  across  Member  States  is  generally  allowed  in  general  meetings  ,  a
company  should  be duly informed about major shareholdings  for which  a  proxy
received common instructions by a number of shareholders.

5.4.3.  Article 11 – Procedures on the notification and disclosure of major holdings

Article  11  (1)  clarifies  the  minimum  contents  of  a  notification  to  be  made  to  a
company.  There  is  no  corresponding  provision  in  Directive  2001/34/EC.  The
Commission’s  initial  suggestions  to  inform  an  issuer  about  the  entire  agreement
between  shareholders  are  no  longer  upheld  in  the  light  of  reactions  received  in  the
two consultation rounds. However, issuers and the public have legitimate interests to
be informed  at least about the consideration  given in  return for those  arrangements
about voting rights.

40

The term “collateral” instead of “security” is preferable in the light of the terminology used in Directive
2002/47/EC of 6.6.2002 on financial collateral arrangements, OJ No L 168 of 27.6.2002, p.43.

25

                                                
Article  11  (2)  reduces  the  notification  period  from  seven  calendar  days  to  five
business days. Referring to business days instead of calendar days is more adapted to
the  market  reality  and  follows  the  view  put  forward  by  many  interested  parties.
Longer  notification  periods  which  in  particular  banks  with  which  securities  are
deposited may have under national law (in accordance with Article 92 last paragraph
of  Directive  2001/34/EC)  should  be  abandoned.  See  also  Article  26  on  the
transitional arrangements.

Article  11  (3)  corresponds  to  Article  93  of  Directive  2001/34/EC.  Further
exemptions which are currently provided for in Articles 94 (professional dealers) and
95  (disclosure  contrary  to  the  public  interest  or  detrimental  to  the  company)  are
outdated  –  a  line  with  which  a  majority  in  the  two  consultation  agreed.  Several
respondents took the view that the specific situations of major shareholdings during
clearing and  settlement  processes  would however deserve  a  specific  treatment.  The
Commission has taken this view into account in the framework of the definition of
security holdings under Article 2 e) second sub-paragraph.

Article  11  (4)  corresponds  to  Article  91  of  Directive  2001/34/EC,  subject  to  a
reduced  disclosure  period  of  three  business  days.  This  new  disclosure  deadline
should be phased in under arrangements provided for in Article 28.

5.4.4.  Article 12 – Additional information

Article 12 (a) corresponds to Article 66 (2) of Directive 2001/34/EC, Article 12 (b)
and  (c)  to  Article  81  (2)  and  (3)  whilst  extending  these  disclosure  requirements  to
sovereign debt issuers.

5.4.5.  Article 13 – Information for shareholders

Article 13 (1) corresponds to Article 65 (1) of Directive 2001/34/EC. In the light of
several  questions  raised  during  the  consultations,  it  is  worth  while  noting  that  this
wording never included a principle of “one share, one vote”.

Article  13 (2)  follows in essence  Article 65  (2)  of  Directive 2001/34/EC.  The  only
new  element  is  included  in  letter  b  where  a  shareholder  may  choose  a  proxy  in
accordance with the law of the issuer’s home Member State (see also section 4.6.2).
However,  there  should  be  no  need  for  selecting  a  proxy  in  each  Member  State.  In
letter  d),  the  word  “renunciation”  should  be  replaced  by  “cancellation”  following
several  responses  asking  for  clarification  of  the  existing  wording  (referring  to
“renunciation”).

Article  13  (3)  sets  out  minimum  conditions  under  which  electronic  information  of
shareholders  should  become  possible.  The  general  objectives  are  set  out  in  section
4.6.3 above.

5.4.6.  Article 14 – Information for debt securities holders

Article  14  essentially  contains  the  same  provisions  as  for  shareholders.  However,
rights  attached  to  debt  securities  differ  compared  to  those  related  to  shares.
Therefore, it is inevitable to have a specific provision for debt securities, as defined
in  the  proposed  Article  2  (b).  In  the  light  of  numerous  reactions  in  the  two
consultations,  the  Commission  does  no  longer  see  a  need  for  derogation  from  the
principle of equal treatment on the grounds of social priorities, as currently provided

26

in  Articles  78  (1)  2nd  subpara.  and  83  (1)  2nd  subpara.  of  Directive  2001/34/EC.
Taking  into  account  the  particularities  of  Eurobond  markets,  Article  14  (3)  allows
issuers to choose the Member State in which they wish to hold a meeting with debt
securities holders.

5.5. 

Chapter IV: General obligations

5.5.1.  Article 15 - Home Member State control

The  general  policy  which  justifies  a  filing  system  in  the  home  Member  State  was
already  explained  in  Section  4.1.2..  At  present,  Member  States  are  only  invited  in
broad terms “to ensure” that information is published (see e.g. Article 70 of Directive
2001/34/EC  on  half-yearly  reports),  save  for  the  notification  of  changes  to  major
shareholdings which should be communicated not only to the issuers, but also to the
competent authorities (see Article 89 (1) of Directive 2001/34/EC).

The Commission should be authorised to adopt further technical implementing rules
as follows:

–  In  particular,  filing  by  electronic  means  must  be  ensured  in  future.  Otherwise,
filing  conditions  with  national  securities  regulators  would  clearly  lag  behind
electronic  filing  with  company  registers  as  proposed  by  the  Commission  for
reforming the First Company Law Directive41;

–  In the case of shares, a home Member State retains the competence for controlling
the  issuer  even  if  the  issuer’s  shares  are  admitted  to  trading  only  in  another
Member  State.  Implementing  rules  should  shape  in  detail  how  to  organise  the
control between the Member States concerned.

5.5.2.  Article 16 - Language regime for issuers and security holders

The objectives for the proposed language regime are already set out in Section 3.2.1.
The  proposed  wording  endeavours  to  follow  the  line  agreed  in  the  Council  on  5
November  towards  the  adoption  of  a  common  position  on  the  future  directive  on
prospectuses.  In  addition,  it  imposes  on  issuers  a  requirement  to  disclose  inside
information – as provided for in Article 6 of the Market Abuse Directive (Directive
2003/6/EC) – under a specific language regime. Otherwise, issuers would be required
to  translate  all  the  information  to  be  published  into  the  official  languages  of  all
Member States where its securities might possibly be traded.

However,  there  is  an  important  difference  to  the  future  Prospectus  Directive.  The
latter  still  allows  host  Member  States  to  require  a  summary  of  a  prospectus  to  be
translated into its own official language. Such a summary is not a way forward under
the present proposal. Instead, the present proposal deviates from the approach agreed
for the future prospectus directive in two ways:

-

Article 16 (3) does not leave issuers whose securities are admitted to trading in
a  regulated  market  solely  in  one  host  Member  State,  but  nowhere  else  in  the

41

Article 3 (2) of the Commission proposal for a Directive amending Council Directive 68/151/EEC, as
regards  disclosure  requirements  in  respect  of  certain  types  of  companies,  COM  (2002)  279  final  of
3.6.2002.

27

                                                
European  Union  a  choice  between  certain  languages;  the  host  Member  State
may  in  principle  impose  the  use  of  its  own  language.  This  rule  should  avoid
“forum shopping” (or indeed “language shopping”);

-

Article 16 (6)  ensures that national rules for the use of languages in judiciary
proceedings are not affected.

As set out in Section 3.2.1. above, the proposed rules on the use of languages would
not  affect  existing  requirements  under  Article  4  of  Council  Directive  89/117/EEC
(Eleventh Company Law Directive).

5.5.3.  Article 17 – Timely and equivalent access to information

–  Article 17 (1) and (2)  would replace Article 102 of Directive 2001/34/EC to the
extent  that  information  to  be  disclosed  to  the  public  under  this  Directive  is
concerned.  It  will  also  determine  in  which  Member  State  and  by  which  means
disclosure of price sensitive information should be achieved. See Section 3.2.2.

–  Article  17  (4)  empowers  the  Commission  to  further  specify  the  conditions  for
disclosing  information  to  the  public  on  the  issuer’s  internet  sites,  as  well  as
keeping this information is available. This includes questions, such as whether the
issuer  should  ensure  that  internet  sites  operate  in  a  server  located  in  a  specific
Member  State  or  whether  the  use  of  specific  dissemination  means  may  also  be
imposed on issuers who did not request or approve admission of its securities to
trading on that regulated market.

5.5.4.  Article 18 – Guidelines

The underlying concept of this provision was already explained under section 3.2.2.
Article  18  (1)  (a)  covers  a  specific  aspect:  The  proposed  filing  system  should  not
lead to unnecessary duplications for issuers who also remain subject to a filing under
the  First  Company  Law  Directive42.  In  practice,  this  concerns  in  essence  financial
statements  (accounts)  and  a  management  report  (annual  report.  These  types  of
information  should  be  filed  with  national  securities  regulators  according  to  the
proposed  Article  15,  but  at  a  later  stage  with  the  national  company  registers  in
accordance with Article 47 of the Fourth Company Law Directive/Article 38 of the
Seventh Company Law Directive, in conjunction with Article 3 of the First Company
Law Directive.

5.5.5.  Article 19 – Third countries

Article  19  (1)  deals  with  issuers  incorporated  in  third  countries.  Article  76  (4)  of
Directive  2001/34/EC  already  requires  them  to  ensure  equivalent  interim  reporting
(based on half-yearly reports); the same applies to the disclosure of changes to major
shareholdings  by  third  country  issuers  under  Article  68  (3)  2nd  sub-paragraph  of
Directive  2001/34/EC.  More  favourable  solutions  for  third  country  issuers  to  the
detriment  of  European  issuers  should  be  avoided  in  future.  This  also  includes
requirements to provide quarterly financial information given that US-stock markets

42

Proposal  for  a  Directive  of  the  European  Parliament  and  of  the  Council  amending  Council  Directive
68/151/EEC, as regards disclosure requirements in respect of certain types of companies – COM (2002)
279 final of 3.6.2002.

28

                                                
representing 60% of the market capitalisation in the world are already subject to even
stricter disclosure requirements.  In  addition,  this  provision  would  pave  the  way  for
equivalence mechanism ensuring better protection for European holders of shares of
third  country  issuers  at  the  level  provided  for  in  Articles  13  and  14.  However,  the
proposed equivalence rules only cover disclosure requirements laid down under this
Directive, but not those incumbent on the issuer under the Market Abuse Directive.

Article 19 (2) builds on Articles 69 (2), 82 (2) and 84 (2) of Directive 2001/34/EC; it
concerns  both  European  and  third  country  issuers.  Article  19  (3)  is  a  provision
similar to that in the future directive on prospectus.

5.6. 

Chapter V: Co-operation amongst competent authorities

5.6.1.  Article 20 – Competent Authorities

At  present,  Directive  2001/34/EC  requires  Member  States  to  notify  which  the
competent authorities are. The designation of a competent authority in each Member
State  answers  the  need  for  efficiency  and  clarity,  and  for  enhanced  co-operation
between  competent authorities. The  administrative nature of these single competent
authorities is necessary to avoid conflicts of interest in the use of financial disclosure
data coming from quarterly financial information and annual financial reports. It will
lead  to  greater  consistency  and  clarity  in  the  application  of  the  provisions  of  the
Directive.

Some  national  securities  regulators  and  stock  exchanges  argued  during  the
consultation  that  the  tasks  of  the  competent  authority  under  this  Directive  (in
particular the repository function) might be delegated to the operator of a regulated
market in a Member State in accordance with the proposed Article 20 (2).

However,  a  permanent  delegation  would  lead  to  a  system  whereby  annual
information under Article 10 of the future Prospectus Directive would be filed with
the competent authority which may no longer delegate this function after the end of
five years following the entry into force of the Prospectus Directive whilst the filing
of  all  corporate  information  to  be  disclosed  to  the  public  on  a  periodic  or  ongoing
basis would  remain  subject  to a  permanent  delegation.  If  this  option  were  pursued,
security  issuers  would  face  a  patchwork  of  national  bodies  (authorities  and  other
bodies  to  which  tasks  are  delegated).  In  the  medium  term,  information  should  be
filed  with  a  single  entity  in  each  Member  State,  and  not  30  to  40  bodies  in  fifteen
Member States.

Pursuing this option would not create inconsistencies with the solution adopted under
the Market Abuse Directive. Certainly, that Directive, in particular Article 12 (1) (c)
allows delegation even in the long run. The present proposal addresses issues related
to  ad-hoc  disclosure  only  in  two  respects:  languages  and  dissemination  of
information. Decisions on the use of languages should be left  to  public  authorities;
control  of  efficient  dissemination  of  information  must  clearly  be  separated  from
dissemination  of  information  as  such,  which  represents  a  profit-making  activity  in
which operators of regulated markets also have own commercial stakes.

29

5.6.2.  Articles 21 and 22

The  obligation  of  professional  secrecy  for  staff  in  national  securities  regulators
should also allay concerns expressed by auditors in the consultations by auditors who
are reluctant to provide information about clients.

5.7. 

Chapter VI: Implementing measures

5.7.1.  Article 23 - European Securities Committee

The  European  Securities  Committee  should  assist  the  Commission  in  accordance
with  the  regulatory  procedure  laid  down  in  Article  5  of  the  Council  Decision  on
comitology  (1999/468/EC).  In addition,  such  decisions  may  only  be  taken  within  a
period  of  four  years,  as  agreed  between  the  European  Institutions  in  the  context  of
the implementation of the recommendations of the Final Report of the Committee of
Wise Men (see section 2.2. above).

5.8. 

Chapter VII: Transitional and final provisions

5.8.1.  Article 26 – Transitional provisions

Article 26 (1)  gives Member States the possibility for  phasing  in  the  new  financial
reporting  requirements  in  two  ways  (see  also  Section  4.3.):  It  carries  forward  the
exemption already provided for some companies issuing debt securities or reporting
under US GAAP, as already foreseen in the Regulation on international accounting
standards.  In  addition, Member  States would be  allowed  not  to  impose  on  publicly
traded companies to apply IAS already in the half-yearly financial report for the first
six months in 2005.

Article  26 (2) provides  for  a  smooth  transition  for  investors  and  issuers  who  move
from a system on disclosing changes to major shareholdings (see section 5.3.) which
is less stringent than that under the proposed Directive. In practice, it would extend
the disclosure deadlines for security holders and for issuers.

Article  26  (3)  provides  for  a  limited  “grand-father”  clause  for  issuers  of  debt
securities who have benefited from the possibility offered by Article 27 of Directive
2001/34/EC.  These  issuers  will  be  exempted  from  the  obligation  to  publish  half-
yearly  financial  reports  for  a  period  of  three  years  after  the  entry  into  force  of  the
Directive,  provided  that  the  admission  to  trading  of  their  debt  securities  was  made
before the entry into force of the Prospectus Directive which will repeal Article 27 of
Directive 2001/34/EC.

30

2003/0045 (COD)

Proposal for a

DIRECTIVE OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

on the harmonisation of transparency requirements with regard to information about
issuers whose securities are admitted to trading on a regulated market and amending
Directive 2001/34/EC

(Text with EEA relevance)

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Articles
44 and 95 thereof,

Having regard to the proposal from the Commission43,

Having regard to the opinion of the European Economic and Social Committee44,

Acting in accordance with the procedure laid down in Article 251 of the Treaty45,

Whereas:

(1) 

(2) 

(3) 

43

44

45

46

Efficient and integrated securities markets contribute to a genuine single market in the
Community and foster  growth and job creation by better allocation of capital and by
reducing  costs.  The  disclosure  of  accurate  and  timely  information  about  security
issuers  builds  sustained  investor  confidence  and  allows  an  informed  assessment  of
their  business  performance  and  assets  thereby  enhancing  market  efficiency.  In
addition,  the  security  issuers’  responsibility  for  the  disclosure  of  information
constitutes  an  indirect  tool  for  promoting  corporate  governance  throughout  the
Community.

To that end, security issuers should ensure appropriate transparency towards investors
through a regular flow of information. To the same end, security holders should also
inform security issuers of the acquisition or disposal of major holdings in companies
so that the latter are in a position to keep the public informed.

The  Commission  Communication  of  11  May  1999,  entitled  “Implementing  the
framework for financial markets: Action Plan”46, identifies a series of actions that are
needed  in  order  to  complete  the  single  market  for  financial  services.  The  Lisbon
European Council of March 2000 called for the implementation of that Action Plan by

OJ C …
OJ C …
Opinion  of  the  European  Parliament  of  ../../….,  published  in  OJ  ---  and  Council  decision  of  ../../….
published in OJ ---
COM/99/232 final.

31

                                                
(4) 

(5) 

(6) 

(7) 

2005. The Action Plan stresses the need to draw up a Directive upgrading transparency
requirements. That need was confirmed by the Barcelona European Council of March
2002.

Greater  harmonisation  of  provisions  of  national  law  on  periodic  and  ongoing
information  requirements  for  security  issuers  should  lead  to  a  high  level  of  investor
protection throughout the Community. However, this Directive does not affect existing
Community  legislation  on  units  issued  by  collective  investment  undertakings  other
than  the  closed-end  type,  or  on  units  acquired  or  disposed  of  through  such
undertakings.

Supervision of an issuer for the purposes of this Directive would be best effected by
the Member State in which the issuer has its registered office. In that respect, it is vital
to ensure consistency  with  Directive  […/…/EC]  of  the  European  Parliament  and  the
Council of  […]  on  the  prospectus  to  be  published  when  securities  are  offered  to  the
public  or  admitted  to  trading  47.  Along  the  same  lines,  some  flexibility  should  be
introduced allowing companies issuing only high unit value debt securities a choice of
home Member State.

A  high  level  of  investor  protection  throughout  the  Community  would  enable  the
removal  of  barriers  to  the  admission  of  securities  to  regulated  markets  situated  or
operating  in  the  territory  of  a  Member  State.  Member  States  other  than  the  home
Member State should no longer be allowed to restrict admission of securities to their
regulated markets by imposing more stringent requirements on periodic  and  ongoing
information  about  issuers  whose  securities  are  admitted  to  trading  on  a  regulated
market.

Regulation (EC) No 1606/2002 of the European Parliament and of the Council of 19
July 2002 on the application of international accounting standards48 has already paved
the way for a convergence of financial reporting standards throughout the Community
for  issuers  whose  securities  are  admitted  to  trading  on  a  regulated  market  and  who
prepare consolidated accounts. Thus, a specific regime for security issuers beyond the
general  system  for  all  companies,  as  laid  down  in  the  Company  Law  Directives,  is
already  established.  The  current  Directive  continues  to  build  on  this  approach  with
regard to annual and interim financial reporting.

(8) 

An annual financial report should ensure information over the years once the issuer’s
securities  have  been  admitted  to  a  regulated  market.  Better  comparability  of  annual
financial reports only serve investors in securities markets if they can be sure that this
information will be published after a certain maximum delay.

(9)  More  timely  and  more  reliable  information  about  the  issuer’s  performance  over  the
year also requires a higher frequency of interim financial information. There has been
a marked trend at international level and in the majority of the Member States to move
to  a  quarterly  frequency,  but  the  reporting  standards  for  such  quarterly  information
differ. A first important step should be made to make quarterly financial information
mandatory for the  first and third quarter of  a financial  year. Such quarterly  financial
information  would  not  imply  the  establishment  of  interim  reports  following  the

47

48

OJ L […],[ ….], p. [….]
OJ L 243, 11.9.2002, p. 1

32

                                                
International Accounting Standards, in particular  IAS 34.  Instead,  quarterly  financial
information  should  provide  key  historical  data  on  the  issuer’s  performance.  If  the
issuer  so  chooses,  it  whould  also  include  a  trend  information  allowing  investors  to
judge on any long term strategy which the share issuer pursues.

(10) 

Investor  confidence  should  be  reinforced  by  ensuring  that,  under  national  law,  a
company  and 
its  administrative,  management,  or  supervisory  bodies  bear
responsibility  and  civil  liability  as  far  as  annual  and  interim  financial  reporting  is
concerned.  This  is  the  most  effective  way  to  enforce  the  requirement  that  issuers
provide the public with accurate and reliable information. Each Member State should
ensure such responsibility and liability under its national law or regulations.

(11)  The public should be informed of changes to major holdings in issuers whose shares
are  traded  on  a  regulated  market  situated  or  operating  within  the  Community;  those
issuers  can  inform  the  public  of  changes  in  major  holdings  only  if  they  have  been
informed of such changes by the holders. This information should enable investors to
acquire  or  dispose  of  shares  in  full  knowledge  of  changes  in  the  voting  and  capital
structure  leading  to  blocking  minorities;  it  should  also  enhance  effective  control  of
share issuers and overall market transparency on important capital movement. In order
to  simplify  the  periods  for  notifying  changes  to  the  voting  rights  or  to  the  capital
structure and to approximate them more amongst Member States, such periods should
be limited to five business days for the holder and subsequently to three business days
for the issuer to disclose such information to the public.

(12)  Ongoing information of security holders should continue to be based on the principle
of  equal  treatment.  Such  equal  treatment  only  relates  to  shareholders  in  the  same
position and does not therefore prejudice the issue of how many voting rights may be
attached  to  a  particular  share.  By  the  same  token,  holders  of  debt  securities  ranking
pari  passu  should  continue  to  benefit  from  equal  treatment.  Information  of  security
holders  in  general  meetings  should  be  facilitated.  In  particular,  securities  holders
situated  abroad  should  be  more  actively  involved  in  that  they  should  be  able  to
mandate proxies to act on their behalf. For the same reasons, it should be decided in a
general  meeting  of  security  holders  whether  the  use  of  modern  information  and
communication technologies should become a reality.

(13)  Removal  of  barriers  and  effective  enforcement  of  new  Community  information
requirements  also  require  adequate  control  by  the  competent  authority  of  the  home
Member State. The present Directive should not provide for a scrutiny of the contents
of  financial  information  to  be  disclosed,  but  at  least  a  minimum  guarantee  for  the
timely availability of such information. For this reason, each competent authority in a
home Member State should introduce a filing system.

(14)  Any obligation for an issuer to translate all ongoing and periodic information into all
the  relevant  languages  in  all  the  Member  States  where  its  securities  are  admitted  to
trading  does  not  foster  integration  of  securities  markets,  but  has  deterrent  effects  on
cross-border  admission  of  securities  to  trading  on  regulated  markets.  Therefore,  the
issuer  should  be  entitled  to  provide  information  drawn  up  in  a  language  that  is
customary in the  sphere of  international  finance  in  the  case  of  securities  admitted  to
trading in more than one Member State. Since a particular effort is needed to attract
investors from abroad, even outside the Community, Member States should no longer
prevent  security  holders  from  making  the  required  notifications  to  the  issuer  in  a
language customary in the sphere of international finance.

33

(15)  To ensure timely access to information about the issuer whose securities are admitted
to trading on regulated markets in more than one Member State, the Internet  sites of
the issuer concerned might also be used as means of public disclosure, provided that
real-time dissemination of information is ensured, together with an efficient electronic
alert system for all interested parties.

(16) 

In  order  to  further  simplify  investor  access  to  corporate  information  across  Member
States, it should be left to the national supervisory authorities to formulate guidelines
for  setting  up  electronic  networks,  in  close  consultation  with  the  other  parties
concerned,  in  particular  security  issuers,  investors,  market  participants,  operators  of
regulated markets and financial information providers.

(17)  So  as  to  ensure  the  effective  protection  of  investors  and  the  proper  operation  of
regulated  markets  within  the  Community,  the  rules  relating  to  information  to  be
published  by  issuers  whose  securities  are  admitted  to  trading  on  a  regulated  market
within  the  Community  should  also  apply  to  issuers  which  do  not  have  a  registered
office in a Member State and which do not fall within the scope of Article 48 of the
Treaty.  It  should  equally  be  ensured  that  any  additional  relevant  information  about
Community issuers or third country issuers, disclosure of which is required in a third
country but not in a Member State, is made available to the public in the Community.

(18)  A  single  competent  authority  should  be  designated  in  each  Member  State  to  assume
final responsibility for supervising compliance with the provisions adopted pursuant to
this Directive, as well as for international cooperation. Such an authority should be of
an administrative nature, and its independence of economic actors should be ensured
in order to avoid conflicts of interest.

(19) 

Increasing  cross-border  activities  require  improved  co-operation  between  national
competent authorities, including a comprehensive set of provisions for the exchange of
information  and  for  precautionary  measures.  The  organisation  of  the  regulatory  and
supervisory  tasks  in  each  Member  State  should  not  hinder  efficient  co-operation
between the competent national authorities.

(20)  At its meeting on 17 July 2000, the Council set up the Committee of Wise Men on the
Regulation  of  European  securities  markets.  In  its  final  report,  that  Committee
proposed  the  introduction  of  new  legislative  techniques  based  on  a  four-level
approach, namely essential principles, technical implementing measures, co-operation
amongst  national  securities  regulators,  and  enforcement  of  Community  law.  The
Directive should confine  itself to broad  “framework”  principles,  while  implementing
measures  to  be  adopted  by  the  Commission  with  the  assistance  of  the  European
Securities Committee should lay down the technical details.

(21)  The Resolution adopted by the Stockholm European Council of March 2001 endorsed
the final report of the Committee of Wise Men and the proposed four-level approach
to make the regulatory process for Community securities legislation more efficient and
transparent.

(22)  According  to  the  Stockholm  European  Council  Resolution,  implementing  measures
should be used more frequently, to ensure that technical provisions can be kept up to
date  with  market  and  supervisory  developments,  and  deadlines  should  be  set  for  all
stages of implementing rules.

34

(23)  The Resolution of the European Parliament of 5 February 2002 on the implementation
of financial services legislation also endorsed the Committee of Wise Men’s report, on
the basis of the solemn declaration made before the European Parliament the same day
by  the  President  of  the  Commission  and  the  letter  of  2  October  addressed  by  the
Internal  Market  Commissioner  to  the  Chairman  of  the  Parliament’s  Committee  on
Economic  and  Monetary  Affairs  with  regard  to  safeguards  for  the  European
Parliament’s role in this process.

(24)  The  measures  necessary  for  implementing  this  Directive  should  be  adopted  in
accordance  with  Council  Decision  1999/468/EC  of  28  June  1999  laying  down  the
procedures for the exercise of implementing powers conferred on the Commission49.

(25)  The  European  Parliament  should  be  given  a  period  of  three  months  from  the  first
transmission of draft implementing measures to allow it to examine them and to give
its opinion. However, in urgent and duly justified cases, that period may be shortened.
If,  within  that  period,  a  resolution  is  passed  by  the  European  Parliament,  the
Commission should re-examine the draft measures.

(26)  Technical  implementing  measures  for  the  rules  laid  down  in  this  Directive  may  be
necessary  to  take  account  of  new  developments  on  securities  markets.  The
Commission  should  accordingly  be  empowered  to  adopt  implementing  measures,
provided that they do not modify the essential elements of this Directive and provided
that  the  Commission  acts  in  accordance  with  the  principles  set  out  therein,  after
consulting  the  European  Securities  Committee  established  by  Commission  Decision
2001/528/EC of 6 June 200150.

(27) 

In order to ensure fulfilment of the requirements laid down pursuant to this Directive
or  measures  implementing  this  Directive,  an  infringement  of  those  requirements
should  be  promptly  detected  and,  if  necessary,  penalised.  To  that  end,  sanctions,
including  civil  sanctions,  should  be  sufficiently  dissuasive,  proportionate  and
consistently  enforced.  Member  States  should  ensure  that  decisions  taken  by  the
competent national authorities are open to judicial review.

(28)  This  Directive  aims  to  upgrade  the  current  prevailing  transparency  requirements  for
security  issuers  and  investors  acquiring  or  disposing  of  major  holdings  in  security
issuers.  This  Directive  replaces  some  of  the  requirements  set  out  in  Directive
2001/34/EC  of  the  European  Parliament  and  of  the  Council  of  28  May  2001  on  the
admission  of  securities  to  official  stock  exchange  listing  and  on  information  to  be
published  on  those  securities51.  In  order  to  gather  transparency  requirements  in  a
single act it is necessary to amend it accordingly.

(29)  Since  the  objectives  of  the  action  to  be  taken,  namely  to  ensure  investor  confidence
through  equivalent transparency throughout the  Community  and  thereby  to  complete
the internal market, cannot be sufficiently achieved by the Member States on the basis
of the existing Community legislation and can, by reason of the scale and effects of the
measures,  be  better  achieved  at  Community  level,  the  Community  may  adopt
measures, in accordance with the principle of subsidiarity as set out in Article 5 of the
Treaty. In accordance with the principle  of  proportionality, as set out in that Article,

49

50

51

OJ L 184, 17.7.1999, p. 23
OJ L 191, 13.7.2001, p. 45.
OJ L 184, 6.7.2001, p. 1.

35

                                                
this  Directive  does  not  go  beyond  what  is  necessary  in  order  to  achieve  these
objectives.

(30)  This  Directive  respects  fundamental  rights  and  observes  the  principles  recognised  in

particular by the Charter of the Fundamental Rights of the European Union,

HAVE ADOPTED THIS DIRECTIVE:

Chapter I

General provisions

Article 1

Subject-matter and scope

This Directive establishes requirements in relation to the disclosure of periodic and ongoing
information  about  issuers  whose  securities  are  already  admitted  to  trading  on  a  regulated
market situated or operating within a Member State.

This Directive shall apply neither to units issued by collective investment undertakings other
than  the  closed-end  type,  nor  to  units  acquired  or  disposed  of  through  such  collective
investment undertakings.

Article 2

Definitions

1. 

For the purposes of this Directive the following definitions shall apply:

(a)

‘securities’ means transferable securities as defined in Article 1(4) of Directive
93/22/EEC/Article  …  of  the  Directive  ./../EC  on  Investment  Services  and
Regulated  Markets52  with  the  exception  of  money-market  instruments,  as
the
defined 
Directive./../EC  on  Investment  Services  and  Regulated  Markets  having  a
maturity  of  less  than  12  months,  for  which  national  legislation  may  be
applicable;

in  Article  1(5)  of  Directive  93/22/EEC/Article  …  of 

(b)

“debt securities” means bonds or other forms of transferable securitised debts,
with the exception of securities which are equivalent to shares in companies or
which, if converted or if the rights conferred by them are exercised, give rise to
a right to acquire shares or securities equivalent to shares;

52

OJ L …, …., p. ….

36

                                                
(c)

(d)

“regulated  market”  means  a  market  as  defined  in  Article  1(13)  of  Directive
93/22/EEC/  Article  …  of  the  Directive  ../../EC  on  Investment  Services  and
Regulated Markets;

“issuer”  means  a  legal  entity  governed  by  private  or  public  law,  including  a
State, whose securities are admitted to trading on a regulated market, the issuer
being,  in  the  case  of  depository  receipts  representing  securities,  the  issuer  of
the securities represented;

(e)

“security holder” means any natural person or legal entity governed by private
or public law, who, directly or through intermediaries, acquires or disposes of:

(i)

securities of the issuer in its own name and on its own account;

(ii)

securities of the issuer in its own name, but on behalf of another natural
person or legal  entity, except where such  securities are  acquired  for  the
sole purpose of clearing and settling transactions within a short period;

(iii) depository receipts, in which case the security holder shall be the bearer;

(iv) derivative  securities entitling a natural person or  legal  entity  to  acquire,
on  its  initiative,  or  to  dispose  of,  on  the  sole  initiative  of  a  third  party,
shares to which voting rights with the issuer are attached;

(f)

“controlled undertaking” means any undertaking

(i)

in which a security holder has a majority of the voting rights;

(ii)

of which a security holder is both the parent undertaking,  with the right
to  appoint  or  remove  a  majority  of  the  members  of  the  administrative,
management or supervisory body, and a shareholder or member;

(iii) of  which  the  security  holder  is  a  shareholder  or  member  and  alone
controls  a  majority  of  the  shareholders’  or  members’  voting  rights,
respectively,  pursuant 
into  with  other
shareholders or members;

to  an  agreement  entered 

(iv) over which the security holder actually exercises, directly or indirectly, a

dominant influence;

(g)

“collective investment undertaking other than the closed-end type” means unit
trusts and investment companies:

(i)

(ii)

the object of which is the collective investment of capital provided by the
public, and which operate on the principle of risk spreading; and

the  units  of  which  are,  at  the  request  of  the  holder  of  such  units,
repurchased or redeemed, directly or indirectly, out of the assets of those
undertakings;

(h)

“units  of  a  collective  investment  undertaking”  means  securities  issued  by  a
collective investment undertaking and representing rights of the participants in
such an undertaking over its assets;

37

(i)

“home Member State” means

(i)

in the case of an issuer of debt securities the denomination of which does
not exceed EUR 5 000 or an issuer of shares:

-

-

where  the  issuer  is  incorporated  in  the  Community,  the  Member
State in which it has its registered office;

where  the  issuer  is  incorporated  in  a  third  country,  the  Member
State in which it is required to file the annual information with the
competent  authority  in  accordance  with  Article  10  of  Directive
[…/…/EC] [Prospectus];

(ii)

for any issuer not covered by (i), the Member State chosen by the issuer
from  among  those  Member  States  which  have  admitted  its  securities  to
trading  on  a  regulated  market  on  their  territory,  provided  that  those
securities continue to be admitted to trading on that regulated market for
three  financial  years,  that  being  the  period  of  validity  of  the  issuer’s
choice;

“host Member State” means a Member State in which securities are admitted to
trading on a regulated market, if different from the home Member State;

“regulated  information”  means  all  information  which  the  issuer,  or  any  other
person who has applied for the admission of securities to trading on a regulated
market without the issuer’s consent, is required to disclose under this Directive,
under Article 6 of Directive 2003/6/EC of the European Parliament and of the
Council  53,  or  under  the  laws,  regulations  or  administrative  provisions  of  a
Member State;

“electronic  means”  are  means  of  electronic  equipment  for  the  processing
(including  the  digital  compression),  storage  and  transmission  of  data,
employing  wires,  radio,  optical  technologies,  or  any  other  electromagnetic
means.

(j)

(k)

(l)

2. 

3. 

For the  purposes of the  definition of “controlled undertaking” in paragraph  1(f)(ii),
the  holder’s rights  in  relation  to  voting,  appointment  and  removal  shall  include  the
rights of any other undertaking controlled by the securities holder and those of  any
natural  person  or  legal  entity  acting,  albeit  in  its  own  name,  on  behalf  of  the
securities holder or of any other undertaking controlled by the securities holder.

In order to take account of technical developments on financial markets and to ensure
the  uniform  application  of  paragraph  1  of  this  Article,  the  Commission  shall,  in
accordance  with  the  procedure  referred  to  in  Article  23(2),  adopt  implementing
measures concerning the definitions set out in paragraph 1.

The Commission shall, in particular:

(a)

specify,  for  the  purposes  of  the  exception  referred  to  in  paragraph  1(e)(ii)  in
relation  to  securities  acquired  for  the  sole  purpose  of  clearing  and  settling

53

OJ L …, …., p. ….

38

                                                
(b)

(c)

(d)

transactions within a short period, the maximum length, in number of days, of
the “short period”;

establish, for the purposes of paragraph 1(i)(ii), the procedural arrangements in
accordance with which an issuer may make the choice referred to therein;

adjust, where appropriate for the purposes of the choice of the home Member
State referred to in paragraph 1(i) (ii) , the three-year period in relation to the
issuer’s track record in the light of any new requirement under Community law
concerning admission to trading on a regulated market;

establish, for the purposes of paragraph 1(l), an indicative list of means which
are  not  to  be  considered  as  electronic  means,  thereby  taking  into  account
Annex  V  to  Directive  98/34/EC  of  the  European  Parliament  and  of  the
Council54.

Article 3

Integration of securities markets

1.

The home Member State may make an issuer subject to requirements more stringent
than those laid down in this Directive, as regards the disclosure of information to the
public or to security holders.

The  home  Member  State  may  also  make  a  security  holder  subject  to  requirements
more stringent than those laid  down  in  this  Directive, as  regards  the  notification of
information.

2.

A host Member State may not:

(a)

as  regards  the  admission  of  securities  to  a  regulated  market  in  its  territory,
impose disclosure requirements more stringent than those provided for in this
Directive or in Article 6 of Directive 2003/6/EC;

(b)

as  regards  the  notification  of  information,  impose  on  security  holders
requirements more stringent than those laid down in this Directive.

54

OJ L204, 21.7.1998, p. 37, as amended by Directive 98/48/EC, OJ L 217, 5.8.1998, p. 18.

39

                                                
Chapter II

Periodic information

Article 4

Annual financial reports

1.

2.

3.

4.

5.

6.

55

56

The  issuer  shall  disclose  its  annual  financial  report  to  the  public  at  the  latest  three
months after the end of each financial year and shall ensure that it remains publicly
available.

The annual financial report shall comprise:

(a)

the audited financial statements;

(b)

the management report;

(c)

statements made by the persons responsible within the issuer, whose names and
functions shall be clearly indicated, to the effect that the information contained
in the annual financial report is, to the best of their knowledge, in accordance
with the facts and that the report makes no omission likely to affect its import.

The audited financial statements shall comprise the issuer’s consolidated accounts in
accordance with Article 4 of Regulation (EC) No 1606/2002 or, where the issuer has
no subsidiary, the accounts for the financial year, in accordance with the national law
of the home Member State.

The  financial  statements  shall  be  audited  in  accordance  with  Article  37  of  Council
Directive  83/349/EEC55  or,  where  the  issuer  has  no  subsidiary,  in  accordance  with
Articles 51 and 51a of Council Directive 78/660/EEC56.

The  audit  report,  signed  by  the  person  or  persons  responsible  for  auditing  the
financial  statements,  together  with  any  qualifications  thereto  or  references  to  any
matters by way of emphasis to which the auditors draw attention without qualifying
their report, shall be disclosed in full to the public together with the annual financial
report.

The management report shall be drawn up in accordance with Article 36 of Directive
83/349/EEC or, where the issuer has no subsidiary, in accordance with Article 46 of
Directive 78/660/EEC.

The Commission shall, in accordance with the procedure referred to in Article 23(2),
adopt implementing measures in order to take account of technical developments on
financial markets and to ensure the uniform application of paragraphs 1 to 5 of this
Article.

OJ L 193, 18.7.1983, p. 1.
OJ L 222, 14.8.1978, p.11.

40

                                                
The Commission shall, in particular, specify the period of time  throughout  which  a
published annual financial report, including the audit report, is to remain available to
the public, as well as any other conditions to be complied with by the issuer in that
connection.

Article 5

Half-yearly financial reports

1.

The issuer shall disclose to the public a half-yearly financial report covering the first
six  months  of  the  financial  year  as  soon  as  possible  after  the  end  of  the  relevant
period, but at the latest two months thereafter. The issuer shall ensure that the half-
yearly report remains available to the public.

2.

The half-yearly financial report shall comprise:

(a)

the condensed set of financial statements;

3.

4. 

5. 

(b)

an update of the last management report as provided for in Article 4 (5) ;

(c)

statements made by the persons responsible within the issuer, whose names and
functions shall be clearly indicated, to the effect that the information contained
in  the  half-yearly  financial  report  is,  to  the  best  of  their  knowledge,  in
accordance with the facts and that the report makes no omission likely to affect
its import.

The  condensed set of financial  statements shall be prepared in accordance  with  the
international  accounting  standards  for  interim  financial  reporting,  as  adopted
pursuant to Articles 2, 3 and 6 of Regulation (EC) No 1606/2002 or, where the issuer
has no subsidiary, in accordance with the national law of the home Member State.

If  the  half-yearly  financial  report  has  been  audited,  the  audit  report,  and  any
qualifications thereto or references to any matters by way of emphasis to which the
auditors  draw  attention  without  qualifying  their  report,  shall  be  reproduced  in  full.
The same shall apply in the case of an auditors’  review.  If the half-yearly financial
report has not been audited or reviewed by auditors, the issuer shall make a statement
to that effect in its report.

The Commission shall, in accordance with the procedure referred to in Article 23(2),
adopt implementing measures in order to take account of technical developments on
financial markets and to ensure the uniform application of paragraphs 1 to 5 of this
Article.

The Commission shall, in particular:

(a)

specify the period  of  time  throughout  which  a  published  half-yearly  financial
report, including where applicable the audit report, is to remain available to the
public, as well as any other conditions to be complied with by the issuer in that
connection;

(b)

clarify the nature of the auditors’ review, referred to in paragraph 5; and

41

(c)

if there is evidence of an urgent need to enhance investor protection throughout
the  Community,  make  the  half-yearly  financial  report  subject  to  a  mandatory
auditors’ review.

Article 6

Quarterly financial information

1.

An issuer whose shares are admitted to trading on a regulated market shall disclose
to  the  public  quarterly  financial  information  covering  the  first  and  third  quarter,
respectively,  of  the  financial  year,  as  soon  as  possible  after  the  end  of  the  relevant
three-month  period,  but  at  the  latest  two  months  thereafter.  The  same  issuer  shall
ensure that the quarterly financial information remains available to the public.

2.

Quarterly financial information shall contain at least:

(a)

(b)

(c)

consolidated figures, presented in table form, indicating, for the relevant three-
month period, the net turnover, and the profit or loss before or after deduction
of tax; and

an explanatory statement relating to the issuer’s activities and profits and losses
during the relevant three-month period; and

if the  issuer so chooses,  an indication  of the likely future development of the
issuer  and  its  subsidiaries  at  least  for  the  remaining  financial  year,  including
any significant uncertainties and risks which may affect that development.

3.

4.

Where the quarterly financial information, or any quarterly financial report, has been
audited, the audit report, and any qualifications thereto or references to any matters
by  way  of  emphasis  to  which  the  auditors  draw  attention  without  qualifying  their
report, shall be reproduced in full. The same shall apply in the case of an  auditors’
review.  If  the  quarterly  financial  information  has  not  been  audited  or  reviewed  by
auditors, the issuer shall make a statement to that effect.

The Commission shall, in accordance with the procedure referred to in Article 23(2),
adopt implementing measures, in order to take account of technical developments on
financial markets and to ensure the uniform application of paragraphs 1, 2 and 3 of
this Article.

The Commission shall, in particular:

(a)

(b)

(c)

specify  the  period  of  time  throughout  which  published  quarterly  financial
information is to remain available to the public, as well as any other conditions
to be complied with by the issuer in that connection

clarify, if necessary, the terms “net turnover” and “profit or loss before or after
deduction  of  tax”  in  relation  to  specific  types  of  issuers,  such  as  credit
institutions;

specify the information to be given in the explanatory statement, as referred to
in  paragraph  2(b),  and  in  the  indication  of  the  issuer’s  likely  future
development, as referred to in paragraph 2(c);

42

(d)

clarify the nature of the auditors’ review, referred to in paragraph 3.

Article 7

Responsibility and liability

1.

2.

Member States shall ensure that responsibility for the information to be drawn up and
to be  made  public in accordance  with Articles  4, 5 and  6  lies  with  the  issuer  or  its
administrative, management or supervisory bodies.

Member States shall ensure that their laws, regulations and administrative provisions
on civil liability apply to those persons responsible for the information disclosed to
the public in accordance with Articles 4, 5 and 6.

Article 8

Exemptions

Articles 4, 5 and 6 shall not apply to the following issuers:

(a)

(b)

a State, a regional or local authority of  a State, a public international body of
which at least one Member State is a member, the European Central Bank, and
national central banks whether or not they issue shares or other securities; and

an  issuer  exclusively  of  debt  securities  admitted  to  trading  on  a  regulated
market in a Member State, the denomination per unit of which is at least EUR
50 000.

Chapter III

Ongoing information

SECTION I

INFORMATION ABOUT MAJOR HOLDINGS

Article 9

Notification of the acquisition or disposal of major holdings

1.

The home Member State shall ensure that, where the security holder, or any natural
person or legal entity entitled to exercise voting rights on behalf the security holder,
acquires  or  disposes  of  voting  rights  or  capital  of  the  issuer,  the  security  holder
notifies the issuer of the proportion of voting rights and capital of the issuer held by
the  security  holder  as  a  result  of  the  acquisition  or  disposal  where  that  proportion

43

reaches,  exceeds  or  falls  below  the  thresholds  of  5%,  10%,  15%,  20%,  25%,  30%,
50% and 75%.

The proportion of capital need be notified only to the extent that the home Member
State  allows  multiple  voting  rights  to  attach  to  shares  and  the  issuer  provides
accordingly in its statutes or instruments of incorporation.

The home Member State need not apply:

2.

3.

(a)

(b)

(c)

the  5%  threshold  where  a  security  holder  holds  only  derivative  securities  as
referred  to  in  Article  2(e)(iv)  or  where  voting  rights  may  be  exercised  in
accordance with Article 10(d) or (f);

the 30% threshold where  the home Member State  applies a  threshold  of  one-
third;

the 75% threshold where the  home Member State  applies a threshold of two-
thirds.

Article 10

Determination of the voting rights

For the purposes of determining whether a notification is to be made pursuant to Article 9(1),
a natural person or legal entity shall be regarded as being entitled to exercise voting rights on
behalf of a security holder in the case of the following:

(a)

(b)

(c)

(d)

(e)

(f)

voting  rights  held  by  a  third  party  with  whom  that  person  or  entity  has
concluded an effective agreement,  which obliges them  to adopt,  by concerted
exercise  of  the  voting  rights  they  hold,  a  lasting  common  policy  towards  the
management of the issuer in question;

voting rights held by a third party under an effective agreement concluded with
that person or entity providing for the  temporary transfer for  consideration of
the voting rights in question;

voting rights attaching to shares which are lodged as collateral with that person
or entity, provided the latter controls the voting rights and declares its intention
of exercising them;

voting  rights  attaching  to  shares  in  which  that  person  or  entity  has  the  life
interest;

voting rights which are held, or which may be exercised within the meaning of
points (a) to (d), by an undertaking controlled by that person or entity;

voting rights attaching to shares deposited with that person or entity which the
latter can exercise at its discretion in the absence of specific instructions from
the security holders;

44

(g)

voting  rights  which  that  person  or  entity  or  one  of  the  parties  mentioned  in
points (a) to (e) is required to sell, on the sole initiative of a third person, or is
entitled to acquire, on his own initiative, under a formal agreement;

(h)

voting rights which that person or entity may exercise as a proxy according to
common instructions from securities holders.

Article 11

Procedures on the notification and disclosure of major holdings

1.

The notification required under Article 9 shall include the following information:

(a)

the resulting situation, in terms of voting rights and capital;

(b)

the date on which the acquisition or disposal was effected;

(c)

(d)

the identity of the security holder, and the natural person or legal entity entitled
to exercise voting rights on behalf of the security holder; and

in  the  cases  referred  to  in  Article  10(a),  (b)  and  (g),  the  remuneration  or  any
other form of consideration given in return for the voting rights.

The notification to the issuer shall be effected within five business days, the first of
which  shall  be  the  day  on  which  the  security  holder  learns  of  the  acquisition  or
disposal or on which, having regard to the circumstances, the security holder should
have learned of it.

Where  a  controlled undertaking makes  the  required  notification  in  accordance  with
paragraph  1,  the  security  holder,  or  the  natural  person  or  legal  entity  which  may
exercise voting rights on its  behalf, shall be exempted from the  obligation  to  make
that notification.

Upon receipt of the notification under  paragraph 1, but  no  later  than  three  business
days  thereafter,  the  issuer  shall  make  public  all  the  information  contained  in  the
notification, together with the new breakdown of voting rights and capital.

In order to take account of technical developments on financial markets and to ensure
the uniform application of paragraphs 1 to 4 of this Article, the Commission shall, in
accordance  with  the  procedure  referred  to  in  Article  23(2),  adopt  implementing
measures:

(a)

to  establish  a  standard  form  to  be  used  throughout  the  Community  when
notifying the required information to the issuer under paragraph 1;

(b)

to establish the calendar of “business days” for all Member States.

2.

3.

4.

5.

45

Article 12

Additional information

The issuer shall inform the public without delay of

(a)

(b)

(c)

any  change  in  the  rights  attaching  to  the  various  classes  of  shares,  including
changes in the rights attaching to derivative securities issued by the issuer itself
and giving access to the shares of that issuer;

any  changes  in  the  rights  of  securities  holders  resulting  in  particular  from  a
change in loan terms or in interest rates; and

new  loan  issues  and  in  particular  of  any  guarantee  or  security  in  respect
thereof.

SECTION II

INFORMATION FOR SECURITY HOLDERS

Article 13

Information for shareholders

6. 

7. 

The issuer shall ensure equal treatment for all holders of shares who are in the same
position.

The  issuer  shall  ensure  that  all  the  facilities  and  information  necessary  to  enable
holders of shares to exercise their rights are available in the home Member State and
that  the  integrity  of  data  is  preserved.  Shareholders  shall  not  be  prevented  from
exercising  their  rights  by  proxy,  subject  to  the  law  of  the  home  Member  State.  In
particular, the issuer shall:

(a)

provide  information  on  the  place,  time  and  agenda  of  meetings,  the  total
number  of  shares  and  voting  rights  and  the  rights  of  holders  to  participate  in
meetings;

(b) make  available  a  proxy  form,  on  paper  or,  where  applicable,  by  electronic
means, to each person entitled to vote at a shareholders meeting, together with
the notice concerning the meeting;

(c)

(d)

designate  as  its  agent  a  financial  institution  through  which  shareholders  may
exercise their financial rights; and

publish notices or distribute circulars concerning the allocation and payment of
dividends  and  the  issue  of  new  shares,  including  information  on  any
arrangements for allotment, subscription, cancellation or conversion.

46

3. 

For the purposes of conveying information to shareholders, the home Member State
shall allow issuers the use of electronic means, provided such a decision is taken in a
general meeting and meets at least the following conditions:

(a)

(b)

(c)

(d)

the  use  of  electronic  means  shall  in  no  way  depend  upon  the  location  of  the
seat or residence of the shareholder or, in the cases referred to in Article 10(a)
to (g), of the natural persons or legal entities;

identification  arrangements  shall  be  put  in  place  in  order  to  ensure  that  the
shareholders  or,  in  the  cases  referred  to  in  Article  10  (a)  to  (g),  the  natural
persons or legal entities, are effectively informed;

the  use  of  electronic  means  for  the  transmission  of  information  shall  remain
subject to the individual consent of the shareholder concerned or, in the cases
referred to in Article 10 (a) to (e), of the natural person or legal entity;

any apportionment of the costs entailed in the conveyance of such information
by electronic means shall be determined by the  issuer  in  compliance  with  the
principle of equal treatment laid down in paragraph 1.

The  Commission  shall,  in  accordance  with  the  procedure  provided  for  in  Article
23(2),  adopt  implementing  measures  in  order  to  take  account  of  technical
developments on financial markets, to take account of developments in information
and communication technology and to ensure the uniform application of paragraphs
1,  2  and  3  of  this  Article.  It  shall,  in  particular,  specify  the  types  of  financial
institution through which a shareholder may exercise the financial rights provided for
in paragraph 2(c).

Article 14

Information for debt securities holders

The issuer shall ensure that all holders of debt securities ranking pari passu are given
equal treatment in respect of all the rights attaching to those debt securities.

The issuer shall ensure that all the facilities and information necessary to enable debt
securities holders to exercise their rights are publicly available in the home Member
State and that the integrity of data is preserved. Debt securities holders shall not be
prevented  from  exercising  their  rights  by  proxy,  subject  to  the  law  of  the  home
Member State. In particular, the issuer shall:

(a)

publish notices,  or distribute  circulars,  concerning the  place, time  and  agenda
of meetings of debt securities holders, the payment of interest, the exercise of
any conversion,  exchange,  subscription or cancellation rights,  and  repayment,
as well as the right of those holders to participate therein;

(b) make  available  a  proxy  form,  on  paper  or,  where  applicable,  by  electronic
means, to each person entitled to vote at  a meeting of debt securities holders,
together with the notice concerning the meeting; and

4. 

1.

2.

47

3.

4.

5.

(c)

designate  as  its  agent  a  financial  institution  through  which  debt  securities
holders may exercise their financial rights.

If  only  holders  of  debt  securities  whose  denomination  per  unit  amounts  to  at  least
EUR  50000  are  to  be  invited  to  a  meeting,  the  issuer  may  choose  as  venue  any
Member  State,  provided  that  all  the  facilities  and  information  necessary  to  enable
such holders to exercise their rights are made available in that Member State.

For  the  purposes  of  conveying  information  to  debt  securities  holders,  the  home
Member  State,  or  the  Member  State  chosen  by  the  issuer  pursuant  to  paragraph  3,
shall allow issuers the use of electronic means, provided such a decision is taken in a
general meeting and meets at least the following conditions:

(a)

(b)

(c)

(d)

the  use  of  electronic  means  shall  in  no  way  depend  upon  the  location  of  the
seat  or  residence  of  the  debt  security  holder  or  of  a  proxy  representing  that
holder;

identification  arrangements  shall  be  put  in  place  in  order  to  ensure  that  debt
securities  holders  and  proxies  representing  those  holders  are  effectively
informed;

the  use  of  electronic  means  for  the  conveyance  of  information  shall  remain
subject to the individual consent of the debt securities holder concerned, or of a
proxy entitled to give such consent;

any  apportionment  of  the  costs  entailed  in  the  conveyance  of  information  by
electronic  means  shall  be  determined  by  the  issuer  in  compliance  with  the
principle of equal treatment laid down in paragraph 1.

The  Commission  shall,  in  accordance  with  the  procedure  provided  for  in  Article
23(2),  adopt  implementing  measures  in  order  to  take  account  of  technical
developments on financial markets, to take account of developments in information
and communication technology and to ensure the uniform application of paragraphs
1 to 4 of this Article. It shall, in particular, specify the types of financial institution
through which a debt security holder may exercise the financial rights provided for in
paragraph 2(c).

Chapter IV

General obligations

Article 15

Home Member State control

1.

Whenever  the  issuer  discloses  regulated  information,  it  shall  at  the  same  time  file
that  information  with  the  competent  authority  of  its  home  Member  State.  That
competent authority may decide to publish such filed information on its Internet site.

48

2.

3.

4.

1.

2.

Where an issuer proposes to amend its instrument of incorporation or statutes, it shall
communicate the draft amendment to the competent authority of the home Member
State and to the regulated market to which its securities is admitted to trading. Such
communication shall be effected without delay, but at the latest on the date of calling
the general meeting which is to vote on, or be informed of, the amendment.

The  home  Member  State  may  exempt  an  issuer  from  the  requirement  under
paragraph  1  in  respect  of  information  disclosed  in  accordance  with  Article  6  of
Directive 2003/6/EC or Article 11(4) of this Directive.

Information to be notified to the issuer in accordance with Article 9 shall at the same
time be filed with the competent authority of the home Member State.

In order to ensure the uniform application of paragraphs 1, 2 and 3 of this Article, the
Commission  shall,  in  accordance  with  the  procedure  referred  to  in  Article  23(2),
adopt implementing measures.

The Commission shall, in particular, specify the procedure in accordance with which
an issuer or security holder is to file information with the competent authority of the
home Member State under paragraphs 1 or 3, respectively, in order to:

(a)

enable filing by electronic means in the home Member State;

(b)

co-ordinate the filing of  the annual  financial report referred to in Article 4 of
this Directive with the filing of the annual information referred to in Article 10
of Directive […/…/EC] [Prospectus].

The  Commission  shall  also  establish  a  standard  form  to  be  used  throughout  the
Community when filing information under paragraph 3.

Article 16

Languages

Where  securities  are  admitted  to  trading  on  a  regulated  market  only  in  the  home
Member State, regulated information shall be disclosed in a language accepted by the
competent authority in the home Member State. Where the denomination per unit of
those  securities  amounts  to  at  least  EUR  50  000,  regulated  information  may,
depending on the choice of the issuer, be provided only in a language customary in
the sphere of international finance.

Where  securities  are  admitted  to  trading  on  a  regulated  market  both  in  the  home
Member State and in one or more host Member States, regulated information shall be
disclosed:

(a)

(b)

in a language accepted by the competent authority in the home Member State;
and

depending  on  the  choice  of  the  issuer,  either  in  a  language  accepted  by  the
competent authority in each host Member State or in a language customary in
the sphere of international finance.

49

3.

4.

5.

6.

1.

2.

Where  securities  are  admitted  to  trading  on  a  regulated  market  only  in  one  host
Member  State,  and  not  in  the  home  Member  State,  regulated  information  shall  be
disclosed  in  a  language  accepted  by  the  competent  authority  in  that  host  Member
State. Where the denomination per unit of those securities amounts to at least EUR
50  000,  regulated  information  may,  depending  on  the  choice  of  the  issuer,  be
provided only in a language customary in the sphere of international finance.

Where securities are admitted to trading on a regulated market in more than one host
Member  State,  but  not  in  the  home  Member  State,  regulated  information  shall,
depending on the choice of the issuer, be disclosed either in a language accepted by
the competent authority in each host Member State or in a language customary in the
sphere of international finance.

Where securities  are  admitted  to trading  on  a  regulated market without  the  issuer’s
consent, the obligations under paragraphs 1, 2 and 3 shall be incumbent, not upon the
issuer,  but  upon  the  person  who,  without  the  issuer’s  consent,  has  requested  such
admission.

Member States shall allow security holders to notify information to an issuer under
this Directive only in a language customary in the sphere of international finance.

If an action concerning the content of regulated information is brought before a court
or tribunal in a Member State, responsibility for the payment of costs incurred in the
translation of that information for the purposes of the proceedings shall be decided in
accordance with the law of that Member State.

Article 17

Timely access to regulated information

The home Member State shall ensure that the issuer discloses regulated information
in a manner ensuring timely access to such information. In particular, it shall require
the  issuer  to  use  such  media  as  may  reasonably  be  relied  upon  for  the  effective
dissemination  of  information  to  the  public  throughout  its  territory  and  abroad.  The
home  Member  State  may  not  impose  an  obligation  to  use  only  media  whose
operators are established on its territory. Nor may it prevent the issuer from using a
single medium for disseminating all regulated information.

A  host  Member  State  may  not  impose  on  issuers  any  requirements  regarding  the
media  to  be  used  for  the  dissemination  of  regulated  information.  However,  a  host
Member State may require issuers:

(a)

(b)

to publish regulated information on their Internet sites, in which case the host
Member  State  shall  keep  the  public  informed  as  regards  the  Internet  sites  of
issuers; and

to  alert  any  interested  person,  without  delay  and  free  of  charge,  to  any  new
disclosure  or  any  change  to  regulated  information  which  has  already  been
published,  such  communication  to  be  effected  by  electronic  means  or,  upon
request, on paper.

50

3.

4.

1.

2.

Where  securities  are  admitted  to  trading  on  a  regulated  market  in  only  one  host
Member  State,  and  not  in  the  home  Member  State,  the  host  Member  State  shall
ensure  disclosure  of  regulated  information  in  accordance  with  the  requirements
referred to in paragraph 1.

In  order  to  take  account  of  technical  developments  on  financial  markets,  to  take
account  of  developments  in  information  and  communication  technology  and  to
ensure  the  uniform  application  of  paragraphs  1,  2  and  3  of  this  Article,  the
Commission  shall  adopt  implementing  measures  in  accordance  with  the  procedure
referred to in Article 23(2).

The Commission shall, in particular, specify:

(a) minimum  standards  for  the  dissemination  of  regulated  information  via  the

issuers’ Internet sites, including the conditions for alerting interested parties;

(b)

for  the  various  types  of  regulated  information,  conditions  and  time-limits  in
accordance with which published regulated information must be kept available
to the public.

The Commission may also specify and update a list of media for the dissemination of
information to the public.

Article 18

Guidelines

The competent authorities of the Member States shall draw up appropriate guidelines
with a view to further facilitating public access to information to be disclosed under
Directive 2003/6/EC, Directive […/…/EC] [Prospectus], and this Directive.

The aim of those guidelines shall be the creation of:

(a)

an electronic network to be set up at national level between national securities
regulators,  operators  of  regulated  markets,  and  national  company  registers
covered by Council Directive 68/151/EEC57; and

(b)

a  single  electronic  network,  or  a  platform  of  electronic  networks,  across
Member States.

The  Commission  shall  review  the  results  achieved  under  paragraph  1  by  31
December 2006 at the latest and may, in accordance with the procedure referred to in
Article 23(2), adopt implementing measures to facilitate compliance with Articles 15
and 17.

57

OJ L 65, 14.3.1968, p. 8.

51

                                                
1.

2.

3.

1.

2.

Article 19

Third countries

Where the registered office of an issuer is in a third country, the competent authority
of the home Member State may exempt that issuer from requirements under Articles
4 to  7 and  Articles 11 to 14, provided that the law of  the third  country in  question
lays down at least equivalent requirements.

However, the information covered by the requirements laid down in the third country
shall be filed in accordance with Article 15 and disclosed in accordance with Articles
16 and 17.

The  competent  authority  of  the  home  Member  State  shall  ensure  that  information
disclosed  in  a  third  country  which  may  be  of  importance  for  the  public  in  the
Community  is  disclosed  in  accordance  with  Articles  16  and  17,  even  if  such
information is not regulated information within the meaning of Article 2(1)(k) of this
Directive.

In  order  to  ensure  the  uniform  application  of  paragraphs  1  and  2,  the  Commission
may,  in  accordance  with  the  procedure  referred  to  in  Article  23(2),  adopt
implementing  measures  stating  that,  by  reason  of  its  domestic  law,  regulations,
administrative  provisions,  or  of  the  practices  or  procedures  based  on  international
standards  set  out  by  international  organisations,  a  third  country  ensures  the
equivalence of the information requirements provided for in this Directive.

Chapter V

Competent authorities

Article 20

Competent authorities and their rights

Each Member State shall designate the central authority referred to in Article 21(1)
of  Directive  […/…/EC]  [prospectus]  as  central  competent  administrative  authority
responsible  for  carrying  out  the  obligations  provided  for  in  this  Directive  and  for
ensuring that the provisions adopted pursuant to this Directive are applied. Member
States shall inform the Commission accordingly.

Member States may allow their  central competent  authority to delegate  tasks  .  Any
delegation of tasks related to the obligations provided for in this Directive and in its
implementing  measures  shall  end  five  years  after  the  entry  into  force  of
Directive[…/…/EC] [prospectus]. Any delegation of tasks shall be made in a specific
manner stating the tasks to be undertaken and the conditions under which they are to
be carried out.

52

Those  conditions  shall  include  a  clause  requiring  the  entity  in  question  to  be
organised  in  a  manner  such  that  conflicts  of  interest  are  avoided  and  information
obtained  from  carrying  out  the  delegated  tasks  is  not  used  unfairly  or  to  prevent
competition. In any case, the final responsibility for supervising compliance with the
provisions  of  this  Directive  and  implementing  measures  adopted  pursuant  thereto
shall lie with the competent authority designated in accordance with paragraph 1.

3.

4.

Member  States  shall  inform  the  Commission  and  competent  authorities  of  other
Member  States  of  any  arrangements  entered  into  with  regard  to  the  delegation  of
tasks, including the precise conditions for regulating the delegations.

Each competent authority shall have  all the rights necessary for the performance of
its functions. It shall at least be empowered to:

(a)

(b)

(c)

(d)

(e)

(f)

require  issuers,  security  holders,  and  the  persons  that  control  them  or  are
controlled by them, to provide information and documents;

require  managers  and,  if  need  be,  auditors  of  the  issuer  to  disclose  the
information required under point (a) to the public by the means and within the
time limits the authority considers necessary. It may publish such information
on its own initiative in the event that the issuer, or the persons that control them
or are controlled by them, fail to do so and after having heard the issuer;

require  managers  of  the  security  holders  to  notify  the  information  required
under  this  Directive,  or  under  national  law  adopted  in  accordance  with  this
Directive, and, if necessary, to provide further information and documents;

suspend,  or  request  the  relevant  regulated  market  to  suspend,  the  trading  of
securities for a maximum of ten days at one time if it has reasonable grounds
for suspecting that the provisions of this Directive, or of national law adopted
in accordance with this Directive, have been infringed by the issuer;

prohibit  trading  on  a  regulated  market  if  it  finds  that  the  provisions  of  this
Directive,  or  of  national  law  adopted  in  accordance  with  this  Directive,  have
been infringed, or if it has reasonable  grounds for  suspecting  that  they  would
be infringed;

ensure  that  the  issuer  discloses  timely  information  in  a  way  guaranteeing
effective  and  equal  access  to  the  public  in  all  Member  States  where  the
securities are traded;

(g) make  public  the  fact  that  an  issuer,  or  a  security  holder,  is  failing  to  comply

with its obligations; and

(h)

scrutinise  completeness,  accuracy,  and  comprehensibility  of  information
required  under  this  Directive,  to  the  extent  that  a  Member  State  decides  to
make  mandatory  such  scrutiny  in  full  or  only  in  respect  of  completeness  and
comprehensibility.

5.

Where  necessary,  the  competent  authority  may  apply  to  the  relevant  judicial
authority for permission to enforce the powers referred in points (d) and (e).

53

6.

1.

2.

3.

1.

2.

Paragraphs 1 to 5 shall be without prejudice to the possibility for a Member State to
make  separate  legal  and  administrative  arrangements  for  overseas  European
territories for whose external relations that Member State is responsible.

Article 21

Professional secrecy and co-operation between Member States

The obligation of  professional  secrecy  shall  apply  to  all  persons  who  work  or  who
have  worked  for  the  competent  authority  and  for  entities  to  which  competent
authorities  may  have  delegated  certain  tasks.  Information  covered  by  professional
secrecy may not be disclosed to any other person or authority except by virtue of the
laws, regulations or administrative provisions of a Member State.

Competent  authorities  of  the  Member  States  shall  co-operate  with  each  other,
whenever necessary, for the purpose of  carrying out their duties and making use of
their  powers,  whether  set  out  in  this  Directive  or  in  national  law.  Competent
authorities shall render assistance to competent authorities of other Member States.

Paragraph 1 shall not prevent the competent authorities from exchanging confidential
information.  Information  thus  exchanged  shall  be  covered  by  the  obligation  of
professional  secrecy,  to  which  the  persons  employed  or  formerly  employed  by  the
competent authorities receiving the information are subject.

Article 22

Precautionary measures

Where  the  competent  authority  of  a  host  Member  State  finds  that  the  issuer  or  the
security holder has committed irregularities or infringed its obligations, it shall refer
its findings to the competent authority of the home Member State.

If, despite the measures taken by the competent authority of the home Member State
or because such measures prove inadequate, the issuer or the security holder persists
in infringing the relevant  legal  or  regulatory  provisions,  the  competent  authority  of
the  host  Member  State  shall,  after  informing  the  competent  authority  of  the  home
Member State, take, in accordance with Article 3(2),all the appropriate measures in
order to protect investors. The Commission shall be informed of such measures at the
earliest opportunity.

54

Chapter VI

Implementing measures

Article 23

Committee

1.

2.

3.

4.

1.

2.

The Commission shall be assisted by the European Securities Committee, instituted
by Article 1 of Decision 2001/528/EC.

Where  reference  is  made  to  this  paragraph,  the  regulatory  procedure  laid  down  in
Article  5  of  Decision  1999/468/EC  shall  apply,  in  compliance  with  Article  7  and
Article  8  thereof,  provided  that  the  implementing  measures  adopted  in  accordance
with that procedure do not modify the essential provisions of this Directive.

The period provided for in Article 5(6) of Decision 1999/468/EC is three months.

Without prejudice to the implementing measures already adopted, on the expiry of a
four-year  period  following  its  entry  into  force,  the  application  of  the  provisions  of
this Directive concerning the adoption of technical rules and decisions in accordance
with the procedure referred to in paragraph 2 shall be suspended. On a proposal from
the Commission, the European Parliament and the Council may renew the provisions
concerned in accordance with the procedure laid down in Article 251 of  the  Treaty
and, to that end, shall review them prior to the expiry of the four-year period.

Article 24

Sanctions

Without  prejudice  to  the  right  of  Member  States  to  impose  criminal  sanctions,
Member  States  shall  ensure,  in  conformity  with  their  national  law,  that  the
appropriate  administrative  measures  may  be  taken  or  civil  sanctions  imposed  in
respect of the persons responsible, where the provisions adopted in accordance with
this  Directive  have  not  been  complied  with.  Member  States  shall  ensure  that  those
measures are effective, proportionate and dissuasive.

Member States shall provide that the competent authority may disclose to the public
every measure taken or sanction imposed for infringement of the provisions adopted
pursuant to this Directive, save where such disclosure would seriously jeopardise the
financial markets or cause disproportionate damage to the parties involved.

55

Article 25

Judicial review

Member States shall  ensure  that  decisions  taken  under  laws,  regulations,  and  administrative
provisions adopted in accordance with this Directive are subject to review by the courts.

Chapter VII

Transitional and final provisions

Article 26

Transitional provisions

1.

2.

3.

Notwithstanding Article 5(3) of this Directive, the home Member State may exempt
from  disclosing  financial  statements 
in  accordance  with  Regulation  (EC)
No.1606/2002:

(a)

all issuers for the financial year starting on or after 1 January 2005;

(b)

issuers  referred  to  in  Article  9  of  Regulation  (EC)  No.1606/2002  for  the
financial years starting on or after 1 January 2005 and 1 January 2006.

Notwithstanding Article 11(2), a shareholder shall notify the issuer at the latest on 15
January  2005  of  the  proportion  of  voting  rights  and  capital  it  holds,  in  accordance
with  Articles  9  and  10,  with  issuers  at  that  date,  unless  it  has  already  made  a
notification containing equivalent information before that date.

Notwithstanding  Article  11(4),  an  issuer  shall  in  turn  disclose  the  information
received in those notifications no later than 31 January 2005.

The  home  Member  State  may  exempt  debt  security  issuers  from  disclosing  half-
yearly  financial  reports  in  accordance  with  Article  5  for  three  years  following  the
entry into force of this Directive, provided that:

(a)

the last application for admission of the issuer’s debt securities to trading on a
regulated market in any Member State was made before the entry into force of
Directive […/…/EC] [Prospectus], and

(b)

the home Member State decided to allow issuers to benefit from the provisions
of Article 27 of Directive 2001/34/EC.

After  the  end  of  the  three-year  period,  exemptions  may  be  granted  only  in
accordance with Article 8.

56

Article 27

Transposition

1.

2.

Member States shall take the measures necessary to comply with this Directive by 31
December 2004 at the latest. When Member States adopt those provisions they shall
contain a reference to this Directive  or be accompanied  by  such  a  reference  on  the
occasion  of  their  official  publication.  Member  States  shall  determine  how  such
reference is to be made.

Where  Member  States  adopt  measures  pursuant  to  Articles  3(1)  or  26,  they  shall
immediately  communicate  those  measures  to  the  Commission  and  to  the  other
Member States.

Article 28
Amendments

With  effect  from  the  date  specified  in  Article  27(1),  Directive  2001/34/EC  is  amended  as
follows:

(1) 

In Article 1, points (g) and (h) are deleted;

(2) 

Article 4 is deleted;

(3) 

In Article 6, paragraph 2 is deleted;

(4) 

In Article 8, paragraph 2 is replaced by the following:

“2. Member  States  may  make  the  issuers  of  securities  admitted  to  official  listing
subject  to  additional  obligations,  provided  that  those  additional  obligations
apply generally for all issuers or for individual classes of issuers”;

(5) 

Articles 64 to 97 are deleted;

(6) 

Articles 102 and 103 are deleted;

(7) 

In Article 107(3), the second subparagraph is deleted;

(8) 

Article 108 is amended as follows:

a)

b)

c)

d)

in  paragraph  2(a),  the  words  “periodic  information  to  be  published  by  the
companies of which shares are admitted” are deleted;

in paragraph 2, point (b) is deleted,

in paragraph 2, point ( c ) (iii) is deleted,

in paragraph 2, point (d) is deleted

References to the deleted provisions shall be construed as references to the provisions of this
Directive.

57

Article 29

Review

The Commission shall by 30 June 2007 at the latest report on the operation of this Directive
to the European Parliament and to the Council.

Article 30

Entry into force

This Directive shall enter into force on the twentieth day following that of its publication in
the Official Journal of the European Union.

Article 31

Addresses

This Directive is addressed to the Member States.

Done at Brussels, […]

For the European Parliament
The President
[…]

For the Council
The President
[…]

58

IMPACT ASSESSMENT FORM

THE IMPACT OF THE PROPOSAL ON BUSINESS WITH SPECIAL REFERENCE
TO SMALL AND MEDIUM-SIZED ENTERPRISES( SMEs)

TITLE OF PROPOSAL

DIRECTIVE  OF  THE  EUROPEAN  PARLIAMENT  AND  OF  THE  COUNCIL  on  the
harmonisation  of transparency  requirements  with  regard  to  information  about  issuers  whose
securities are admitted to trading on a regulated market and amending Directive 2001/34/EC

DOCUMENT REFERENCE NUMBER

COM (XXX)

THE PROPOSAL

1.

Taking  account  of  the  principle  of  subsidiarity,  why  is  Community  legislation
necessary in this area and what are its main aims?

A  single  financial  market  should  promote  the  competitiveness  of  the  European
economy,  lowering  the  cost  of  capital  whilst  enhancing  the  level  of  disclosure  of
information about security issuers with the aims of sound investor protection and the
properly functioning of financial markets.

An integrated financial market should be founded on a harmonised set of principles
and  rules.  The  objective  of  these  rules  will  be  to  ensure  a  high  level  of  investor
protection at Community level enabling Member States to effectively reduce national
barriers  for  issuers  seeking  access  to  regulated  markets  in  other  Member  States.
Given the diversity of issues covered under this directive, the issuer’s home Member
State  should  be  allowed 
imposing  more  stringent  or  additional  disclosure
requirements.

This  action  responds  to  the  Lisbon,  Stockholm  and  Barcelona  European  Council’s
request to achieve an integrated financial market and in particular to give priority to
securities markets legislation provided for in the Financial Services Action Plan and
in  the  report  by  the  Committee  of  Wise  Men  on  the  Regulation  of  European
Securities Markets.

THE IMPACT ON BUSINESS

2.

Who will be affected by the proposal?

–  which  sectors  of  business:  Publicly  traded  companies  whose  securities  are
admitted  to  trading  on  regulated  markets  in  Member  States.  This  will  cover  all
sectors of business. Investment funds holding securities on behalf of their clients.
Auditors/accountants  being  in  charge  of  auditing/establishing  the  companies
financial statements (accounts).

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–  which  sizes  of  business  (what  is  the  concentration  of  small  and  medium-sized
firms):  All  publicly  traded  companies,  including  small  and  medium  sized  firms.
However, it should be taken into account that small firms are normally not quoted
on  regulated  markets.  Proportionality  has  been  taken  into  account  in  that  SMEs
are  not  subject  to  too  stringent  reporting  requirements.  In  practice,  large
companies (“blue chip companies”) already provide for more detailed information
to securities markets.

–  are there particular geographical areas of the Community where these businesses
are found? No. But trading of specific securities (shares,  bonds, derivatives) can
concentrate in specific geographical areas.

3.

What will business have to do to comply with the proposal?

they  will  be 

Security  issuers  will  have  to  meet  the  requirements  on  annual  financial  reporting
within a  given  deadline of three months, on  interim financial reporting  (half-yearly
financial report and quarterly financial information) within a deadline of two months.
In  addition, 
to
statutes/instruments of incorporation, as well as other internal rules on the acquisition
of  own  shares  and  on  remunerating  managers  by  securities,  including  on  stock
options. In the context of security holders meetings, publicly traded  companies will
be  required  to  allow  proxy  participation,  but  will  also  be  provided  with  the
opportunity  to  invite  its  shareholders  to  decide  on  the  introduction  of  electronic
means.

to  make  public  all  amendments 

required 

Companies who hold securities will be required to more frequently and swifter notify
to issuers the acquisition or disposal of major holdings in securities. As a necessary
complement,  the  security  issuer  concerned  will  be  required  to  make  such
notifications public.

4.

What economic effects is the proposal likely to have?

–  on employment

Positive effects on job creation can be expected. By facilitating and lowering the cost
for raising capital directly on the European securities markets improving the amount
of new financial resources  available to business.  In  addition,  improved  information
standards protecting investors can be expected to create more loyalty and confidence
of investors to capital markets.

–  on investment and the creation of new businesses

Efficient  European  securities  markets  should  improve  the  overall  macroeconomic
performance  of  the  economy  and  the  confidence  of  investors  into  the  economy,
producing higher economic growth with positive impact on business innovation and
productivity (including encouraging venture capital growth).

–  on the competitiveness of businesses

Positive impact can be expected due to  the lower cost of raising  capital throughout
the  European  Union  and  new  robust  Community  disclosure  requirements  to  which
host  Member  States  may  not  add  further  disclosure  requirements.  This  does  not

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prejudice  other  requirements  for  admission  of  securities  to  trading  on  a  regulated
market.

5.

Does the proposal contain measures to take account of the specific situation of small
and medium-sized firms (reduced or different requirements etc)?

The proposal provides for further technical rules to be adopted under the comitology
decision.  Where  the  Commission,  through  the  consultation  process  in  co-operation
with  the  Committee  of  European  Securities  Regulators,  has  identified  potential
negative effects of its proposals for detailed technical implementing measures, it will
have reassessed its measures in order to take due account of those concerns.

The  impact  of  periodic  reporting  requirements  (annual  financial  report,  interim
financial reports) on SME’s has in particular  been assessed in two open and public
consultations  with  the  business  community,  market  participants,  and  investors.  The
conclusion  has  been  that  the  reward/risk  profile  of  SME’s  quoted  on  regulated
markets,  in  particular  of  young  companies,  do  not  justify  specific  exemptions.  In
fact,  investors  encountered  particular  problems  with  SME’s  whose  securities  are
admitted to trading on a  regulated market (e.g. Neuer Markt in Germany), and it is
introduced  even  higher  reporting
worth  while  noting 
requirements for young SME’s (UK and LUX). This line is particularly supported by
the Committee of European Securities Regulators in which the national supervisory
authorities for securities markets are members.

that  Member  States 

This  being  said,  the  contents  of  the  periodic  reports  will  be  defined  in  different
contexts where tailor-made solutions for SMEs are provided for (in the company law
directives with respect to the management report) or will be provided for (in the IAS
Regulation  with  respect  to  financial  statements  for  which  specific  international
accounting standards are under preparation).

CONSULTATION

6.

List the organisations which have been consulted about the proposal and outline their
main views (see also section 2.1. of the explanatory memorandum).

The recommendations of the Lamfalussy Committee of Wise Men on Regulations on
European Securities Markets called for early, broad and systematic consultation. The
Stockholm European Council endorsed this in March 2001, the European Parliament
in February 2002.

On 11 July 2001, the Commission published a first consultation document in which it
presented its preliminary views for reforming disclosure requirements at Community
level. It received 91 replies from all the Member States, but also from third countries.
In December 2001, it published a summary of the replies received.

In the light of the reactions received, the Commission published a second and  final
consultation  on  8  May  2002  and  set  a  deadline  of  two  months  for  replies.  In  this
document,  it  revised  its  preliminary  views,  draw  the  attention  of  the  public  to  the
relationship  of  this  initiative  to  other  initiatives  under  the  “disclosure  and
transparency  agenda”  (such  as  the  IAS-Regulation,  the  forthcoming  Directives  on
Market  Abuse  and  Prospectus)  and  presented  in  particular  a  detailed  outline  on  its
ongoing work towards a final Commission proposal.

61

third 

from 

countries 

On its second consultation, the Commission received again 93 responses from all the
following
Member  States, 
European/International  Organisations:  European  Savings  Banks  Group  (ESBG),
International Primary Market Association (IPMA), Federation of European Securities
Exchanges  (FESE),  the  European  Federation  for  Retirement  Provision  (EFRP),  the
European  Newspaper  Publisher’s  Association  (ENPA),  European  Federation  of
Accountants  (FEE),  Union  of  Industrial  and  Employer’s  Confederations  of  Europe
(UNICE), Euroshareholders.

from 

also 

and 

the 

In  addition,  the  Committee  of  European  Securities  Regulators  (CESR)  replied  in
October  2002  to  the  second  consultation  document.  In  its  reply,  it  stressed  that
supervision of corporate governance issues should be addressed whilst admitting that
transparency rules is only an indirect tool and does not concern rules governing the
functioning  of  a  company.  It  also  asked  for  consistent  solutions  between
requirements  related  to  annual  financial  reporting  and  the  registration  document
under  the  forthcoming  Prospectus  Directive.  It  fully  supports  the  introduction  of
quarterly  financial  reporting  (except  for  one  member),  but  has  reservations  to
specific  solutions  for  SMEs.  It  feels  that  half-yearly  financial  reporting  for  debt
security  issuers  would  adequately  reflect  the  risk  profile  of  such  securities.  It
welcomed the enhanced disclosure requirements on voting and capital structures, but
stressed  the  need  for  detailed  implementing  rules  ensuring  an  efficient  system.  On
the  ways  of  how  financial  information  should  be  disseminated,  CESR  is  not
convinced  whether  web  postings  on  the  issuer’s  internet  sites  represents  an
appropriate publication.

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