Commission staff working document - The review of the operation of Directive 2004/109/EC: emerging issues Accompanying document to the Report from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions - Operation of Directive 2004/109/EC on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market COM(2010)243
Date: 2010-05-27
Institutions: European Commission
Subjects: approximation of laws, consumer information, dissemination of information, financial legislation, impact study, investment, official market, securities

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EUROPEAN COMMISSION 

Brussels, 27.5.2010 
SEC(2009) 611 

COMMISSION STAFF WORKING DOCUMENT 

The review of the operation of Directive 2004/109/EC: emerging issues 

Accompanying document to the 

Report from the Commission to the Council, the European Parliament, the European 
Economic and Social Committee and the Committee of the Regions  
Operation of Directive 2004/109/EC on the harmonisation of transparency requirements 
in relation to information about issuers whose securities are admitted to trading on a 
regulated market 

COM(2010)243 

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   EN 

 
 
 
  
 
 
 
 
Table of contents 

Introduction ................................................................................................................................ 3 

1. 

1.1. 

1.2. 

2. 

2.1. 

2.2. 

2.3. 

2.4. 

2.5. 

2.6. 

2.7. 

2.8. 

The transposition of the Transparency Directive: impact and compliance.................. 3 

Impact of the Transparency Directive.......................................................................... 3 

Compliance with the Transparency Directive requirements........................................ 5 

The review of the operation of the Directive: emerging issues ................................... 6 

Smaller listed companies and disclosure requirements................................................ 7 

Financial disclosures: do quarterly disclosures contribute to short-termism? ........... 10 

Information about major holdings of voting rights: maximum harmonisation? ........ 11 

Information about major holdings of voting rights: specific issues........................... 14 

Corporate governance-related, non-financial and other disclosure obligations......... 16 

Access to information on listed companies: storage of "regulated information"....... 17 

Non-regulated markets and disclosure requirements ................................................. 19 

Issues for clarification and/or technical adjustments ................................................. 20 

Annex 1 – The Transparency Directive and its importance for financial markets................... 21 

Annex 2 – Methodology for this report.................................................................................... 31 

Annex 3 – The Transposition of the Transparency Directive .................................................. 35 

Annex 4 – The use by the Commission of implementing powers ........................................... 39 

Annex 5 – Cost of compliance with the Directive ................................................................... 46 

Annex 6 – Issues for technical adjustments in the Directive ................................................... 54 

Annex 7 – Aggregation of holdings of voting rights and financial instruments? .................... 59 

Annex 8 – Lowering of thresholds for the notification of major holdings .............................. 63 

Annex 9 – Disclosure of holdings of cash-settled derivatives ................................................. 68 

Annex 10 – The question of stock lending and empty voting.................................................. 80 

Annex 12 – Enhanced disclosure requirements for significant holdings ................................. 95 

Annex 13 – Alternative systems for the notification of major holdings of voting rights ...... 100 

Annex 14 – Corporate governance-related and Non-financial disclosures............................ 103 

Annex 15 – Access to and storage of information on listed companies ................................ 108 

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INTRODUCTION 

1. 

2. 

3. 

This  Commission  staff  working  document  reviews  the  operation  of  Directive 
2004/109/EC1  on  the  harmonisation  of  transparency  requirements  in  relation  to 
information  about  issuers  whose  securities  are  admitted  to  trading  on  a  regulated 
market  (hereinafter  the  "Transparency  Directive").  It  supplements  the  Report  from 
the Commission on the operation of this Directive. 

The Transparency Directive requires issuers of securities in regulated markets within 
the  EU  to  ensure  appropriate  transparency  for  investors  through  the  disclosure  of 
regulated  information  and  its  dissemination  to  the  public  throughout  the  EU.  Such 
information  consists  of  financial  reports,  information  on  major  holdings  of  voting 
rights and information disclosed pursuant to Article 6 of the Market Abuse Directive. 

The  objectives  pursued  by  the  Transparency  Directive  are  important  to  financial 
markets and recognised by international standard setting  bodies, such as IOSCO or 
the OECD. The current financial crisis demonstrates that the disclosure of accurate, 
comprehensive and timely information about securities issuers is essential in order to 
build  sustained  investor  confidence  and  allow  an  informed  assessment  of  their 
business performance and assets (see Annex 1 for further detail on the Transparency 
Directive and its importance for financial markets). 

This  Commission  staff  working  document2  is  based  in  part  on  external  studies 
conducted  for  the  Commission  and  information  collected  from  stakeholders  and 
other  external  sources  (see  Annex  2  for  further  detail  on  the  methodology  of  this 
report).  This  document  (1)  describes  the  impact  of  the  Transparency  Directive  and 
how it has been complied with; and (2) presents the main issues emerging from the 
application of the Directive. This document is completed by several annexes. 

1. 

THE  TRANSPOSITION  OF  THE  TRANSPARENCY  DIRECTIVE: 
COMPLIANCE 

IMPACT  AND 

1.1. 

Impact of the Transparency Directive 

4. 

1 

2 
3 
4 

the  stakeholders  who  participated 

The  External  Study  on  the  application  of  the  Transparency  Directive  conducted  on 
behalf  of  the  Commission  (hereinafter  "the  External  Study")3  reflects  that  a  strong 
the 
majority  of 
Transparency  Directive  to  be  useful  for  the  proper  and  efficient  functioning  of  the 
market.  About  two  thirds  of  those  stakeholders  consider  that  the  provisions  of  the 
Directive  are  appropriate  to  achieving  its  objectives  of  providing  accurate, 
comprehensive and timely information to the market4. The stakeholders' perception is 

the  survey  consider 

in 

Directive  2004/109/EC  of  the  European  Parliament  and  of  the  Council  of  15  December  2004  on  the 
harmonisation of transparency requirements in relation to information about issuers whose securities are 
admitted  to  trading  on  a  regulated  market  and  amending  Directive  2001/34/EC,  OJ  L  390  of 
31.12.2004, p.38. See: www.ec.europa.eu/internal_market/securities/transparency/index_en.htm 
This document does not reflect the views of the Commission as such, but rather those of its staff only. 
Mazars (2009). See Annex 2 of this paper for further information on the External Study.  
See Mazars (2009), section 1.7 (suitability of the provisions of the Directive).  

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also  that  the  main  obligations  the  Transparency  Directive  are  sufficiently  clear5. 
Concerning  the  provisions  regarding  the  dissemination  of  regulated  information, 
stakeholders'  perception  is  that  this  is  satisfactory  and  they  generally  believe  that 
regulated  information  disclosed  by  issuers  reaches  investors,  except  perhaps  in  the 
case of information disclosed by smaller listed companies6.  

In  terms  of  economic  impacts  of  the  Directive  on  financial  markets,  research 
conducted so far is not conclusive7. It seems rather that the Transparency Directive is 
neutral: while perceived as a simplifying factor for primary market issuance, there is 
a  lack  of  empirical  evidence  to  back  up  the  perception.  As  concerns  listings  in 
regulated markets, the Directive does create neither obstacles, nor incentives. Other 
rules  (e.g.  the  Prospectus  Directive)  are  considered  more  important  in  this  regard. 
Also,  there  is  no  economic  evidence  of  the  impact  of  the  Directive  with  regard  to 
making comparable information available to the market, resulting in particular from 
the low harmonisation achieved8.  

Two  points  have  been  frequently  made  regarding  the  general  architecture  of  the 
Directive  in  the  survey  conducted  by  the  External  Study.  Firstly,  the  minimum 
harmonisation  character  of  the  Transparency  Directive  allows  Member  States  to 
adopt  more  stringent  requirements9.  Thus  the  transposition  of  the  Directive10  is 
relatively uneven as a result of different national requirements (see Annex 3 for more 
detail  on  the  transposition  process  and  Annex  4  regarding  the  use  of  implementing 
powers  by  the  Commission).  More  stringent  national  requirements,  in  particular 
regarding  the  notification  of  major  holdings  of  voting  rights,  are  perceived  as 
problematic  by  stakeholders11.  This  results  in  real  and  costly  implementation 

Ibid., section 1.4 (clarity of obligations).  
Ibid.,  sections  4.1  and  4.3  (dissemination  of  regulated  information).  See  in  particular  section  4.3.2.5 
(access  to financial  information on a  cross-border basis  of  mid  and small  caps)  about  the  poor  cross-
border dissemination of regulated information by smaller listed companies and the low interest shown 
by analysts and investors in those companies (referred to as the "black hole" problem). 
See Mazars (2009), section 1.5 (impact of the directive). See also another recent external study recently 
conducted  for  the  European  Commission  (CRA  International  (2009)).  The  aim  of  this  study  was  to 
evaluate the economic impact of the whole Financial Services Action Plan of 1999. The impact of the 
Transparency  Directive  was  evaluated  together  with  other  so-called  information  measures  aiming  at 
harmonising information disclosure and increasing market confidence. Overall, information disclosure 
measures within the FSAP were assessed to have a mixed impact on the market. 
See  CRA  International  (2009),  p.173.  According  to  this  study,  participants  representing  institutional 
investors indicated the importance of the availability of comparative information as investors are then 
able  to  systematically  compare  information  between  companies.  This  includes  the  ability  to  take 
information that is available in comparable electronic form and apply internal models to assess whether 
the companies meet investment objectives. In particular, interviewees made reference to the ability to 
more  easily  monitor  investments  that  are  made  -  both  because  accounting  information  is  comparable 
and  also  because  it  is  more  freely  available  than  in  the  past.  Interviewees  also  drew  attention  to  the 
benefits  to  risk  management  from  the  additional  information  available  since  this  enables  them  to 
understand the risks involved with the investments they were making.  
The  Commission  staff  examined  the  question  of  more  stringent  national  requirements  in  2008  and 
produced  a  specific  report  with  detailed  information  on  this  matter,  which  should  be  regarded  as  a 
complement to this paper. See European Commission (December 2008). 
In 2008 CESR conducted a comprehensive mapping of the national requirements by each Member State 
pursuant to the Transparency Directive. See CESR (September 2008). 
See generally Europe Economics (2009); and Mazars (2009), sections 1.3, 1.4.3 and 3.3.7.  

5. 

6. 

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problems12. This raises the question as to whether the current regime (i.e. a minimum 
harmonisation  directive)  is  the  appropriate  tool  to  achieve  an  effective  level 
harmonisation of transparency requirements in the EU13.  

Secondly,  the  absence  of  more  flexible  rules  for  smaller  listed  companies  makes 
requirements too demanding  and costly  according to such companies, thus  creating 
market inefficiency14.  

7. 

Additionally,  it  appears  that  the  Directive's  obligations  need  to  be  adapted  to 
innovation in financial markets. In particular, insufficient disclosure of stock lending 
practices  seemed  to  have  increased  the  risk  of  empty  voting  and  lack  of  disclosure 
regarding  cash-settled  derivatives  has  led  to  problems  with  "hidden  ownership"15. 
Finally, the progress towards the establishment of a pan-European system of storage 
of regulated information, with a view to facilitate investors' access to information, is 
slow16 and the impact of the Directive in this area has been insufficient17.  

1.2. 

Compliance with the Transparency Directive requirements 

8. 

9. 

12 

13 

14 
15 
16 

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18 
19 
20 
21 

22 

23 

A  review  of  issuers'  practices  shows  that  issuers  generally  comply  with  financial 
reporting obligations and that this is also the perception of stakeholders18. Moreover, 
issuers  appear  to  voluntarily  publish  more  information  than  the  minimum 
requirements  regarding  half-yearly  and  quarterly  financial  information.  Financial 
information disclosed is considered useful and sufficient for investment  purposes19. 
Also,  the  simplification  of  language  requirements  for  disclosure  of  financial 
information introduced in 2004 has been particularly welcome20.  

The cost of compliance with the obligations of the Transparency Directive21 does not 
appear,  prima facie, particularly  high22.  Concerning  issuers'  expenditure,  more  than 
two  thirds  of  stakeholders  surveyed  in  the  External  Study23  did  not  consider  the 
compliance  cost  with  disclosure  of  financial  information  for  issuers  to  be  too 
onerous,  albeit  small  and  medium  sized  listed  companies  are  more  sensitive  to  the 

Mazars (2009), section 1.8 (level of harmonisation). See also European Commission (December 2008) 
and Annex 5 – Section D of this paper. See as well European Parliament (September 2008), recital J. 
The fact that no harmonisation has yet been achieved is confirmed by another study conducted for the 
Commission,  which  explains  that  although  the  Transparency  Directive  has  made  progress  towards 
harmonisation  "there  remain  numerous  differences  between  Member  States  which  would  need  to  be 
overcome in order to see impacts through this channel and hence no harmonisation impact has yet been 
achieved". See CRA International (2009), p. 173-174 and 182. 
Mazars (2009), section 1.9 (SMEs and non regulated markets).  
Ibid., section 3.6 (financial innovation) 
See the Commission Recommendation 2007/657/EC of 11 October 2007 on the electronic network of 
officially appointed mechanisms for the central storage of regulated information referred to in Directive 
2004/109/Ec of the European Parliament and of the Council, OJ L 267, 12.10.2007, p.16.  
Mazars (2009), section 4.4 (storage of regulated information), in particular p. 137. 
Ibid., section 2.3 (compliance review). 
Ibid., section 2.4 (suitability of periodic information disclosed). 
Ibid., executive summary, point 5..  
It should be noted that the bulk of the requirements on the content (e.g. accounting standards) of annual 
and half-yearly financial reports are not contained in the Transparency Directive. 
See  Europe  Economics  (2009),  a  recent  study  conducted  for  the  European  Commission  on  cost  of 
compliance with selected financial services directives (see Annex 5 of this paper for further detail on 
this study). This study survey the costs incurred by some categories of financial institutions. 
Mazars (2009), section 2.3.5 (compliance cost). 

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cost of compliance. The introduction of the "Home Member State rule" as well as the 
simplification  of  the  language  regime  for  financial  disclosures  in  2004)  should,  in 
principle, have contributed to reducing issuers' costs24.  

However, the situation is different for investors. There are increased costs for cross-
border  investors  resulting  from  the  insufficiently  harmonised  requirements  of  the 
Directive25:  some  larger  asset  managers  view  the  Transparency  Directive  as 
something  of  a  missed  opportunity  to  reduce  costs  due  to  the  minimum 
harmonisation approach adopted in its implementation26.  

THE REVIEW OF THE OPERATION OF THE DIRECTIVE: EMERGING ISSUES 

A  number  of  issues  emerge  from  the  review  of  the  operation  of  the  Transparency 
Directive.  First  and  foremost,  the  debate  is  raised  as  to  whether  the  transparency 
rules  should  be  specifically  adapted  to  smaller  listed  companies  with  a  view  to 
maintaining  and  also  increasing  the  attractiveness  of  regulated  markets  for  this 
category of issuers (see Section 2.1)27. 

Other  important  emerging  issues  concerning  the  scope  of  the  Directive  are:  the 
usefulness  of  quarterly  financial  disclosures  (see  Section  2.2);  the  need  for  greater 
harmonisation of the rules on notification of major holdings28 (see Section 2.3); the 
need for greater sophistication of the Directive rules so as to cover market trends and 
innovations29  (see  Sections  2.4  to  2.6);  or  the  question  of  the  transparency  rules  in 
the non-regulated markets  (see  Section 2.7). These issues are equally related to the 
possibility  to  reduce  the  costs  of  compliance  with  the  Directive30,  notably  those 
associated  to  notification  of  major  holdings31  and  those  incurred  by  smaller  listed 
companies. 

According  to  the  "Home  Member  State  Rule"  (cf.  Article  3(1)),  issuers  are  only  subject  to  the 
obligations set out by their Home Member State (normally the one of incorporation) but not to those of 
the  Host  Member  State.  This  "Home  Member  State  Rule"  should  avoid  the  dual  (or  multiple) 
application of rules to issuers. See European Commission (December 2008), §§ 7 and 8. Nevertheless, 
according  to  the  External  Study,  companies  not  listed  in  their  Member  State  of  incorporation  have 
expressed frustration as the Home Member State principle was to simplify matters, whereas in reality, 
they  do  not  feel  that  this  is  the  case  –  dual  reporting  and  compliance  with  two  different  sets  of  rules 
would  continue  to  exist  due to  supervisors'  practices going beyond  what  is  required by  the Directive. 
See Mazars (2009), section 1.1. 
See above §6 of this paper. See generally European Commission (2008), and in particular §9.  
Europe Economics (2009), in particular p. 76. See also CRA International (2009) p.175 on this point: 
"In the case of the Transparency Directive, a lack of harmonisation, means gains from this source are 
limited  compared  to  those  which  could  potentially  be  achieved."  See  also  European  Commission 
(December  2008),  §§  11  to  13  in  relation  to  increased  costs  associated  to  more  stringent  national 
measures. Mazars (2009) also supports these conclusions, see section 1.1 of the Study report. 
See for instance Mazars (2009), Possible Improvements 2 and 4. 
See  for  instance  Mazars  (2009),  Possible  Improvements  1,  5  and  7.  See  also  European  Commission 
(December 2008).  
See for instance Mazars (2009), Possible Improvements 6 and 8 to 14. 
Reduction  of  administrative  burden  for  EU  businesses  is  an  important  objective  of  the  European 
also: 
Commission. 
See 
http://ec.europa.eu/enterprise/policies/better-regulation/administrative-burdens/index_en.htm 
and 
http://ec.europa.eu/governance/better_regulation/admin_costs_en.htm  
For  instance,  the  Commission  has  recently  proposed  that  powers  are  granted  to  the  future  European 
Securities Markets Authority with a view to develop a standard form to be used for the notification of 

Commission 

European 

(January 

2007). 

See 

2. 

10. 

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29 
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11. 

Finally, while there are no major compliance problems, the review of the operation 
of the Directive shows that some adjustments to the text of the Directive would be 
beneficial in the interest of improved clarity32 (see Section 2.8).  

2.1. 

Smaller listed companies and disclosure requirements 

12. 

An  important  recurrent  issue  is  how  to  make  access  to  regulated  market  more 
attractive33  for  small  and  medium-sized  enterprises  (SMEs).  The  argument  is 
regularly  advanced  to  the  Commission  staffs  that  the  rules  appear  to  be  designed 
primarily  for  the  "blue-chip"  companies  in  the  first  place  and  that,  for  SMEs  or 
smaller listed companies34, the costs of being listed are proportionally higher35. In the 
External  Study36,  stakeholders’  views37  are  in  favour  of  a  distinct  transparency 
regime  for  SMEs  (understood  as  smaller  listed  companies)38,  in  particular  those  of 
financial  analysts,  retail  investors  and  issuers  of  shares  (especially  mid-  and  small 
caps)39.  Stock  exchanges  and  institutional  investors  are  however  more  reluctant  to 

major holdings of voting rights and financial instruments, with a view to simplify the application of the 
rules  by  cross-border  investors.  See  draft  Article  7  of  the  Commission  Proposal  of  26.10.2009  for  a 
Directive  of  the  European  Parliament  and  of  the  Council  amending  Directives  1998/26/EC, 
2002/87/EC,  2003/6/EC,  2003/41/EC,  2003/71/EC,  2004/39/EC,  2004/109/EC,  2005/60/EC, 
2006/48/EC, 2006/49/EC, and 2009/65/EC in respect of the powers of the European Banking Authority, 
the European Insurance and Occupational Pensions Authority and the European Securities and Markets 
Authority; COM(2009)576final. See also Mazars (2009), recommendation 13, which also supports the 
need for a single e-notification form. 
See  for  instance,  Mazars  (2009),  section  1.4.3  (assessment  of  the  legal  clarity  for  the  operational 
functioning of the Directive). 
In order to raise capital at competitive cost, the main alternatives to listing shares in regulated markets 
would be private equity, banking loans, acceding alternative (non-regulated) markets or issuing debt. It 
should be noted however that issuers of debt securities admitted to trading in regulated markets are also 
subject to the obligations of the Transparency Directive. 
The  concept  of  ‘smaller  listed  companies’  has  not  been  defined  for  the  purposes  of  this  paper,  but 
would  encompass  larger  companies  than  SMEs  (as  traditionally  defined  in  EU  law).  Recently,  the 
European Commission, when referring to this category of listed companies, used the expression "issuers 
with reduced market capitalisation" in a proposal for directive (Proposal for a Directive of the European 
Parliament and of the Council amending Directives 2003/71/EC on the prospectus to be published when 
securities  are  offered  to  the  public  or  admitted  to  trading  and  2004/109/EC  on  the  harmonisation  of 
transparency  requirements  in  relation  to  information  about  issuers  whose  securities  are  admitted  to 
trading  on  a  regulated  market;  23.9.2009;  COM(2009)  491  final.  See  in  particular  recital  11).  In  this 
paper, the less technical expression "smaller listed companies" will be preferred. 
Interestingly,  anecdotal  information  collected  in  2008  suggests  that  the  costs  associated  with  the 
Transparency  Directive  obligations  do  not  seem  to  be  the  main  driver  for  issuers'  choice  on  non-
regulated  markets  as  opposed  to  regulated  markets.  See  European  Commission  (December  2008), 
Annex 7.  
Mazars (2009), section 1.9.1. 
Of the 14 EU MS surveyed, a strong opinion in favour of a specific regime is expressed in ES, FR, IT, 
LU and SK. 
In Mazars (2009), reference is made to market capitalisation (between €250 M and €1 billion) and not 
the  turnover,  nor  the  number  of  employees,  as  the  relevant  criterion  for  defining  smaller  listed 
companies in this context. 
On this issue, see also the recent report prepared at the request of the French Ministry of Economics: 
Demarigny (March 2010). This report explains that the EU Directives have set requirements, applicable 
to all issuers irrespective of their size, representing a barrier too high for small and medium companies 
in  terms  of  compliance  and  costs.  In  addition,  it  explains  that  the  trading  and  the  liquidity  has 
concentrated  on  major  listed  companies  of  the  leading  indexes:  on  average,  93%  of  listed  companies 
that are not in the largest market capitalisations benefit from less than 7% of the liquidity. This reports 

32 

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34 

35 

36 
37 

38 

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this.  For  Exchanges,  in  particular,  the  differentiation  line  should  be  made  between 
regulated markets on the one hand and Exchange regulated or alternative markets on 
the  other  hand,  for  which  rules  should  be  much  lighter  (see  Section  2.7  of  this 
paper)40. 

According  to  that  External  Study,  “a  specific  regime  for  SMEs,  limited  to  well-
identified measures, would create a more favourable environment for listing and […] 
it would contribute to the efficiency of the market. […].”41 

The  scope  for  simplification  of  the  Transparency  Directive  rules  for  smaller  listed 
companies, and therefore achieving savings, is however limited42 – which leads those 
who  oppose  a  specific  regime  for  smaller  listed  companies  to  argue  that  the 
requirements are not too demanding and that if a company is not able to meet them it 
should not be listed at all.  

13. 

However  there  are  specific  simplification  measures  which  could  be  envisaged, 
without undermining investor protection, such as for instance: (i) providing for more 
flexible deadlines to the disclosure of financial reports; (ii) alleviating the obligation 
to publish quarterly financial information; (iii) harmonising the maximum content of 
reports; or (iv) facilitating cross border visibility of smaller listed companies.  

40 
41 
42 

pleads  for  the  establishment  of  a  proportionate  regulatory  and  financial  environment  for  small  and 
medium-sized issuers listed in Europe. 
Mazars (2009), section 1.9.2. 
Mazars (2009), Possible Improvement n°2. 
The bulk of the issuers' costs associated with the Transparency Directive relate to the preparation of the 
financial  reports.  However,  the  accounting  rules,  as  such,  are  not  regulated  by  the  Transparency 
Directive but by different EU (or national) instruments. 
There is, however, a parallel reflection within the Commission on the simplification of accounting rules 
for  SMEs.  The  Commission’s  Directorate  General  for  Internal  Market  and  Services  published  a 
consultation  paper  to  gain  an  understanding  of  EU  stakeholders'  views  on  the  International  Financial 
Reporting  Standard  (IFRS)  for  Small  and  Medium-sized  Entities  (SMEs)  issued  by  the  International 
Accounting  Standards  Board  on  9  July  2009.  Deadline  for  comments:  12  March  10.  See: 
http://ec.europa.eu/internal_market/consultations/2009/ifrs_for_sme_en.htm  

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14. 

(i)  More  flexible  deadlines  to  the  disclosure  of  financial  reports43.  Smaller  listed 
companies generally express their dissatisfaction about the strict two-month deadline 
for  the publication of the half-yearly financial report, which is difficult for them to 
respect  since  they  are  less  well-equipped  or  have  fewer  resources  devoted  to  the 
production of financial information. The difficulty is greater and more costing when 
half-yearly accounts should be audited by an external auditor44.  

This  strict  deadline  also  leads  to  an  unintended  bottleneck  of  disclosed  half-yearly 
financial reports at the end of the second month – in particular for those issuers with 
accounting  years  corresponding  to  the  calendar  year  (end  August).  This  bottleneck 
disrupts the market, and analysts and the financial media in any event focus on top 
companies. Moreover, this contributes to the poor cross-border visibility for smaller 
listed companies (also referred to as the “black hole” problem)45 resulting from the 
disclosure of financial information46.  

15. 

Some  smaller  listed  companies  have  tried  to  overcome  the  difficulty  by  publishing 
the half-yearly reports on time and holding the analysts' meeting after the deadline. 
However, this has sometimes created artificial price movements as the judgement on 
the results is often different once explanations are given by management. Therefore, 
smaller  listed  companies  are  reluctant  to  separate  the  publication  from  the  analysts 
meeting47. 

Spreading  the  publications  over  an  extended  period  of  time  could  therefore  both 
alleviate  the  burden  for  smaller  listed  companies  and  contribute  to  a  more  fluid 
functioning of the market.  The  suggestion of having different deadlines for  smaller 
listed  companies  is  supported  by  an  important  number  of  stakeholders48,  has  been 
recommended  by  IOSCO49  and  is  currently  practiced  in  the  US50.  It  is  also 
recommended in the External Study in order to enhanced market efficiency51. 

16. 

(ii)  Alleviating  the  obligation  to  publish  quarterly  financial  information.  In  this 
context,  the  question  could  be  asked  whether  the  disclosure  by  smaller  listed 
companies  of  interim  management  statements (or, as  appropriate,  quarterly reports) 
leads to tangible benefits (see also Section 2.2). Possible ways forward could be to 

43 
44 
45 

46 

47 
48 
49 
50 
51 

Mazars (2009), possible improvement n°2. 
Additionally, the cost of such audit is presumably higher considering the short deadline. 
While large investors seem to consider that the Directive has facilitated access to information disclosed 
by  smaller  listed  companies,  many  smaller  listed  companies  generally  complain  about  the  lack  of 
interest by foreign investors. Investors and analysts are considered to concentrate on major companies. 
As outlined by the external study, “market players seem to be in a “catch 22” situation: SMEs regret 
the  low  level  of  cross-border  interest  of  analysts  and  investors  and  therefore  are  reluctant  to  spend 
money  to  ensure  wider  dissemination  (translation  into  English  in  particular).  On  their  side,  analysts 
and  investors  believe  that  they  do  not  receive  sufficient  information  from  non  domestic  SMEs,  and 
therefore are reluctant to invest in those companies.” See Mazars (2009), section 4.3.2.5. 
In some Member States the cost of publication of regulated information in printed press is invoked as a 
particular  problem  for  smaller  listed  companies.  Smaller  listed  companies  expressed  the  view  that 
posting information on their website should be sufficient to comply with the dissemination obligation of 
the Directive. See Mazars (2009), section 4.3.1.1. 
See generally Mazars (2009), section 2.5.1. 
Although a majority would oppose. See Mazars (2009), section 2.5.2. 
IOSCO (February 2010), p.23. 
See Mazars (2009), section 6. 
Ibid., Possible Improvement n°4. 

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17. 

18. 

reduce  substantially  the  information  to  be  provided  by  those  companies  in  those 
interim management statements or to remove that obligation, at least temporarily52.  

(iii)  Harmonising  the  maximum  content  of  reports.  It  has  also  been  suggested  that 
obligations for listed companies could be made simpler if the content of the annual 
financial  report  was  subject  to  maximum  harmonisation  regulation  at  EU  level53. 
Such  rationalisation  could  also  integrate  disclosures  of  corporate  governance  and 
non-financial  nature  (see  Section  2.5).  This  point  could  at  least  be  considered  in 
relation to smaller listed companies. 

(iv)  Facilitating  cross  border  visibility  of  smaller  listed  companies.  Finally, 
regarding the poor cross-border visibility issue, improvements on the mechanisms to 
access  regulated  information  over  time  could  be  a  means  of  increasing  interest  of 
investors in smaller listed companies (see Section 2.6).  

2.2. 

Financial disclosures: do quarterly disclosures contribute to short-termism? 

19. 

20. 

52 

53 

54 

55 

56 

57 

The  short-term vision  of  both issuers of securities  and investors has been criticised 
by many voices reacting to the financial crisis54. In this context, one could wonder to 
what  extent  the  requirement  for  issuers  of  shares  to  provide  quarterly  financial 
information55 contributes to such short-termism: indeed, investors take this quarterly 
information into account for making their investment decisions. 

Removing  the  Transparency  Directive  requirement  to  publish  quarterly  financial 
information  would  therefore  appear,  at  first  sight,  as  alleviating  the  short-term 
pressure  on  issuers  of  shares56  and  would  therefore  be  coherent  with  recent 
Commission  initiatives  encouraging  financial  institutions  and  issuers  to  establish 
incentives  for  a  longer-term  vision57.  In  practice,  however,  it  could  be  anticipated 

Mazars  (2009)  suggests  considering exempting  issuers  from  selected  disclosure  obligations  during  an 
initial period after listing. See Mazars (2009), possible improvement n°2, p. XIII and p. 13. 
On  a  related  issue,  see  the  recommendation  of  a  recent  external  study  regarding  the  possible 
harmonisation  of  the  content  of  corporate  governance  statements  in  a  harmonised  standard  form.  See 
Riskmetrics (2009), p. 181 and seq. 
This  issue  is  largely  linked  to  the  question  of  the  corporate-governance  related  disclosures  that  are 
included in the annual financial report (see Annex 14). It is also linked to the scope of application of 
Article 8(2) of Directive 2001/34/EC (see Annex 6; see also European Commission (December 2008), 
Annex 4). 
For  instance,  recent  research  related  to  risk-taking  and  compensation  schemes  in  the  financial  sector 
suggests  that  short  term  investors  (including  institutional  investors)  incentivize  (or  put  pressure  on) 
management  using  short-term  incentives  (such  as  compensation  schemes)  to  take  large  bets  on  risky 
propositions  with  a  view  to  meeting,  inter  alia,  quarterly  targets.  See  Cheng,  Hong  &  Scheinkman 
(2009), section IV.E. 
Either  quarterly  financial  reports  or  interim  management  statements  as  defined  in  Article  6  of  the 
Transparency Directive. This requirement does only apply to issuers of shares. Concerning the national 
transposition  of  Article  6,  see  European  Commission  (December  2008),  notes  to  table  4  in  pp.  30-31 
and CESR (September 2008), replies to questions 95-97.  
It  should  however  be  noted  that  pursuant  to  the  Market  Abuse  Directive,  issuers  of  shares  (among 
others)  are  expected  to  immediately  disclose  to  the  market  any  inside  information  that  could  have  a 
significant effect on the price of the share. 
The European Commission has, for instance, recommended that remuneration of directors in issuers and 
financial  institutions  takes  into  account  the  long  term  behaviour  of  companies.  See  European 
Commission  Recommendation  2009/384/EC  of  30.4.2009  on  remuneration  policies  in  the  financial 
services  sector,  OJ  L  120,  15.5.2009,  p.  22;  and  Commission  Recommendation  2009/385/EC  of 

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that  many  issuers  (in  particular  large  ones)  would  continue  to  disclose  quarterly 
financial information even in the absence of a legal obligation in EU law58, so such 
removal would most likely only benefit smaller listed companies and certainly have a 
cost reduction effect for them59. 

Additionally,  transparency  of  quarterly  financial  information  is  well  perceived  by 
market participants, which generally find such information valuable and think that it 
enhances the transparency and efficiency of markets60. This requirement was indeed 
one of the most important changes brought by the Transparency Directive in 2004.  

21. 

A related problem is whether the level of detail of the Transparency Directive rules 
on  disclosure  of  quarterly  financial  information  is  sufficient  to  facilitate  issuers' 
compliance and to allow for predictability of the information to be disclosed. There 
is a market demand for more detailed rules in this regard, in particular regarding the 
content  of  interim  management  statements:  "issuers  and  users  of  information 
expressed  a  desire  of  a  more  detailed  definition  of  the  content  of  the  interim 
management  statements 
to  ensure  more  predictability  and 
comparability  (over  time,  cross-border  and  across-sector).  However,  there  is  a 
balance  to  be  found,  to  let  issuers  decide  which  information  is  most  relevant  and 
pertinent ant to avoid a box ticking exercise"61.  

(Article  6(1)) 

2.3. 

Information about major holdings of voting rights: maximum harmonisation? 

22. 

As  mentioned  in  Section  1.2  above,  the  uneven  transposition  of  the  obligations  on 
information  about  major  holdings62  results  in  compliance  difficulties  for  investors. 

58 

59 

60 
61 

62 

30.4.2009 complementing Recommendations 2004/913/EC and 2005/162/EC as regards the regime for 
the  remuneration  of  directors  of  listed  companies,  OJ  L  120,  15.5.2009,  p.  28.  See  also  European 
Commission (April 2009).  
The  suppression  of  the  obligation  in  EU  law  does  not  automatically  entail  the  suppression  of  such 
obligation in national law, which may maintain more stringent requirements. Additionally, many large 
companies  are  also  listed  in  the  US,  where  the  requirement  for  disclosure  of  quarterly  reports  would 
remain.  Moreover,  some  regulated  markets  require  the  publication  of  quarterly  financial  reports, 
irrespective of what the law says (e.g. in Sweden). Finally, experience shows that when the market is 
used  to  a  certain  level  of  transparency,  issuers  (at  least  large  ones)  would  continue  to  provide  such 
transparency even when legal obligations are suppressed. See for instance the experience in the United 
Kingdom with regard to the "preliminary statements" in Mazars (2009), section 1.7 in fine. 
See §§ 13-16 of this paper. Smaller companies will be facing a chicken & egg dilemma: since I do not 
attract investors' interest to my company, why spending money in preparing quarterly information?; at 
the same time, if I do not disclose quarterly information, how can I attract the interest of investors? 
Mazars (2009), sections 2.6.3 and 2.6.4.  
Mazars  (2009),  section  2.6.5.  See  also  section  1.8.1  of  that  Study.  See  additionally  CESR  (February 
2008), p. 3, where respondents to a CESR's call for evidence on possible level 3 work on this Directive 
identified the need to establish "principles to prepare interim management statements". See also CESR 
(October  2009),  questions  3  to  9,  which  try  to  clarify  part  of  the  requirements  of  Article  6  of  the 
Transparency Directive. On the question of comparability, see also Ernst & Young (2009). 
The absence of maximum harmonisation for the disclosure of financial reports is of lesser importance, 
as a result of the home Member State rule: issuers are no longer subject to duplicity of obligations in 
case of double listing; while investors face multiple different national rules when complying with their 
obligations  on  information  on  major  holdings.  See  European  Commission  (December  2008),  in 
particular §§4-9 and Annex 4. 
However, the External Study on the operation of the Directive underlines that stakeholders also point at 
the  lack  of  harmonisation  in  relation  to  the  requirements  on  the  content  of  the  Interim  Management 
Statement (as well as to the practical functioning of the officially appointed mechanisms for the storage 
of regulated information). See Mazars (2009), section 1.8.1. 

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The  provisions  of  the  Directive  on  this  issue  are  considered  to  be  the  most 
problematic according to the perception of stakeholders and the legal analysis made 
in  the  External  Study63.  The  fundamental  principles  are  not  questioned:  the 
information  disclosed  is  considered  useful  for  investment  purposes64  and  the 
obligations  are,  in  principle,  not  an  unreasonable  burden65.  However,  in  practice,  it 
appears  that  holdings  are  calculated  in  a  different  manner  from  country  to  country 
because  of  divergences  in  definitions,  scope  of  the  obligations,  exemptions  and 
thresholds66. As a result the question is raised as to whether the current regime (i.e. a 
minimum  harmonisation  directive67)  on  information  about  major  holdings  is  the 
appropriate tool to achieve an effective harmonisation of transparency requirements 
in the EU.  

23. 

The stakeholders surveyed in the External Study are largely in favour of single EU 
rules  (without  national  differences)  for  disclosures  of  major  holdings,  without 
significant geographical differences. Supervisors do not follow this trend68. 

24. 

Several arguments are advanced in support of maximum harmonisation requirements 
in  this  area.  Firstly,  one  rule  at  EU  level  would  facilitate  compliance  by  investors 
with  cross-border  investments69,  as  well  as  diminishing  their  compliance  costs70. 
National specificities, even those connected to contract law or company law, would 
not  be  insurmountable71  and  convergence  in  this  area  should  be  possible  without 

63 
64 
65 
66 

67 

68 
69 

70 
71 

See Mazars (2009), section 3.1.. 
Ibid. section 3.3.1. 
Ibid. section 3.3.2. 
Ibid., sections 1.8.1 and 3.3.7 and seq. On the question of more stringent requirements, see generally, 
European Commission (December 2008), Europe Economics (2009) and Mazars (2009), section 1.3.  
It  should  be  noted  that  the  traditional  counterbalance  to  minimum  harmonisation,  namely  regulatory 
competition, does not work for issuers of shares in this area as a result of the Home Member State rule: 
issuers of shares are regulated by the rules of the Member State where their registered office is located 
irrespective of whether their shares are listed in a regulated market of that Member State or not. 
Mazars (2009), section 3.8.3.1. 
For instance, according to Mazars (2009), few stakeholders believe that the Directive has facilitated the 
cross-border declaration of thresholds (see section 3.3.4 of that Study).  
See generally Section 1.2 and Annex 5 – Section D of this paper. 
The main difficulty in this regards appears to be the question of when the “acquisition” (or “disposal”) 
of the voting rights becomes effective, which would then trigger the notification obligation. However, a 
solution  to  this  issue  was  included  in  Article  9  of  Commission  Directive  2007/14/EC  regarding  the 
interpretation of Article 12(2) of the Transparency Directive. 

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25. 

26. 

72 
73 

74 

75 
76 

77 

78 
79 

80 
81 

losing  transparency72.  Furthermore,  rules  of  maximum  harmonisation  nature  would 
facilitate the convergence towards a single rule book in the securities area73.  

The External Study concludes that the Transparency Directive has not succeeded in 
simplifying  the  notification  of  major  holdings  in  the  EU  so  far  and  that  maximum 
harmonisation  is  desirable  in  this  area.  For  this  study,  the  maximum  harmonisation 
could include: "the definition of the category of financial instruments or products to 
be  included  in  the  calculation  of  the  threshold74,  the  exemptions,  the  timelines  for 
notification  and  disclosures  as  well  as  the  threshold  levels  (initial  and  subsequent) 
and the content of the notification".75  

If  full  harmonisation  is  not  be  possible  or  desirable76,  a  reinforced  harmonisation 
might  also  be  a  possible  option:  this  would  entail  at  a  minimum  a  substantial 
convergence on a maximum number of issues77; voluntary limitation on the adoption 
of  more  stringent  requirements78;  strongly  coordinated  common  application  policy 
through CESR79 (including guidance80) and development of facilitation tools for the 
private  sector  (such  as  electronic  standard  forms  for  the  notification  of  major 
holdings81). It should be noted that the Commission has recently proposed to entrust 

On the contrary, the trend is towards more transparency. See Section 2.4 of this paper.  
See for instance, the Presidency Conclusions of 18/19 June 2009 European Council meeting, Council 
document 11225/2/09 REV 2, §20. 
The  existing  regime  lacks  consistency  regarding  the  calculation  of  the  thresholds  triggering  the 
disclosure obligations, leading to transparency gaps. The Directive establishes an obligation to disclose 
major holdings on the one hand, and an obligation to disclose holdings of financial instruments, on the 
other hand. As a result, an investor holding 4,9% of voting rights in shares and an option to call 4,9% of 
voting  rights  through  the  holding  of  financial  instruments  covered  by  Article  13  is  not  required  to 
disclose any of these positions to the market under the Transparency Directive rules. The Commission 
had proposed in 2003 the aggregation of these two categories of holdings for the purposes of calculating 
whether the thresholds were reached or crossed. However, the Council and Parliament did not follow 
the Commission’s views. It should be noted however, that in some Member States, holdings of voting 
rights  and  of  financial  instruments  are  aggregated  for  the  purposes  of  calculating  whether  the 
notification obligation is triggered. For a detailed description of this issue, see Annex 7. 
Mazars (2009), possible improvement n°7 and generally section 3. 
It may be possible that convergence is only possible for certain issues, but not for all. Alternatively, it 
might be considered necessary to grant flexibility at national level in order to swiftly address new issues 
raised by financial innovation. See for instance, European Commission (December 2008), footnote 52, 
where  it  is  underlined  that  more  stringent  national  measures  may  be  a  driver  of  possible  future 
convergence.  
When  asked  on  this  question  separately  from  the  one  on  the  single  rules,  the  majority  of  the 
stakeholders surveyed in the external study on the operation of the Directive were also largely (about 
two thirds) favourable to a reduction of the national differences on the notification of major holdings. 
Mazars (2009), section 3.3.2. 
See European Commission (December 2008), §§22-24. 
In  the  future,  through  the  soon  to-be-created  European  Securities  Markets  Authority  and  its  new 
powers, such as the possibility to develop binding technical standards. 
See European Commission (December 2008), §§25-27 and Mazars (2009), Possible Improvement n°3. 
Ibid.  European  Commission  (December  2008),  §27.  A  common  electronic  standard  form  for  the 
notification of major holdings is largely supported by the stakeholders surveyed in the External Study: 
despite  some  doubts  expressed  by  supervisors,  a  clear  majority  (above  60%)  favours  the  use  of  such 
form. Indeed, this study also recommends the creation of a single e-notification form. According to this 
study, "considerable simplification can be obtained by making a common electronic notification form 
for the EU mandatory especially if additional harmonisation is successfully introduced in the Directive. 
Specificities in national company law could be taken into account in subsections of the common form. 
The  electronic  form  could  be  conceived  in  such  a  way  that  basic  error  would  be  signalled  prior  to 

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the future European Securities Markets Authority with the development of technical 
standards for an electronic standard form for the notification of major holdings82.  

2.4. 

Information about major holdings of voting rights: specific issues 

27. 

28. 

29. 

82 

83 

84 
85 

86 

87 
88 

89 

Whether  maximum  or  reinforced  harmonisation  of  the  obligations  on  information 
about  major  holdings  is  desirable,  the  review  of  the  operation  of  the  Directive  has 
revealed a number of specific issues which deserve closer examination. 

The  Transparency  Directive  obligations  on  information  about  major  holdings  of 
voting  rights  have  a  dual  objective:  on  the  one  hand,  they  provide  the  market  with 
information  about  significant  transactions  and  trends,  therefore  contributing  to 
making  informed  investment  decisions,  to  the  prevention  of  market  abuse  and 
ultimately to market efficiency; on the other hand, they facilitate the identification of 
major  shareholders  for  company  law  or,  more  recently,  corporate  governance 
purposes83. There seems indeed to be an evolution towards facilitating the interaction 
between issuers and their shareholders. However, there are doubts as to whether the 
current  rules  capture  all  the  relevant  market  movements  and  also  allow  issuers  to 
effectively know who their shareholders are. 

In the first place, the existing regime lacks consistency regarding the application of 
the  thresholds  triggering  the  disclosure  obligations84,  leading  to  an  uneven 
application of the rules. Additionally, the existing thresholds are considered by many 
to be too high to capture relevant shareholders movements. In some Member States 
(accounting  for  around  60%  of  total  market  capitalisation  in  the  EU),  the  initial 
disclosure  threshold  of  the  Directive  (5%)  has  been  lowered  to  2%  or  3%.  The 
European Parliament85 and market experts86 are in favour of setting a 3% threshold in 
the  Directive.  However,  the  External  Study  explains  that  stakeholders  views,  as 
expressed  in  the  survey  conducted,  are  mixed  on  the  need  to  lower  the  initial 
disclosure threshold to 3% (or to 2%)87. While there are arguments in favour of88 and 
against89 the lowering the initial disclosure threshold, the External Study concludes 

validation,  and  the  form  routed  to  the  relevant  issuer  and  competent  authority."  See  Mazars  (2009), 
Possible Improvement n°13. 
European  Commission  Proposal  for  a  Directive  of  the  European  Parliament  and  of  the  Council 
amending  Directives  1998/26/EC,  2002/87/EC,  2003/6/EC,  2003/41/EC,  2003/71/EC,  2004/39/EC, 
2004/109/EC, 2005/60/EC, 2006/48/EC, 2006/49/EC, and 2009/65/EC in respect of the powers of the 
European  Banking  Authority,  the  European  Insurance  and  Occupational  Pensions  Authority  and  the 
European  Securities  and  Markets  Authority;  COM(2009)0576  final  of  26  October  2009.  See  draft 
Article 7 modifying Articles 12, 13 and 25 of the Transparency Directive. 
See  European  Commission  (December  1985),  §2  and  European  Commission  (March  2003),  section 
4.5.1. See also generally Schouten (2009).  
See also footnote 74 and Annex 7. 
The  European  Parliament  called  on  the  Commission  in  2008  to  prepare  legislation  lowering  the 
threshold  for  the  disclosure  of  major  holdings  to  3%.  See  European  Parliament  (September  2008), 
Annex to the Resolution.  
Although warning about setting too lower disclosure levels, ESME expressed an opinion in favour of 
setting the 3% threshold. See ESME (December 2007), p.5. 
Mazars (2009), section 3.4.1. 
Such  as  such  as  better  capturing  shareholders'  movements  of  interest  to  the  market  or  facilitating 
shareholders' activism. See Mazars (2009), ibid. and European Commission (December 2008), §15. 
Notably the impact on the market of corporate control. See European Commission (December 2008), 
§§16 and 21. 

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30. 

that  lowering  the  initial  threshold  to  3%  could  be  a  possible  improvement  to  the 
Directive, to the extent that such measure permits maximum harmonisation without 
disrupting the market90. See also Annex 8. 

Moreover, the rules of the Transparency Directive do not adequately respond to new 
market developments resulting from financial innovation. Disclosure of cash-settled 
financial instruments is not required by the Directive, despite the fact that they may 
be used with a view to acquire control of voting rights91. Some Member States have 
already reacted to this risk by introducing legislation requiring disclosure of holdings 
of voting rights. Supervisors92 and market experts93 are calling for an EU regime in 
this  area.  Market  participants  would  also  be  favourable  to  the  introduction  of 
disclosure  obligations  regarding  cash-settled  financial  instruments94.  The  External 
Study also recommends requiring disclosure of cash-settled equity swaps or similar 
financial products95. For more detail on this issue, see Annex 9.  

There  are  also  calls  to  reduce  the  risk  of  “empty  voting”96  resulting,  in  particular, 
from the use of securities lending schemes97. This problem is also connected to the 
so-called “record date capture” issue98. The External Study shows a large stakeholder 
support  to  introduce  measures  to  prevent  “empty  voting”99  and  suggest  limiting 
empty  voting  practices100.  The  study  describes  different  ways  to  address  this 
problem:  from  the  request  for  more  transparency  to  the  restriction  or  even  the 
prohibition of empty voting. For more detail on this issue, see Annex 10. 

31. 

Thirdly,  issuers  associations  argue  that  the  possible  transparency  improvements 
described  in  the  precedent  paragraphs  would  not  be  sufficient  for  corporate 
governance purposes. They favour the introduction of mechanisms allowing them to 
identify the ultimate investor (with smaller holdings) so as to be able to engage into 
real  shareholders-issuers  dialogue.  These  mechanisms  would  result  in  enhanced 
transparency  towards  the  issuer  but  not  necessarily  towards  the  market.  For  more 
detail on this issue, see Annex 11.  

90 
91 

92 
93 
94 

95 
96 

97 
98 

99 
100 

Mazars (2009), possible improvement n°8, pp. XIV and 77. 
The so-called “hidden ownership” problem (use of equity derivatives to conceal economic ownership of 
shares). See generally Schouten (2009) as well as Hu & Black (2006) and Hu & Black (2007). 
CESR (January 2010).  
ESME (November 2009) 
According to the external study on the operation of the Directive, 90% of the stakeholders expressing an 
opinion  on  this  issue  favour  the  inclusion  of  cash-settled  equity  swaps  or  cash-settled  contracts  for 
differences  in  the  calculation  of  thresholds  (fully  or  above  a  certain  threshold).  See  Mazars  (2009), 
sections 3.1 and 3.6.3. 
Mazars (2009), Possible Improvement n°11. 
“Empty  voting”  is  the  reverse  situation  to  “hidden  ownership”:  the  exercise  of  voting  power  without 
corresponding economic interest. See generally Schouten (2009) as well as Hu & Black (2006) and Hu 
& Black (2007). 
On the treatment of securities lending by the Directive, see Annex 10.  
The situation in which the investor identified as shareholder on the record date sells his shares between 
such  date  and the  date  of  the  general  meeting,  but  remains  legally  entitled  to  vote  although  it  has  no 
longer an economic interest n the issuer. If the selling transaction takes place two/three days before the 
general  meeting,  the  market  will  not  necessarily  be  informed  of  such  transaction  before  the  general 
meeting. 
See Mazars (2009), section 3.6.2. 
Mazars (2009), Possible Improvement n°10. 

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32. 

Furthermore, even when shareholders with major holdings of voting rights are well 
known,  calls  are  being  made  to  enhance  the  disclosure  requirements  for  significant 
holdings.  In  some  Member  States,  large  investors  are  already  requested  to  disclose 
their  intentions  as  regards  their  holdings  and  how  they  financed  their  acquisition. 
There is some support for extending such obligations across EU countries101. At the 
same time, it should be noted that such enhanced transparency requirements may also 
have  adverse  consequences,  in  particular  in  the  market  for  corporate  control102.  In 
any  event,  the  External  Study  concludes  by  recommending  the  introduction  of 
enhanced disclosure requirements for significant holdings103. 

Additionally,  the  question  of  whether  large  investors  should  disclose  their  voting 
policies remains on the table. For more detail on these issues, see Annex 12. 

33. 

Finally,  the  comparison  with  the  regime  on  major  holdings  disclosures  in  selected 
third countries shows the existence of alternative approaches104. Annex 13 provides a 
summary description of the most interesting features of third countries regimes. 

2.5. 

Corporate governance-related, non-financial and other disclosure obligations  

34. 

101 

102 
103 

104 

105 
106 

In  addition  to  the  disclosure  of  financial  reports  required  by  the  Transparency 
Directive, EU law also requires (or, as appropriate, recommends) listed companies to 
make  some  periodic  non-financial  (but  corporate  governance-related)  disclosures, 
generally in connection with the annual financial report. This relates in particular to 
the so-called Corporate Governance Statement105; the Report under Article 10 of the 
Takeover  Bids  Directive  (when  not  included  into  the  Corporate  Governance 
Statement)  or  the  disclosures  related  to  the  remuneration  policy  of  the  company106. 

According to the external study on the operation of the Directive, more than 50% of the stakeholders 
surveyed  support  that  investors  acquiring  a  certain  significant  holding  of  voting  rights  (such  as 
10%,15% or 20%) should be required to provide more detailed information than under the current rules. 
See Mazars (2009), section 3.7. 
See European Commission (December 2008), §21. 
“12.  Introduce  enhanced  disclosure  requirements  for  significant  holdings:  the  applicable  thresholds 
should be significant enough to be meaningful (for example 10% and 20%). Information could include 
a statement regarding the investor’s intent (regarding the potential acquisition of control, the desire to 
continue to buy shares, the willingness to change the composition of the Board, the intention to modify 
the  strategy  of  the  company),  if  possible  some  information  on  the  sources  of  finance  and  the  time 
horizon of the investment, and the status of the investor (fully exposed to the economic risk of the shares 
or not).” Mazars (2009), Possible Improvement n°12. 
In China and the US, a more complex system takes into account the relative position of the shareholder 
or  its  intent.  For  instance,  in  China,  investors’  disclosure  obligations  are  different  depending  on  their 
relative position within the issuer. In the US, simplified requirements are applicable to passive investors 
(not  seeking  to  acquire  or  influence  control  of  the  issuer)  and  obligations  are  different  depending  on 
whether  the  investor  makes a  first disclosure  for  that  issuer or  an  update  on  a  previous  disclosure.  In 
Switzerland, the thresholds for the disclosure voting rights and of financial instruments given access to 
voting rights are not combined for the purposes of triggering the notification obligation. However, the 
moment a threshold is crossed, full information shall be disclosed on all positions. See generally Mazars 
(2009), section 6. See also IOSCO (June 2009a), Annex A. 
Article 46a of the 4th Company Law Directive. 
See Commission Recommendation 2004/913/EC and Commission Recommendation 2009/385/EC.  
See also recital 13 of the Transparency Directive, where it is stated that the European Parliament and 
the Council welcomed the Commission's commitment (in 2004) to consider enhancing the transparency 
on remuneration issues as well as the Commission's intention to make a Recommendation on this topic 
in the future (which eventually become Recommendation 2004/913). 

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35. 

The  issue  has  been  raised  as  to  whether  these  disclosure  requirements  should  be 
integrated into the Transparency Directive regime. See Annex 14 for more detail.  

A related issue concerns disclosure of Environmental, Social and Governance (ESG) 
data made  by listed companies.  Article 46(1)(b) of the 4th Company Law Directive 
and  36(1)  of  the  7th  Company  Law  Directive107  requires  companies  to  include 
information relating to environmental and employee matters in their annual report to 
the  extent  necessary  for  an  understanding  of  the  company's  development, 
performance  or  position.  Recital  14  of  the  Transparency  Directive  also  contains  an 
indirect  reference  to  disclosure  of  this  kind  (on  disclosures  by  oil  and  mining 
companies  of  payments  to  governments).  A  number  of  stakeholders  are  regularly 
requesting 
legislation  regarding  ESG 
disclosures.  In  their  view,  the  Transparency  Directive  appears  as  a  possible 
appropriate  vehicle  to  integrate  such  disclosures  alongside  financial  reporting 
obligations of listed companies, and to address some of the perceived short-comings 
of current ESG disclosure rules and practice. See Annex 14 for more detail.  

improve  and  strengthen  European 

to 

36. 

Finally,  debate  regarding  disclosures  in  relation  to  short  selling  has  led  to  the 
consideration of the possible application of the dissemination and storage rules of the 
Directive  to  certain  types  of  short  selling-related  disclosures,  which  could  become 
caught  by  the  definition  of  "regulated  information"  in  the  same  manner  as  certain 
disclosures requested under the Market Abuse Directive are caught108. 

2.6. 

Access to information on listed companies: storage of "regulated information" 

37. 

38. 

107 

108 

109 

110 
111 

The External Study shows that the dissemination rules of the Directive requiring the 
pushing  of  regulated  information  to  media  are  positively  perceived109.  The  poor 
cross-border dissemination of regulated information by smaller listed companies and 
the low interest shown by analysts and investors in such information (and a fortiori 
in  those  companies)  remains,  however,  an  issue  (the  so-called  "black  hole" 
problem110). It has also been outlined that some Member States still require a paper-
based  publication  of  some  regulated  information  in  newspapers,  which  would  go 
against the modernisation spirit of the Directive111. 

The impact of the Directive rules on storage of regulated information is however less 
encouraging  (for  more  detail  on  access  to  regulated  information,  see  Annex  15). 
Access to historical information on listed companies on a pan-European scale has not 
been  simplified:  interested  parties  need  to  go  through  27  different  national 

Article 4(5) of the Transparency Directive requires that the annual management report is drawn up in 
accordance with Article 46 of the 4th Company Law Directive and, if the issuer is required to prepare 
consolidated accounts, in accordance with Article 36 of the 7th Company Law Directive.  
See the consultation paper issued by CESR in 2009 (CESR (July 2009b), pp.5-6, 9 and 14), although its 
final report of March 2010 leaves the question open (CESR (March 2010), p. 10). On the short selling 
issue, see generally IOSCO (June 2009b). 
Mazars (2009), section 4.3. Interestingly, this Study outlines that even if practices are very diverse in 
Member  States,  the  way  companies  comply  with  the  obligation  to  disseminate  their  Regulated 
information has not radically changed with the Directive. It also provides some information explaining 
that no enforcement by supervisors of the obligation to publish on an "EU wide" basis is happening. 
Mazars (2009), sections 4.3.2.5 and 4.3.2.6. See also §14 of this Report. 
Mazars (2009), section 4.3.1.1. However, see also recital 8 of the Transparency Directive. 

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databases112  and  the  electronic  network  interconnecting  them  is  only  at  an  initial 
stage  with  rather  modest  results  so  far  (see  Annex  15).  If  compared  with  the  US, 
where  a  single  electronic  database  exists113,  the  EU  situation  is  not  positive.  This 
raises  the  question  as  to  whether  the  Directive  storage  mechanisms,  as  currently 
designed,  are  able  to  fulfil  the  role  of  "gate"  to  historical  financial  information  on 
listed companies at pan-European level114.  

39. 

A more centralised storage system115 would certainly be able do so by facilitating the 
work of financial intermediaries and analysts on a wider EU scale116. It would also 
allow  to  address  the  black  hole  problem  in  a  longer  perspective.  This  is  also  the 
Commission's long term vision, as described in its 2008 Recommendation on storage 
of regulated information117, as well as IOSCO's recommendation118.  

Enhancing the network of national storage mechanisms (or the ex novo creation of a 
centralised  storage  system)  would  require  solving  governance  issues,  in  particular 
who  should  take  responsibility  for  enhancing  such  network:  actors  such  as  the 
European  Securities  Market  Authorities119,  the  network  of  European  business 
registries120, the European Central Bank121 or the Office for the Harmonisation of the 
Internal Market122 could a priori be concerned. Decisions on costs, notably regarding 
the  initial123  investment,  would  also  need  to  be  taken124.  The  Commission  will  be 

112 

113 
114 

115 

116 
117 

118 
119 

120 
121 

122 

123 
124 

In  the  Directive,  these  databases  are  referred  to  as  "officially  appointed  mechanism  for  the  central 
storage  of  regulated  information"  (cf.  Article  21(2)).  Additionally,  according  to  Mazars  (2009), 
stakeholders complaint about the lack of harmonisation on the practical functioning of these databases 
(see section 1.8.1 of that Study). 
Mazars (2009), sections 4.4.3.5 and 6.4.3. See also http://www.sec.gov/edgar.shtml 
According  to  Mazars  (2009),  stakeholders  would  use  the  companies'  websites  as  primary  source  of 
information rather than the storage mechanism, although they would trust more the latter. See section 
4.4.3 of that Study. 
This would require, as minimum, a single point of access (not necessarily a single database) and some 
harmonisation of input standards: e.g. electronic standard forms for the notification of major holdings 
and of other disclosed  information;  use  of  interactive  data  (such  as XBRL)  etc.  It  would  also  require 
some  interaction  with  other  databases  on  securities  (e.g.  CESR's  mifid  database,  ECB's  centralised 
securities database etc.). 
See Mazars (2009), section 4.4.3.6. 
Commission Recommendation 2007/657/EC of 11 October 2007 on the electronic network of officially 
appointed  mechanisms  for  the  central  storage  of  regulated  information  referred  to  in  Directive 
2004/109/EC  of  the  European  Parliament  and  of  the  Council,  OJ  L  267,  12.10.2007,  p.16.  See  in 
particular §22. 
IOSCO (February 2010), p.25. 
ESMA  will  be  CESR  successor.  CESR  should  prepare  guidelines  in  2010  regarding  the  future 
development  of  the  electronic  network  of  storage  mechanisms  (cf.  Recommendation  2007/657  of  the 
European  Commission,  §§21  and  22).  CESR  is  also  running  the  so-called  Mifid  database  and  is 
currently providing a temporary initial network of storage mechanism. See Annex 15 of this paper. 
See www.ebr.org  
The European Central Bank runs a "centralised securities database" which could have the potential to 
integrate regulated information on issues. See European Central Bank (February 2010).  
OHIM is an EU agency that manages the EU trademark registry. As such, it has the know-how to keep 
registries  and  could  potentially  be  an  alternative  to  develop  a  pan-European  storage  system.  See 
http://oami.europa.eu  
Understood as one-off costs as opposed to regular on-going costs. 
See  in  this  regard  Decision  No  716/2009/EC  of  the  European  Parliament  and  of  the  Council  of  16 
September  2009  establishing  a  Community  programme  to  support  specific  activities  in  the  field  of 
financial services, financial reporting and auditing, OJ L253, 25.9.2009, p.8. In principle this Decision 
allows  for  EU  (partial)  financing  of,  inter  alia,  certain  CESR  activities,  including  information 

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launching in 2010 a feasibility study on the development of a pan-European storage 
system for regulated information, which should be addressing those issues.  

40. 

Should  a  more  centralised  storage  system  neither  be  possible  nor  desirable,  certain 
stakeholders appear in favour of a simpler (and radical) solution: imposing minimum 
standards  for  issuers  to  store  regulated  information  on  their  website125  and  inviting 
the  users  of  financial  information  to  use  Internet  search  facilities126.  This 
decentralisation would eliminate the storage mechanisms as such127. 

2.7. 

Non-regulated markets and disclosure requirements 

41. 

125 

126 
127 

128 

129 

130 
131 

132 

The rules of the Transparency Directive do not apply to non-regulated markets (also 
known  as  alternative  or  exchange-regulated  markets)  and  Member  States  have 
generally not extended the applicability of the detailed rules of the Directive to those 
markets128.  At  the  same  time,  lighter  transparency  rules  are  generally  applicable  to 
issuers  of  securities  traded  in  those  markets129.  This  situation  is  well  accepted  by 
stakeholders and, according to the External Study, there is no support for extending 
the  Transparency  Directive  requirements  to  issuers  whose  securities  are  traded  on 
such exchange-regulated or alternative markets130. Stock exchanges, in particular, see 
those  markets  with  lighter  rules  and  lower  compliance  costs  as  an  attractive 
possibility for smaller companies to get access to capital markets (see Section 2.1).  

Concerning  the  facilitation  tools131  linked  to  the  Transparency  Directive,  it  is 
however  conceivable  to  make  them  available  to  market  participants  in  the  non-
regulated markets132. 

technology projects of EU dimension. See also Decision No 922/2009/EC of the European Parliament 
and  of  the  Council  of  16  September  2009  on  interoperability  solutions  for  European  public 
administrations (ISA), OJ L 206, 3.10.2009, p.20. 
Storage of regulated information on the website of the issuer is already compulsory in several Member 
States. Disclosure of corporate governance related information on the issuers websites is also requested 
by the Shareholders Rights Directive. In any event, stakeholders would already be using the companies' 
websites as primary source of information. See Mazars (2009), section 4.4.3. 
Mazars (2009), section 4.4.3.6, in fine. 
The External Study seems to suggest a middle solution: a single EU access point at CESR level with a 
direct  Internet  link  to  a  compulsory  and  harmonised  section  of  the  issuers’  website  where  the 
information would be stored. See Mazars (2009), Possible Improvement n°14. 
The  application  of  the  Transparency  Directive  rules  to  alternative  markets  would  imply  higher 
compliance costs for issuers of securities traded on those markets. Those costs would in particular result 
from  the  need  to  present  financial  statements  in  IFRS  and  its  related  auditing  and  legal  costs.  The 
disseminations rules would also imply higher compliance costs for issuers. 
See European Commission (December 2008), Annex 7. Those lighter rules generally request issuers to 
disclose at least an annual financial report, although not necessarily presenting the financial statements 
in IFRS.  
Mazars (2009), section 1.9.2. 
E.g. possible use of (adapted) electronic standard forms for notification of major holdings (see Section 
2.3) or of the storage mechanism (see Section 2.6) 
For instance, the Belgian officially appointed mechanism for the storage of regulated information will 
soon be in a position to include information on companies whose securities are traded in an alternative 
market in Belgium. 

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2.8. 

Issues for clarification and/or technical adjustments  

42. 

The  review  of  the  operation  of  the  Transparency  Directive  shows  that  some  of  its 
requirements are not always clear, leading to uncertainty as regards those obligations. 
For  instance,  CESR  regularly  publishes  interpretative  documents,  in  a  "questions-
and-answers" format, regarding the Directive obligations133. The External Study also 
identified some requirements that would benefit from  further clarity134. As a result, 
some technical adjustments to the text of the Directive would possibly be beneficial 
with a view to clarifying its obligations. 

Annex  6  to  this  report  provides  a  detailed  description  of  number  of  these  clarity 
issues135. This Annex also addresses the question of the possible prolongation of the 
exemption in Article 30(4). 

133 
134 

135 

CESR (October 2009). 
Mazars  (2009),  see  sections  1.4.3  (on  definitions);  2.4.7  (on  financial  reporting);  2.6.5  (content  of 
interim  management  statements);  3.3.7  (on  major  holdings  notifications);  3.6.1.4  (on  stock  lending); 
and  3.6.3.2  (on  financial  instruments)  of  that  study.  At  the  same  time,  it  should  be  noted  that  the 
stakeholders' perception about the overall clarity of the Directive is positive and that, in case of lack of 
clarity, stakeholders tend to attribute such lack of clarity to national laws, guidance or market practices 
more often than to the Directive itself (see sections 1.4.1 and 1.4.2 of that study).  
Annex 7 also provides a description of another not-sufficiently clear requirement. 

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ANNEX  1  –  THE  TRANSPARENCY  DIRECTIVE  AND  ITS  IMPORTANCE  FOR  FINANCIAL 

MARKETS 

1. 

Annex 

1.1. 

This Annex presents: 

•  A) a description of the Transparency Directive; 

•  B) the changes introduced to the Transparency Directive since 2004; and 

•  C) the importance of the Transparency Directive for financial markets 

A) Description of the Transparency Directive  

1.2. 

Directive  2004/109/EC136  (the  "Transparency  Directive")  requires  issuers  of 
securities in regulated markets within the EU to ensure appropriate transparency for 
investors through a regular flow of information by disclosing periodic and on-going 
regulated  information  and  by  disseminating  such  information  to  the  public 
throughout  the  Community.  Regulated  information  consists  of  financial  reports, 
information on major holdings of voting rights and information disclosed pursuant to 
the  Market  Abuse  Directive.  For  this,  shareholders,  or  natural  persons  or  legal 
entities holding voting rights or financial instruments that result in an entitlement to 
acquire  existing  shares  with  voting  rights,  should  also  inform  issuers  of  the 
acquisition of or other changes in major holdings in companies so that the latter are 
in a position to keep the public informed.  

1.3.  Whilst it is not a revolutionary legal text, the Transparency Directive is an important 
instrument for the modernisation of the EU financial markets137 (see also Section C 
of  this  Annex  on  the  importance  of  the  Transparency  Directive  for  financial 
markets).  It  builds  on  the  transparency  requirements  previously  established  in 
Directive  2001/34/EC138.  As  a  result  of  the  modification  of  Directive  2001/34/EC, 
new rules on transparency requirements apply to the issuers of securities in regulated 
markets within the Community while at the same time leaving freedom to Member 
States as to the requirements that should be applicable in the alternative markets.  

1.4. 

The  Transparency  Directive  contains  rules  on:  disclosure  of  information  (such  as 
deadlines, content, formats, language etc); dissemination of information to the public 
and  the  competent  authorities;  storage  of  disclosed  information  by  the  officially 

136 

137 

138 

The 

p.38. 

Directive  2004/109/EC  of  the  European  Parliament  and  of  the  Council  of  15  December  2004  on  the 
harmonisation of transparency requirements in relation to information about issuers whose securities are 
admitted  to  trading  on  a  regulated  market  and  amending  Directive  2001/34/EC,  OJ  L  390  of 
31.12.2004, 
at: 
text 
http://www.ec.europa.eu/internal_market/securities/transparency/index_en.htm 
See  generally  the  European  Financial  integration  report  2007  and  previous  similar  reports,  at: 
http://www.ec.europa.eu/internal_market/finances/fim/index_en.htm 
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 
L 184, 6.7.2001, p. 1. Directive 2001/34/EC is itself a codification of previous directives, see recital 1 
of that Directive. 

available 

directive 

the 

of 

is 

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21 

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appointed  storage  mechanisms;  liability  of  issuers  regarding  disclosed  information; 
supervision  by  competent  authorities  and  penalties  for  lack  of  compliance.  The 
Directive determines which national law is applicable, irrespective of place of listing 
of the issuer: the so-called home/host Member State rule. The Directive also contains 
some provisions regarding the treatment of issuers from third country. 

1.5. 

The main novelties of the Transparency Directive, compared to the previous regime 
under Directive 2001/34/EC, are: 

–  The  so-called  home/host  Member  State  rule  and  its  consequences  regarding  the 
applicable law and the supervisory powers of competent authorities (Article 3); 

–  The shortening of the deadlines  for the  disclosure of annual financial report and 

half-yearly financial reports (Articles 4 and 5); 

–  The  requirement  to  disclose  quarterly  financial  reports  or  "interim  management 

statements" (Article 6); 

–  The  modernisation  of  the  rules  regarding  disclosure  of  holdings  of  voting  rights 
(Article 10) and the requirement to disclose holdings of financial instruments that 
may allow to control voting rights (Article 13); 

–  The obligation on the dissemination of regulated information to the public (Article 

21 of the methods of dissemination; Article 20 on the language); 

–  The rules on supervision by the competent authorities (Articles 19 and 24). 

1.6. 

1.7. 

The transposition deadline of the Transparency Directive was 20 January 2007. 

The Transparency Directive was completed by Commission Directive 2007/14/EC139, 
to  be  transposed  by  8  March  2008.  Commission  Directive  2007/14/EC  contains 
implementing measures adopted pursuant to the Transparency Directive mandate in 
order to complete the legal framework established by the Transparency Directive. In 
adopting these implementing measures, the Commission took into account the advice 
provided by CESR (Committee of European Securities Regulators). See Annex 4 for 
more detail on the use of implementing powers. 

1.8. 

The  Transparency  Directive  is  further  supplemented  by  soft-law.  This  notably 
includes: (i) the Commission recommendation on storage of regulated information140; 
(ii) the standard form141 developed by the Commission services for the notification of 

139 

140 

141 

p. 

27. 

The 

Commission  Directive  of  8 March  2007  laying  down  detailed  rules  for  the  implementation  of  certain 
provisions of Directive 2004/109/EC on the harmonisation of transparency requirements in relation to 
information  about  issuers  whose  securities  are  admitted  to  trading  on  a  regulated  market;  OJ  L  69, 
9.3.2007, 
at: 
www.ec.europa.eu/internal_market/securities/transparency/index_en.htm 
Commission  Recommendation  of  11  October  2007  on  the  electronic  network  of  officially  appointed 
mechanisms for the central storage of regulated information referred to in Directive 2004/109/EC of the 
European Parliament and of the Council, OJ L267, 12.10.2007, p.16. The text of the recommendation is 
available at: www.ec.europa.eu/internal_market/securities/transparency/index_en.htm 
The 
http://www.ec.europa.eu/internal_market/securities/transparency/index_en.htm 

available 

available 

directive 

standard 

form 

text 

text 

the 

the 

at: 

of 

of 

is 

is 

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22 

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major holdings; and (iii) the interpretative work undertaken by CESR with regard to 
the  alignment  of  the  exercise  of  supervisory  powers  by  the  national  competent 
authorities  (see  in  particular  the  "Frequently  Asked  Questions  regarding  the 
Transparency Directive: common positions agreed by CESR members"142). 

1.9. 

The Transparency Directive obligations are often closely connected to obligations set 
out in other Community texts, either in the corporate governance/company law field 
or in the financial markets/securities field.  

–  Firstly,  the  Transparency  Directive  covers  fields  that  may  be  directly  related  to 
other  EU  legal  instruments,  such  as  the  Shareholders  Rights  Directive143  or  the 
accounting rules144.  

–  Secondly,  other  EU  instruments,  such  as  the  Prospectus  Directive145,  the  2006 
modification to the accounting directives146 or the Takeover Bids Directive147 may 
also include disclosure requirements which either form part of or are very close to 
the core area of the Transparency Directive obligations.  

–  Thirdly, the Transparency Directive is the instrument for implementing disclosure 

obligations under other directives, such as the Market Abuse Directive148.  

142 
143 

144 

145 

146 

147 

148 

Latest version from October 2009, www.cesr.eu 
See  Articles  17  and  18  of  the  Transparency  Directive,  concerning  the  relation  between  issuers  of 
securities  and  the  securities  holders.  Directive  2007/36/EC  of  the  European  Parliament  and  of  the 
Council of 11 July 2007 on the exercise of certain rights of shareholders in listed companies, OJ L 184, 
14.7.2007, p.17. See: www.ec.europa.eu/internal_market/company/shareholders/indexa_en.htm 
See  Articles  4  to  7  of  the  Transparency  Directive,  concerning  financial  reporting.  Accounting  Rules: 
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 L 243, 11.9.2002, p. 1; Fourth Council Directive 
78/660/EEC  of  25  July  1978  on  the  annual  accounts  of  certain  types  of  companies,  OJ  L  222, 
14.8.1978,  p.  11  (directive  as  last  amended  by  Directive  2006/46/EC144);  Seventh  Council  Directive 
83/349/EEC  of  13  June  1983  on  consolidated  accounts,  OJ  L  193,  18.7.1983,  p.  1  (directive  as  last 
amended by Directive 2006/46/EC). 
See: www.ec.europa.eu/internal_market/accounting/officialdocs_en.htm 
See in particular Article 10 of the Prospectus Directive regarding the production of an annual summary 
of  information  disclosed.  Directive  2003/71/EC  of  the  European  Parliament  and  of  the  Council  of  4 
November 2003 on the prospectus to be published when securities are offered to the public or admitted 
to 
amending  Directive  2001/34/EC,  OJ  L  345,  31.12.2003,  p.  64. 
See:  www.ec.europa.eu/internal_market/securities/prospectus/index_en.htm.  See  also  ESME  (June 
2008),  Position  on  Article  10  of  the  Prospectus  Directive  in  relation  to  the  Transparency  Directive, 
available at: www.ec.europa.eu/internal_market/securities/esme/index_en.htm 
See,  for  instance,  Articles  Article  46a  of  the  Fourth  Company  Law  Directive  and  Article  36  of  7th 
Company  Law  Directive,  as  amended  by  Directive  2006/46/EC  regarding  the  disclosure  of  the 
corporate governance statement.  
See  in  particular  Article  10  of  the  Takeover  Bids  Directive  which  imposes  some  disclosure 
requirements on issuers regarding the content of the annual report. See also Articles 15 and 16 of that 
Directive  on  the  squeeze-out  and  sell-out  rights.  For  the  exercise  of  these  rights,  knowledge  of  the 
upwards  crossing  of  the  90%  threshold  is  needed.  Directive  2004/25/EC  of  the  European  Parliament 
and of the Council of 21 April 2004 on Takeover bids. OJ L142, 30.4.2004, p.12. 
See: www.ec.europa.eu/internal_market/company/takeoverbids/index_en.htm 
See in particular Article 6 of Directive 2003/06/EC of 28 January 2003 on insider dealing and market 
manipulation  (market  abuse);  OJ  L  96,  12.4.2003,  p.  16;  and  Article  2  of  the  Commission  Directive 
2003/124/EC of 22 December 2003 implementing Directive 2003/6/EC of the European Parliament and 
of the Council as regards the definition and public disclosure of inside information and the definition of 

trading 

and 

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–  Finally, the Transparency Directive is also a "distant cousin" of the 1st Company 
Law Directive149 which also contains disclosure obligations, although not limited 
to listed companies. 

B) The changes introduced to the Transparency Directive since 2004 

1.10. 

1.11. 

1.12. 

Since its adoption in 2004, the Transparency Directive has been a stable text. It was 
modified  once,  in  order  to  align  the  procedure  for  the  exercise  of  implementing 
powers conferred on the European Commission to the new regulatory procedure with 
scrutiny150.  

In  September  and  October  2009,  the  European  Commission  has  tabled  two  draft 
directives  which  include  draft  amendments  to  certain  Articles  of  the  Transparency 
Directive.  

The  first  proposal  concerns  the  review  of  Directive  2003/71/EC  (Prospectus 
Directive)151,  which  would  impact  on  the  definition  of  home  Member  State  in  the 
Transparency  Directive.  The  proposed  changes  to  the  Prospectus  Directive  notably 
include removing the limitation on the determination of the home Member State for 
issues  of  non-equity  securities  with  a  denomination  below  EUR  1.000152.  As  a 
consequence of this proposal, all issuers will be allowed to choose, for the purposes 
of  the  Prospectus  Directive,  the  home  Member  State  for  all  non-equity  security 
independently  of  the  denomination.  This  change  would  trigger  the  need  to  make  a 
corresponding  adjustment  to  the  mechanism  for  the  determination  of  the  home  and 
the  host  Member  States  in  Article  2(1)(i)(i)  of  the  Transparency  Directive 
2004/109/EC. 

1.13. 

In  addition,  the  draft  directive  modifying  the  Prospectus  Directive  also  proposes  to 
repeal Article 10 of such Directive153. The proposal to repeal Article 10 also impacts 

149 

150 

151 

152 
153 

market manipulation, OJ L 339, 24.12.2003, p.70. 
See: www.ec.europa.eu/internal_market/securities/abuse/index_en.htm 
First  Council  Directive  68/151/EEC  of  9  March  1968  on  co-ordination  of  safeguards  which,  for  the 
protection of the interests of members and others, are required by Member States of companies, within 
the meaning of the second paragraph of Article 58 of the Treaty, with a view to making such safeguards 
equivalent  throughout  the  Community,  OJ  L  65,  14.3.1968,  p.8.  This  Directive  was  last  amended  by 
Directive  2003/58/EC  of  the  European  Parliament  and  of  the  Council  of  15  July  2003  amending 
Council  Directive  68/151/EEC,  as  regards  disclosure  requirements  in  respect  of  certain  types  of 
companies, OJ L 221, 4.9.2003, p.13. 
See: www.ec.europa.eu/internal_market/company/official/index_en.htm 
Directive  2008/22/EC  of  the  European  Parliament  and  of  the  Council  of  11  March  2008  amending 
Directive  2004/109/EC  on  the  harmonisation  of  transparency  requirements  in  relation  to  information 
about  issuers  whose  securities  are  admitted  to  trading  on  a  regulated  market,  as  regards  the 
implementing powers conferred on the Commission; OJ L 76, 19.3.2008, p. 50–53  
Proposal  for  a  Directive  of  the  European  Parliament  and  of  the  Council  amending  directives 
2003/71/EC on the prospectus to be published when securities are offered to the public or admitted to 
trading and 2004/109/EC on the harmonisation of transparency requirements in relation to information 
about issuers whose securities are admitted to trading on a regulated market; COM(2009)0491 final of 
23 September 2009. See draft Article 2, modifying Article 2(1)(i) of the Transparency Directive. 
See proposed changes to Article 2(1)(m)(ii). 
As a consequence of the entry into force of the Transparency Directive, the obligation in the Prospectus 
Directive  for  the  issuer  to  provide  annually  a  document  containing  or  referring  to  all  information 
published in the twelve months preceding the issuance of the prospectus has become a dual obligation 
and obsolete. As a consequence, a registration document, instead of being updated in accordance with 

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1.14. 

on  the determination of home  Member  States under the Transparency Directive for 
issuers  of  shares  (and  of  low  value  debt  securities)  incorporated  in  a  third  country, 
since reference was made to that Article for the determination of the home Member 
State. As a result, a technical adjustment is needed in order to avoid a legal vacuum. 
As a result, the reference to Article 10 of the Prospectus Directive is replaced by a 
reference to point (iii) of Article 2(1)(m) of the Prospectus Directive. 

The  second  proposal  relates  to  the  granting  of  powers  to  the  future  European 
Securities  Markets  Authority154.  The  proposal  for  a  Regulation  establishing  a 
European  Securities  and  Markets  Authority  adopted  by  the  Commission  on  23 
September 2009155 provides that the Authority may develop draft technical standards 
in the securities markets area. The draft directive proposed by the Commission on 26 
October 2009 identifies areas for technical standards in relation to several directives. 
Concerning the Transparency Directive, Article 7 of that draft directives foresees that 
the  Authority  may  develop  technical  standards  in  relation  to  a  standard  form  to  be 
used  for  the  notification  of  major  holdings  of  voting  rights  and  of  financial 
instruments  giving  access  to  voting  rights156  (cf.  Articles  12  and  13  of  the 
Transparency  Directive).  This  is  an  issue  of  technical  nature  not  involving  policy 
decisions,  since  the  content  of  the  notification  obligation  is  determined  by  the 
Transparency Directive and its implementing measures. 

1.15.  Additionally, the draft directive also proposes to make clear that communication of 
information  from  national  supervisory  authorities  to  the  future  European  Securities 
Markets Authority shall not be considered to be a breach of professional secrecy (cf. 
Article  25  of  the  Transparency  Directive).  This  proposed  amendment  aims  at 
ensuring  that  there  are  no  legal  obstacles  to  the  information  sharing  obligations 
included in the Regulations establishing the Authorities. Indeed, the new supervisory 
architecture will require national supervisory authorities to cooperate closely with the 
European  Supervisory  Authorities.  In  particular,  these  should  receive  sufficient 
information from the national supervisory authorities in order to be able to discharge 
their duties under the regulation. 

Article  10,  should  be  supplemented  in  accordance  with  the  normal  procedure  to  supplement 
prospectuses.  See  recital  14  Proposal  for  a  Directive  of  the  European  Parliament  and  of  the  Council 
amending directives  2003/71/EC  on  the prospectus  to  be  published when  securities  are  offered  to  the 
public  or  admitted  to  trading  and  2004/109/EC  on  the  harmonisation  of  transparency  requirements  in 
relation  to  information  about  issuers  whose  securities  are  admitted  to  trading  on  a  regulated  market; 
COM(2009)0491 final of 23 September 2009. See also the opinion of ESME regarding Article 10 of the 
Prospectus Directive, ESME (June 2008).  
European  Commission  Proposal  for  a  Directive  of  the  European  Parliament  and  of  the  Council 
amending  Directives  1998/26/EC,  2002/87/EC,  2003/6/EC,  2003/41/EC,  2003/71/EC,  2004/39/EC, 
2004/109/EC, 2005/60/EC, 2006/48/EC, 2006/49/EC, and 2009/65/EC in respect of the powers of the 
European  Banking  Authority,  the  European  Insurance  and  Occupational  Pensions  Authority  and  the 
European  Securities  and  Markets  Authority;  COM(2009)0576  final  of  26  October  2009.  See  draft 
Article  7  modifying  Articles  12,  13  and  25  of  the  Transparency  Directive.  Available  at: 
http://ec.europa.eu/internal_market/finances/committees/index_en.htm  
European  Commission  Proposal  for  a  Regulation  of  the  European  Parliament  and  of  the  Council 
establishing a European Securities and Markets Authority, COM(2009)503 final of 23 September 2009. 
Available at: http://ec.europa.eu/internal_market/finances/committees/index_en.htm  
Financial  instruments  that  result  in  an  entitlement  to  acquire,  on  such  holder's  own  initiative  alone, 
under a formal agreement, shares to which voting rights are attached, already issued of an issuer whose 
shares are admitted to trading on a regulated market 

154 

155 

156 

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1.16. 

These two draft Directives are currently being discussed by Council and Parliament. 

1.17. 

Finally,  it  must  be  also  underlined  that  in  2006,  the  European  Commission  also 
proposed  to  modify  Article  17  of  the  Transparency  Directive  in  the  context  of  the 
proposal for a new directive on the exercise of voting rights by shareholders157. The 
objective  of  this  proposed  amendment  was  to  avoid  duplication  of  obligations 
without  repealing  the  Article  in  its  entirety,  as  such  Article  deals  not  only  with 
information  to  be  provided  in  the  context  of  General  Meetings  but  also,  more 
broadly,  with  all  information  to  be  made  available  to  shareholders  and  persons 
referred  to  in  Article  10  of  the  Transparency  Directive.  This  proposed  amendment 
was  eventually  not  taken  in  the  final  text  of  the  new  Directive  on  the  exercise  of 
shareholders rights158. 

C) The importance of the Transparency Directive for the financial markets 

1.18. 

Section C) of this Annex presents: 

•  C1) The objective of the Transparency Directive 

•  C2) Existing international standards and third country transparency regimes 

•  C3)  Move  for  an  enhanced  transparency  in  the  context  of  the  recent  financial 

crisis 

•  C4) Enhanced transparency as a tool to restore market confidence 

C1) The objective of the Transparency Directive 

1.19. 

1.20. 

1.21. 

In March 2000 the Lisbon European Council decided that a single financial market 
would  be  a  key  factor  in  promoting  the  competitiveness  of  the  European  economy 
and that an integrated market, properly regulated and prudentially sound, will lower 
the cost of capital for companies of all sizes, deliver major benefits to consumers and 
contribute to developing stronger economic and social cohesion throughout Europe.  

Transparency  of  information  about  securities  issuers  enhances  both  investor 
protection and market efficiency and thus contributes to growth and job creation by 
better  allocation  of  capital  and  by  reducing  costs.  On  the  other  hand,  lack  of 
transparency  with  regard  to  such  information  could  hinder  investor  confidence  and 
affect market resilience, reducing investment and slowing economic growth. 

The  current  financial  crisis  demonstrated 
the  disclosure  of  accurate, 
comprehensive and timely information about securities issuers was essential in order 
to  build  sustained  investor  confidence  and  allow  an  informed  assessment  of  their 
business performance and assets.  

that 

157 

158 

Proposal for a Directive of the European Parliament and of the Council on the exercise of voting rights 
by  shareholders  of  companies  having  their  registered  office  in  a  Member  State  and  whose  shares  are 
admitted to trading on a regulated market and amending Directive 2004/109/EC; COM(2005) 685 final 
of 5 January 2006. See in particular draft Article 17. 
Directive 2007/36/EC of the European Parliament and of the Council of 11 July 2007 on the exercise of 
certain rights of shareholders in listed companies, OJ L 184, 14.7.2007, p. 17. 

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1.22. 

The  Transparency  Directive  comes  within  the  scope  of  this  objective.  Its  main 
purpose  is  to  promote  transparency  in  EU  capital  markets  and  to  ensure  grater 
investor  protection  throughout  the  Community  by  prescribing  rules  for  securities 
traded on EU regulated markets and the issuers of such securities159. 

C2) Existing international standards and third country transparency regimes 

1.23. 

1.24. 

1.25. 

The  provisions  of  the  Transparency  Directive  are  in  line  and  consistent  with  the 
existing  international  standards  on  ongoing  disclosure  of  information,  in  particular 
the IOSCO Principles for Ongoing Disclosure160, a body of high level principles for 
ongoing  disclosure  and  material  development  disclosure  by  all  listed  entities. 
However,  these  principles  cover  mostly  the  ongoing  disclosure  of  material  events 
and do not contain specific guidelines on the disclosure of periodic information. 

The 2004  OECD  principles  of corporate governance also request that the corporate 
governance framework should ensure that timely and accurate disclosure is made on 
all  material  matters  regarding  the  corporation,  including  the  financial  situation, 
performance, ownership, and governance of the company161.  

In July 2009 IOSCO published a consultation report162 on the principles for periodic 
disclosure  which  sets  out  specific  guidance  on  the  disclosure  of  annual  and  other 
periodic  interim  reports  as  well  as  on  the  disclosure  of  securities  ownership.  The 
Final  Report  of  IOSCO,  together  with  the  feedback  statement  to  the  consultation, 
was  disclosed  in  February  2010.  In  the  introduction  to  this  Report,  the  IOSCO 
recognises that disclosure of material events on an ad hoc basis alone is not sufficient 
for  investors  to  be  able  to  make  investment decisions. Even though issuers  may be 
required  to  disclose  material  events  to  the  public  shortly  after  they  occur,  these 
disclosures  are  ad  hoc  and  investors  are  not  able  to  make  investment  decisions  on 
these types of disclosures alone. For this reason, issuers should be required to make 
certain  periodic  reports,  such  as  annual  reports  and  other  interim  reports,  in  which 
certain  prescribed  disclosures  must  be  provided  at  regular  intervals  to  the  public. 
These  periodic  reports  facilitate  investor  decision-making  and  monitoring  of  the 
markets by making it possible for investors to compare the performance of the same 
company  over  regular  intervals,  and  by  enabling  investors  to  make  useful 
comparisons among different companies163. 

1.26.  Major third countries, such as US, China, Switzerland and Japan, apply similar rules 
with regard to the publication of financial information, including the publication of 
the  annual,  half-yearly  and  other  interim  reports,  and  the  disclosure  of  major 
holdings164. 

C3) Move for an enhanced transparency in the context of the recent financial crisis 

159 
160 
161 
162 
163 
164 

See recitals 1 and 2 of the Transparency Directive. 
IOSCO (2002). 
OECD (2004), p.22-23 and 49 and seq. 
IOSCO (July 2009). 
IOSCO (February 2010), p. 4. 
See for instance, Schouten & Siems (2009).  

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1.27. 

The  current  financial  crisis  highlighted  once  again  the  importance  of  transparency 
across the financial markets. In the conclusions to the G20 Summits 2009 in London 
and  Pittsburgh,  G20  leaders  called  upon  grater  transparency,  accountability  and 
integrity of global financial markets165, and in particular for enhanced disclosure of 
financial information. Also, the G20 Working Group166 recommended in its report to 
find  solutions  in  order  to  promote  transparency  of  economic  results  in  financial 
reports.  

1.28.  On  EU  side,  in  the  context  of  the  measures  for  financial  recovery167,  improving 
access to up-to-date and official information on companies can be seen as a means to 
restore  confidence  in  the  markets  all  over  Europe.  De  Larosière  report168  identified 
the lack of transparency as one of the factors which contributes to and aggravated the 
financial  crisis  and  recommended  to  enhance  transparency  in  different  areas  of 
financial  markets,  in  particular  with  regard  to  financial  information  provided  to 
investors.  

1.29. 

Following this call from the European and world leaders, international organisation, 
national  authorities  and  industry  have  undertaken  significant  work  in  order  to 
improve  transparency  and  disclosure  of  financial  information  by  companies.  In 
September  2009,  IOSCO  published  a  consultation  report  on  Transparency  of 
Structured  Finance  Products169  which  provides  guidance  to  market  authorities  on 
enhancing  post-trade 
their 
jurisdictions. 

transparency  of  structured  finance  products 

in 

1.30. 

In October 2009, CEBS released a consultation paper Disclosure Guidelines: Lessons 
Learnt  from  the  Financial  Crisis,  which  serves  as  guide  to  financial  institutions  in 
providing  adequate  public  disclosure.  The  guidelines  take  the  form  of  high-level 
principles and address both the form and content of disclosures while also providing 
guidance on presentational aspects. 

1.31.  Also in October 2009, the British Bankers’ Association (BBA) released its Code for 
Financial  Reporting  Disclosure170  to  correspond  with  the  UK  FSA  publication  of 
Discussion  Paper  09/5,  Enhancing  Financial  Disclosures  by  UK  Credit 
Institutions171. This code commits BBA members to a “regular dialogue on financial 
statement  disclosures”  with  their  supervisors  to  “enhance  comparability  and 
understanding”  and  to  combine  quantitative  disclosures  with  “sufficient  qualitative 
narrative to meaningfully explain [their] significance.” 

1.32.  Other  initiatives  were  undertaken  on  national  and  international  level  and  the 
European  Commission  is  currently  working  on  measures  with  regard  to  disclosure 
mechanisms of different financial products and derivatives.  

C4) Enhanced transparency as a tool to restore market confidence 

165 
166 
167 
168 
169 
170 
171 

See G-20 (April 2009), together G-20 (March 2009). See also G-20 (September 2009). 
See G-20 (March 2009) 
European Commission (March 2009). 
De Larosière High Level Group (2009).  
IOSCO (September 2009). 
BBA (October 2009).  
UK FSA (October 2009). 

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1.33. 

Transparency  is  key  for  robust,  well  functioning  markets  providing  reliable  price 
discovery  mechanisms.  The  recent  period  of  market  turmoil  and  illiquidity  has 
highlighted  the  importance  to  market  confidence  of  reliable  and  useful  financial 
disclosures.  Financial  reporting  permits  the  measurement  of  the  financial  condition 
and performance of companies and is the cornerstone of a well-functioning financial 
system. Sound disclosure, accounting and valuation practices are essential to achieve 
transparency,  to  maintain  market  confidence  and  to  promote  effective  market 
discipline172. 

1.34.  When announcing the launch by the European Commission of a public consultation 
on possible ways to enhance co-operation between business registers, Commissioner 
McCreevy said: "The current financial crisis highlighted once again the importance 
of  transparency  across  the  financial  markets.  Improving  access  to  up-to-date  and 
official  information  on  companies  for  creditors,  business  partners  and  consumers 
could serve as means to restore confidence in the markets"173. 

1.35. 

1.36. 

1.37. 

1.38. 

In the post-crisis environment, the transparency needs of the new global marketplace, 
with its heightened prudential and conduct-of-business regulation and its new macro-
prudential  and  systemic  oversight,  will  continue  to  evolve.  Regulatory  reforms  are 
developing  transparency  requirements  and  guidelines  on  product  transparency  and 
disclosure.  While  these  reforms  are  not  yet  complete,  among  the  regulatory 
requirements, industry guidance, market demand, and evolving practice there can be 
no  doubt  that  the  overall  trend  in  product  transparency  and  companies  disclosures 
will  be  dramatically  different  in  the  near  future  compared  with  that  before  2007. 
Also,  the  interconnectedness  of  the  global  financial  system  suggests  a  need  for 
greater systemic exposure and product transparency to help mitigate systemic risk174. 

From  the  EU  perspective,  companies  increasingly  expand  beyond  national  borders 
using the opportunities offered by the Single Market. Cross-border groups as well as 
a  high  number  of  restructuring  operations,  such  as  mergers  and  divisions  involve 
companies  from  different  Member  States  of  the  EU.  Furthermore,  over  the  past 
decade  the  jurisprudence  of  the  European  Court  of  Justice  has  opened  up  the 
possibility  for  businesses  to  incorporate  in  one  Member  State  and  conduct  their 
business activity partly or entirely in another.  

In  this  context,  there  is  an  increasing  demand  for  access  to  information  on 
companies, either for commercial purposes or to facilitate access to justice. However, 
while  official  information  on  companies  is  easily  available  in  the  country  of  their 
registration,  access  to  the  same  information  from  another  Member  State  may  be 
hindered by technical or language barriers.  

In  these  circumstances,  facilitating  cross-border  access  to  official  and  reliable 
company information for creditors, business partners and consumers is necessary to 
ensure  an  appropriate  degree  of  transparency  and  legal  certainty  in  the  markets  all 
over the EU. To achieve this, the Commission services are currently working on the 
ways  to  improve  access  to  information  on  companies  across  EU,  in  particular  by 

172 
173 
174 

See for instance, Financial Stability Forum (2008). 
European Commission IP/09/1677. 
See, for instance, Institute of International Finance (2009). 

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exploring  ways  to  enhance  the  cooperation  of  business  registries175  and  to  create  a 
single point of access to regulated information and a European electronic network for 
storage of information on listed companies (see Annex 15). 

175 

See European Commission (November 2009a).  

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ANNEX 2 – METHODOLOGY FOR THIS REPORT 

2. 

Annex 

2.1. 

The Transparency Directive lays down 3 reporting obligations on the Commission: 

–  Article 33 requires the Commission to, by 30 June 2009, "report on the operation 
of  this  Directive  to  the  European  Parliament  and  to  the  Council  including  the 
appropriateness of ending the exemption for existing debt securities after the 10-
year  period  as  provided  for  by  Article  30(4)  and  its  potential  impact  on  the 
European financial markets". 

–  Article  27(3)  requires  the  Commission  to,  by  December  2010,  "review  the 
provisions  concerning  its  implementing  powers  and  present  a  report  to  the 
European Parliament and to the Council on the functioning of those powers. The 
report  shall  examine,  in  particular,  the  need  to  propose  amendments  to  this 
Directive  in  order  to  ensure  the  appropriate  scope  of  the  implementing  powers 
conferred on the Commission. The conclusion as to whether or not amendment is 
necessary shall be accompanied by a detailed statement of reasons. If necessary, 
the report shall be accompanied by a legislative proposal to amend the provisions 
conferring implementing powers on the Commission". 

–  Article  6(3)  requires  the  Commission  to  "provide  a  report  to  the  European 
Parliament and the Council by 20 January 2010 on the transparency of quarterly 
financial  reporting  and  statements  by  the  management  of  issuers  to  examine 
whether  the  information  provided  meets  the  objective  of  allowing  investors  to 
make an informed assessment of the financial position of the issuer. Such a report 
shall  include  an  impact  assessment  on  areas  where  the  Commission  considers 
proposing amendments to this Article".  

2.2. 

2.3. 

This  Commission  staff  working  document 
three  reporting 
requirements  into  a  single  consolidated  report.  For  the  preparation  of  this  working 
document, the Commission staff used different sources of information. 

integrates 

these 

Firstly,  the  Commission  staff  prepared  in  2008  a  report  on  more  stringent  national 
measures  concerning  the  Transparency  Directive176.  The  report  on  more  stringent 
national measures was a preparatory step in the preparation of the present report. It 
(1)  presented  the  more  stringent  national  rules  in  relation  to  the  minimum 
harmonisation nature of the Transparency Directive; (2) described their main impact 
in terms of negative perception, increased costs but also enhanced transparency; and 
(3)  outlined  the  initiatives  being  taken  to  address  such  more  stringent  national 
measures  (such  as  voluntary  regulatory  convergence  or  the  facilitation  of  cross-
border  compliance  with  different  national  rules).  The  2008  report  concluded  that 
while  the  flexibility  offered  by  the  Directive  results  on  more  transparency  in  the 
market,  there  are  also  practical  difficulties  for  investors'  complying  with  their 
obligations and may have adverse effects on the market for corporate control. Annex 
2 to the 2008 report described the sources of information used for the preparation of 

176 

European Commission (December 2008). 

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that  paper,  including  consultations  with  national  competent  authorities,  CESR, 
ESME  and  an  information  gathering  exercise  with  selected  stakeholders  (namely, 
ABI  (Association  of  British  insurers),  BusinessEurope  (EU  industry),  CCBE 
(Association  of  European  bars  and  law  societies),  Deminor  (small  investors),  EBF 
(European  Banking  Federation),  EcoDA  (European  Confederation  of  Directors' 
Associations),  EFAMA 
(issuers),  FESE 
(Federation  of  European  Stock  Exchanges)  and  SIFMA/ICMA  (Securities  Industry 
and Financial Markets Association)) 

(asset  managers),  EuropeanIssuers 

Secondly,  three  complementary  external  studies  conducted  for  the  Commission  in 
2008  and  2009  addressed  different  aspects  of  the  Transparency  Directive.  A  first 
study  on the economic  impacts  of the Financial Services Action Plan177 establishes 
the  causal  links  between  the  42  measures  FSAP  measures  (including  the 
Transparency  Directive)  analysed  in  the  study  and  their  original  policy  objectives 
and  the  resulting  market  impacts  across  the  relevant  segments  of  the  market.  The 
findings  are  divided  into  3  key  sectors  –  the  banking,  insurance  and  securities 
sectors.  The  study  is  both  quantitative,  based  on  a  wide  range  of  indicators  and 
available data sets, and qualitative, by drawing on interviews with the industry and 
regulators  in  10  selected  Member  States.  A  second  study  dealt  with  the  cost  of 
the  Transparency 
compliance  with  six  selected  FSAP  measures  (including 
Directive)178.  This  study  examines  where  the  major  costs  are  in  terms  of  the 
implementation  and  ongoing  costs  for  firms  of  complying  with  the  measures 
selected.  The  cost  of  compliance  was  defined  as  a  "net  change  to  companies' 
operational expenses due to implementation of the selected EU regulatory measures". 
This definition requires that all other factors which could impact on these costs have 
been removed from this analysis. The study is based on information provided directly 
to  the  consultants  through  surveys  and  interviews  with  companies  of  varying  size 
across a broad range of Member States. 

Last but not least, a study on the application of selected obligations of the Directive 
was  conducted  in  2009179.  The  2009  specific  study  on  the  application  of  the 
Transparency  Directive  evaluates  the  perception  of  stakeholders  with  regard  to  the 
Directive; examines the operation of the directive with regard to some selected issues 
and compares the directive with similar obligations in third countries. It also provides 
some conclusions and practical recommendations for improvement. 

Thirdly, substantial information was collected from Member States authorities during 
the  transposition  of  the  Directive:  e.g.  in  the  context  of  the  transposition  meetings 
organised with Member States authorities, from bilateral contacts or in relation to the 
report  on  more  stringent  national  measures  (above).  Also,  useful  information  arose 
from  consultation  papers  issued  by  national  authorities  in  the  area  covered  by  the 
Directive, in particular regarding national evolutions (e.g. the UK FSA consultation 
on cash-settled derivatives or the French AMF report on major holdings notifications 
and notifications of intentions).  

2.4. 

2.5. 

2.6. 

177 
178 
179 

CRA International (2009). 
Europe Economics (2009). 
Mazars (2009). 

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32 

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2.7. 

2.8. 

Since the adoption of the Directive, CESR180 has provided an invaluable contribution 
to the Commission services with a view to develop the EU legal framework in this 
area and to facilitate its smooth application. A first expert group on the Transparency 
Directive  within  CESR  prepared  CESR's  opinions  on  the  development  of 
implementing  legislation  by  the  Commission  (see  also  Annex  4).  The  European 
Securities  Committee181  was  also  involved  in  this  process.  A  second  expert  group 
within CESR took over in 2007 (or 2008). It carries out level 3 work with a view to 
provide  supervisory  convergence  in  the  day-to-day  implementation  across  the  EU 
and  clarity  for  market  participants.  In  this  context,  CESR  mapped  out  the  way  this 
Directive  is  transposed  by  national  legislation182.  CESR  also  regularly  discloses  a 
clarification  document  on  "Frequently  asked  questions"  regarding  this  Directive183. 
Upon  invitation  by  the  Commission,  CESR  also  prepared  a  report  mapping  out 
national  supervisory  and  sanctioning  powers  under  this  Directive184.  Commission 
staff participated in the work carried out by CESR in this field. Both the information 
collected in the meetings of the expert groups and the results of CESR's work have 
been of particular importance for the preparation of this report. 

Fourthly, experts groups advising the Commission, such as ESME185 and European 
Corporate  Governance  Forum  (ECGF)186,  made 
important  contributions  by 
identifying  areas  where  legislation  would  need  to  be  improved  or  which  deserved 
being regulated. ESME was invited to conduct selective work in the area covered by 
the  Directive.  This  resulted  in  four  different  papers  produced  by  ESME187  which 
address  different  areas:  (1)  First  report  on  the  Transparency  Directive  (December 
2007)  which  focused  on  major  holdings  notification  obligations;  (2)  Preliminary 
views  on  The  definition  of  "acting  in  concert"  between  the  Transparency  Directive 
and  the  Takeover  Bids  Directive  (December  2008),  on  the  applicability  of  Article 
the  Transparency  Directive;  (3)  Opinion  on  Disaggregation  of 
10(a)  of 
Shareholdings  (June  2009),  in  connection  to  the  major  holdings  notification 
obligations;  and  (4)  Views  on  the  issue  of  transparency  of  holdings  of  cash-settled 
derivatives  (November  2009),  concerning  the  possibility  to  require  disclosure  of 
large holdings of cash-settled derivatives.  

2.9. 

ESME prepared other papers regarding financial markets which are indirectly related 
to  the  Transparency  Directive,  such  as:  the  Report  on  MiFID  and  admission  of 

180 

181 

182 
183 
184 
185 

186 

187 

The  Committee  of  European  Securities  Regulators  (CESR)  was  created  by  Commission  Decision 
2001/527/EC of 6 June 2001 establishing the Committee of European Securities Regulators, OJ L 191, 
13.7.2001, p.43. See: www.cesr.eu  
The  European  Securities  Committee  (ESC)  was  created  by  Commission  Decision  2001/528/EC  of  6 
June 2001 establishing the European Securities Committee, OJ L 191, 13.7.2001, p. 45. For information 
on the activities of the ESC, see: http://ec.europa.eu/internal_market/securities/esc/index_en.htm  
CESR (September 2008). 
CESR (October 2009). 
CESR (July 2009). 
A  group  of  market  experts  advising  the  Commission  in  the  field  of  securities  law.  It  was  created  by 
Commission Decision 2006/288/EC of 30 March 2006 setting up a European Securities Markets Expert 
Group to provide legal and economic advice on the application of the EU securities Directives, OJ L 
106, 19/04/2006, p. 14. See: www.ec.europa.eu/internal_market/securities/esme/index_en.htm  
The  European  Corporate  Governance  Forum  (ECGF)  was  created  by  Commission  Decision 
2004/706/EC of 15 October 2004 establishing the European Corporate Governance Forum, OJ L 321, 
see: 
on 
22.10.2004, 
http://ec.europa.eu/internal_market/company/ecgforum/index_en.htm  
ESME papers are available at: http://ec.europa.eu/internal_market/securities/esme/index_en.htm  

information 

activities 

ECGF, 

For 

53. 

the 

the 

of 

p. 

EN 

33 

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2.10. 

2.11. 

securities  to  official  stock  exchange  listing  (December  2007),  which  addresses 
Directive 2001/34/EC; Financial instruments impact of definitions on the perimeter 
of  FSAP  directives  (March  2008);  Report  on  Competent  Authority  pertaining  to 
Issuers  Publication  of  Regulated  Information  (March  2008);  or  the  Position  on 
Article  10  of  the  Prospectus  Directive  in  relation  to  the  Transparency  Directive 
(June  2008),  which  suggested  repealing  Article  10  of  the  Prospectus  Directive 
considering the disclosure and storage requirements in the Transparency Directive.  

The  ECGF  focused  on  corporate  governance  issues  for  listed  companies,  some  of 
which are indirectly related to the Transparency Directive in so far as they relate to 
disclosure obligations: e.g. Statement of the European Corporate Governance Forum 
on Cross-border issues of Corporate Governance Codes (March 2009), Statement of 
the  European  Corporate  Governance  Forum  on  Director  Remuneration  (March 
2009)  and  the  Statement  of  the  European  Corporate  Governance  Forum  on  empty 
voting (February 2010 ). 

Fifthly,  during  the  past  years  the  Commission  services  have  received  views  of 
relevant  private  sector  stakeholders  on  the  operation  of  the  Directive  at  different 
occasions, primarily, in the context of the survey on more stringent requirements and 
of  the  three  external  studies  mentioned  above.  Bilateral  contacts  with  major 
European  stakeholders'  associations  (e.g.  FESE,  EFAMA,  EuropeanIssuers  etc), 
national associations (e.g. Observatoire de la Communication Financière in France) 
or individual companies (e.g. investors, issuers, service providers etc) have also been 
held where necessary.  

2.12. 

Finally, other external sources of information or academic research188 have been used 
where appropriate.  

2.13. 

See References for further detail on papers mentioned. 

188 

See References for a selection of academic papers. 

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34 

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ANNEX 3 – THE TRANSPOSITION OF THE TRANSPARENCY DIRECTIVE 

3. 

Annex 

3.1. 

Few  Member  States  transposed  the  Transparency  Directive  on  time:  i.e.  before  20 
January  2007:  only  DE  notified  to  the  Commission  of  the  adoption  of  the  national 
measures  before  the  deadline  and  other  5  Member  States  shortly  afterwards:  RO, 
UK, FI, LT and BG.  

3.2.  Most  Member  States  were,  however,  delayed  in  their  transposition  process.  Such 
delay is largely explained by the different transposition deadline of the Commission 
implementing  measures (Directive  2007/14/EC),  which  was 8  March 2008.  Several 
Member  States  transposed  both  Directives  in  one  set,  being  late  with  the 
transposition  of  the  Transparency  Directive  but  were  on  time  as  regards  the 
implementing measures: DK, SE, ES, PT, EE, LU, CY and BE. 

3.3. 

3.4. 

189 

190 

191 

Other  factors  also  affected  the  transposition  process.  For  instance,  some  countries 
informed the Commission of difficulties to cope with the transposition of several EU 
directives in the securities field at the same time, due to insufficient capacity to deal 
with several changes at the same time189. The problem of the sequencing of level 1 
and  level  2  measures  has  also  been  raised  in  this  context190.  For  instance,  the 
Directive  modifying  the  date  of  transposition  of  MiFID  explained  that:  "It  is  also 
necessary  that  Directive  2004/39/EC  and  its  implementing  measures  be  transposed 
into national law or apply directly in Member States simultaneously for the Directive 
to produce its full effect".191 

Beyond  spring  2008,  a  significant  delay  in  the  transposition  of  the  Transparency 
Directive and of Directive 2007/14/EC remained only with regard to four countries 
(Hungary,  Netherlands,  Poland  and  the  Czech  Republic).  As  a  result,  the 
Commission  decided  to  tighten  its  enforcement  action  against  these  four  countries 
and sent reasoned opinions on 8 May 2008. The Commission decided to refer to the 
European  Court  of  justice  three  Member  States,  the  Netherlands  on  18  September 
2008, Poland on 29 January 2009 and the Czech Republic on 25 June 2009. These 

For instance, the parallel transposition of the sophisticated MiFID, due by 31 January 2007, which was 
undertaken  as  a  matter  of  priority  in  some  Member  States  and  took  available  resources.  MiFID  was 
originally  due  to  be  transposed  by  April  2006,  but  due  to  difficulties  in  its  transposition,  the 
transposition deadline was extended until 31 January 2007 with an additional 9-month period for firms 
to  adapt  their  systems  to  MiFID  changes  (until  1  November  2007).  See  Directive  2006/31/EC  of  the 
European Parliament and of the Council of 5 April 2006 amending directive 2004/39/EC on markets in 
financial instruments, as regards certain deadlines OJ L 114, 27.4.2006, p. 60 
According to Commission research, it appears that the sequencing of the negotiations and adoption of 
framework co-decision legislation (Level 1) with implementing measures (Level 2) has resulted in some 
bottlenecks and unrealistic timetables. In practice, a significant portion of the transposition period set in 
Level 1 legislation is taken up with the preparation of implementing measures, without which Member 
States  cannot  effectively  proceed  with  their  transposition.  It  is,  however,  hazardous  to  estimate  the 
duration of the negotiation process at Level 2 at the time of adoption of the framework legislation. See 
European Commission (November 2007), section 3.2.  
See recital 4 to Directive 2006/31/EC, cited in footnote 189. 

EN 

35 

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referrals  were  eventually  withdrawn  as  Member  States  communicated  national 
measures shortly after192.  

3.5. 

In  the  case  of  France  and  Italy,  the  main  national  laws  were  in  place,  but  the 
supplementary decrees and orders to be prepared by the securities regulators (AMF 
and  CONSOB)  were  adopted  with  significant  delays.  The  lengthy  consultation 
processes  followed  by  both  AMF  and  CONSOB  also  added  to  the  delay.  This 
affected the overall application of the regulatory framework and was reflected in the 
transposition  record  of  Directive  2007/14/EC.  The  Commission  also  pursued 
infringement proceedings against France and Italy for failure to communicate all the 
transposition measures of Directive 2007/14/EC within the relevant deadline and sent 
reasoned  opinions  on  2  February  2009193.  National  transposition  measures  were 
notified before the procedure could have reached the stage of court referral.  

3.6. 

The  following  charts  provide  an  overall  view  on  the  transposition  process  of  the 
Transparency  Directive  and  Directive  2007/14/EC  as  well  as  of  the  enforcement 
action  taken  by  the  Commission194  (dates  in  the  charts  refer  to  the  date  of 
notification, not of entry into force of the legislation).  

Length of implementation of the Transparecny Directive 2004/109/EC

1000

800

600

y
a
d

400

200

0

-200

E
D

adline 20/01/2007

De

O 
R

K Fi
U

LT

G LV A
B

T EL

R
F

K IE
D

T
E M
S

S
E

T
P

E SI
E

IT

K
S

LU

Y
C

E
B

U NL PL
H

Z
C

Member State

Referral / Court procedure
RO
LFN
Open procedure
notification

192 

193 

194 

See IP/08/692 of 6.5.2008; IP/08/1368 of 18 September 2008; IP/08/1519 of 16.10.2008; IP/09/176 of 
29  January  2009;  IP/09/2009  of  19  February  2009  and  IP/09/1005  of  25  June  2009.  While  the 
Commission also opened infringement proceedings by sending letters of formal notice to other Member 
States, it decided not to send reasoned opinions until after 8 March 2009 – therefore granting Member 
States a grace period until the end of the transposition period of Directive 2007/14/EC. 
See IP/08/692 of 6.5.2008; IP/08/1368 of 18 September 2008; IP/08/1519 of 16.10.2008; IP/09/176 of 
29 January 2009; IP/09/2009 of 19 February 2009 and IP/09/1005 of 25 June 2009. 
Although some of the cases against the HU, NL, PL, CZ, FR and IT were brought before the European 
Court of Justice, transposition was completed before the Court took any decision. 

EN 

36 

   EN 

 
 
                                                 
Length of transposition of Directive 2007/14/EC

y
a
d

600

500

400

300

200

100

0

-100

-200

-300

FI

DK UK 

SE ES EL PT EE LU CY IE BE BG

Deadline 08/03/2008 SK LT RO DE AT SI

Member State

LV MT NL HU PL IT CZ FR

Referral / Court procedure
RO
LFN
Open procedure
notification

3.7. 

3.8. 

Transposition  delays  did  not,  however,  lead  to  a  general  regulatory  vacuum:  there 
was  national  law  in  place  pursuant  to  Directive  2001/34/EC  –  and  to  the  previous 
directives  –  addressing  most  of  the  Directive  requirements.  However,  late 
transposition affected the entry into force of some of the Directive novelties, such as: 
the  requirement  to  disclose  quarterly  financial  reports  or  "interim  management 
statements" (Article 6); the requirement to disclose holdings of financial instruments 
that  may  allow  to  control  voting  rights  (Article  13);  or  the  obligation  on  the 
dissemination  of  regulated  information  to  the  public  (Article  21  of  the  methods  of 
dissemination). 

The application of the home Member State principle (Article 3) and the new rules on 
languages (Article 20) were also important novelties of the Directive in so far as they 
prevented a host Member State to impose their national requirements on issuers with 
securities listed in that Member State but incorporated in a different Member State. 
However, even in the case of absence of transposition of the Directive, issuers could 
prevail  themselves  of  the  Directive  rules  on  this  issue  as  a  result  of  the  so-called 
direct  effect  doctrine.  Therefore  the  restrictions  to  host  Member  States  were 
operational from the first day. 

However,  the  late  transposition  of  the  Directive  in  some  countries  led  to  a  few 
awkward transitional situations where companies listed in one Member State (having 
transposed  the  Directive)  but  incorporated  in  another  Member  State  (not  having 
transposed  the  Directive)  were  not  regulated  by  either  of  them  as  a  result  of  the 
application of the Home/Host Member State principle. This result was due to the fact 
that  the  criterion  for  the  application  of  the  older  legislation  in  the  home  Member 
State was the fact of being listed in that Member State rather than the incorporation 
principle retained in the Directive. These rather anecdotal cases were solved through 
supervisory  cooperation  and  voluntary  compliance  by  the  companies  concerned.  In 
any event, these cases was transitional in nature and, technically speaking, should not 
happen in the future unless the general rules on the Home Member State are changed.  

EN 

37 

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3.9. 

It should be finally noted that the Commission did not receive any official complaint 
for  breach  of  Community  law  by  Member  States  concerning  the  Transparency 
Directive in the period following its adoption. This absence of complaints indirectly 
showed  that  market  participants  were  not  disrupted  by  the  late  transposition  of  the 
measures in some Member States. 

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38 

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ANNEX 4 – THE USE BY THE COMMISSION OF IMPLEMENTING POWERS 

4. 

Annex 

4.1. 

Introduction.  The  Transparency  Directive  is  a  Lamfalussy  process  directive195.  In 
this  context,  implementing  powers  were  granted  by  Council  and  Parliament  to  the 
Commission  in  a  number  of  areas  under  the  Transparency  Directive  (see  below 
tables 4.1 and 4.2). 

The procedural rules for the exercise of these powers were foreseen in Article 27 of 
the Directive, by reference to the so-called comitology Decision196. These procedural 
rules  in  the  Directive  were  changed  in  2008197,  in  order  to  align  them  to  the 
regulatory  procedure  with  scrutiny  introduced  in  the  Comitology  Decision  in 
2006198199.  Concerning  the  Transparency  Directive,  most  of  the  empowerments  for 
implemented  measures  became  subject  to  the  new  regulatory  procedure  with 
scrutiny. 

4.2. 

Request  for  a  report.  Article  27(3)  of  the  Transparency  Directive,  as  modified  in 
the  2008  review,  requires  the  Commission  to,  by  December  2010,  "review  the 
provisions concerning its implementing powers and present a report to the European 
Parliament and to the Council on the functioning of those powers. The report shall 
examine, in particular, the need to propose amendments to this Directive in order to 
ensure  the  appropriate  scope  of  the  implementing  powers  conferred  on  the 
Commission. The conclusion as to whether or not amendment is necessary shall be 
accompanied  by  a  detailed  statement  of  reasons.  If  necessary,  the  report  shall  be 
accompanied  by  a  legislative  proposal  to  amend  the  provisions  conferring 
implementing powers on the Commission". This annex replies to this invitation.  

195 

196 

197 

198 

199 

The launch of the Lamfalussy process in 2001 aimed at putting in place an efficient mechanism to begin 
converging  European  financial  supervisory  practice  and  enable  Community  financial  services 
legislation to respond rapidly and flexibly to developments in financial markets. Under this approach, 
financial regulation is passed in two levels: (i) at "level 1", framework legislation setting out the core 
principles and defining implementing powers is adopted by co-decision; and (ii) the technical details are 
formally  adopted  by  the  Commission  as  implementing  measures  at  "level  2",  after  a  vote  of  the 
competent  regulatory  Committee  –  in  this  case,  the  European  Securities  Committee  –  and  taking 
account  of  the  European  Parliament's  position.  For  the  technical  preparation  of  the  implementing 
measures  in  the  securities  area,  the  Commission  is  advised  by  the  Committee  of  European  Securities 
Regulators  (CESR),  made  up  of  representatives  of  national  supervisory  bodies  –  also  referred  to  as  a 
"level  3"  committee.  For  further  information  on  the  Lamfalussy  process,  see  generally  Commission 
(November 2007). 
Council  Decision  1999/468/EC  of  28  June  1999  laying  down  the  procedures  for  the  exercise  of 
implementing powers conferred on the Commission, OJ L 184 of 17.7.1999, p.23. 
Directive  2008/22/EC  of  the  European  Parliament  and  of  the  Council  of  11  March  2008  amending 
Directive  2004/109/EC  on  the  harmonisation  of  transparency  requirements  in  relation  to  information 
about  issuers  whose  securities  are  admitted  to  trading  on  a  regulated  market,  as  regards  the 
implementing powers conferred on the Commission, OJ L 76 of 19.3.2008, p.50. 
See Council Decision 2006/512/EC of 17 July 2006, amending Decision 1999/468/EC laying down the 
procedures  for  the  exercise  of  implementing  powers  conferred  on  the  Commission,  OJ  L  200  of 
22.7.2006,  p.11,  as  amended  by  Decision  2006/512/EC  (OJ  L  200,  22.7.2006)  which  introduced  the 
regulatory  procedure  with  scrutiny  for  the  adoption  of  measures  of  general  scope  and  designed  to 
amend non-essential elements of a basic instrument.. 
This paper does not address the impact of the entry into force of the Lisbon Treaty on the procedural 
rules concerning comitology. 

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4.3. 

The  use  of  the  implementing  powers  by  the  Commission.  Pursuant  to  the 
implementing powers conferred on it, the Commission adopted in 2007 a directive200 
laying  down  detailed  rules  for  the  implementation  of  several  provisions  of  the 
Transparency Directive. The provisions concerned by Directive 2007/14/EC were: 

Table 4.1 – Implementing powers exercised (Directive 2007/14/EC) 

Empowerment 
(Directive 2004/109) 
Article 2(3)(a) 

Articles concerned 
(Directive 2004/109)
Article 2(1)(ii) 

Article 5(6)(c) 

Article  5(6), 
subparagraph 
Article 9(7) 
Article 9(7) 

first 

Article  5(3),  second 
subparagraph 
Article  5(4),  second 
sentence 
Article 9(4) 
Article 9(5) 

Article 12(8)(b) 
Article 14(2) 
Article 12(8)(c) 

Article 12(2) and (6) 
Article 14(1) 
Article 12(2) 

Article 12(8)(d) 

Article 12(2)  

Article 12(8)(e) 

Article 13(2) 

Article  12(4),  first 
subparagraph 
Article  12(5),  first 
subparagraph 
Article 13(1) 

Article 21(4)(a) 

Article 21(1) 

Article 23(4)(ii) 
Article 23(4)(ii) 
Article 23(4)(ii) 
Article 23(4)(ii) 
Article 23(4)(ii) 
Article 23(4)(ii) 

Article 23(4)(ii) 
Article 23(4)(ii) 
Article 23(4)(ii) 
Article 23(4)(ii) 

Article 23(1) 
Article 23(1) 
Article 23(1) 
Article 23(1) 
Article 23(1) 
Article 23(1) 

Article 23(1) 
Article 23(1) 
Article 23(1) 
Article 23(1) 

Article 23(7) 

Article 23(6) 

Subject  

Procedural arrangements for the choice of the home 
Member State 
Minimum 
consolidated financial statements 
Major related parties' transactions 

the  half-yearly  non-

content  of 

Maximum length of the usual 'short settlement cycle' 
Control  mechanisms  by  competent  authorities  as 
regards market makers 
Calendar of trading days 

Shareholders  and  natural  persons  or  legal  entities 
referred  to  in  Article  10  of  the  Transparency 
Directive required to make the notification of major 
holdings 
Circumstances  under  which  the  notifying  person 
should  have  learned  of  acquisition  or  disposal  or  of 
the possibility to exercise voting rights 
Conditions of independence  to  be  complied  with  by 
management  companies  and 
firms 
investment 
involved in individual portfolio management 

for 

the  dissemination  of 

Types  of  financial  instruments  that  result  in  an 
entitlement to acquire, on the holder's own initiative 
alone, shares to which voting rights are attached 
Minimum  standards 
regulated information 
Requirements equivalent to Article 4(2)(b) 
Requirements equivalent to Article 5(4) 
Requirements equivalent to Articles 4(2) and 5(2)(c) 
Requirements equivalent to Article 6 
Requirements equivalent to Article 4(3) 
Requirements  equivalent  to  Article  4(3),  second 
subparagraph 
Requirements equivalent to Article 12(6) 
Requirements equivalent to Article 14 
Requirements equivalent to Article 15 
Requirements  equivalent  to  Articles  17(2)(a)  and 
18(2)(a)  
Equivalence  in  relation  to  the  test  of  independence 
for  parent  undertakings  of  management  companies 
and investment firms 

200 

Commission Directive 2007/14/EC of 8 March 2007 laying down detailed rules for the implementation 
of  certain provisions  of  Directive  2004/109/EC  on  the  harmonisation  of transparency  requirements  in 
relation to information about issuers whose securities are admitted to trading on a regulated market; OJ 
L 69, 9.3.2007, p. 27. 

EN 

40 

   EN 

 
 
 
                                                 
4.4. 

In the specific area of equivalence of accounting standards, the Commission has also 
adopted three legal texts on the basis of its implementing powers:  

–  Commission  Decision  2006/891/EC  of  4  December  2006  on  the  use  by  third 
country  issuers  of  securities  of  information  prepared  under  internationally 
accepted  accounting  standards201.  This  Decision  was  repealed  by  Commission 
Decision 2008/961/EC, below. 

–  Commission Regulation (EC) No 1569/2007 of 21 December 2007 establishing a 
mechanism for the determination of equivalence of accounting standards applied 
by  third  country  issuers  of  securities  pursuant  to  Directives  2003/71/EC  and 
2004/109/EC of the European Parliament and of the Council202. This Regulation, 
adopted pursuant to Article 23(4)(i) of the Transparency Directive, set out the way 
on which third-country Generally Accepted Accounting Principles (GAAPs)  can 
be found equivalent to International Financial Reporting Standards (IFRS) which 
are adopted by the EU203. 

–  Commission  Decision  2008/961/EC  of  12  December  2008  on  the  use  by  third 
countries’  issuers  of  securities  of  certain  third  country’s  national  accounting 
standards  and  International  Financial  Reporting  Standards  to  prepare  their 
consolidated  financial  statements204.  This  decision,  adopted  pursuant  to  Article 
23(4) of the Transparency Directive, determines that the GAAPs) of US and Japan 
are found to be equivalent to International Financial Reporting Standards (IFRS) 
as  adopted  by  the  EU.  Also,  third  country  issuers  are  permitted  to  prepare  their 
financial  statements  in  accordance  with  the  GAAPs  of  China,  Canada,  South 
Korea  and  India.  The  Commission  will  review  the  situation  of  some  of  these 
countries (China, Canada, South Korea, India) by 2011 at the latest205.  

4.5. 

4.6. 

All  the  exercised  implementing  powers  followed  the  regulatory  procedure  foreseen 
when  the  Directive  was  adopted  in  2004.  The  regulatory  procedure  with  scrutiny 
introduced in 2008 has not yet been used as regards the Transparency Directive. 

Areas  where  the  implementing  powers  have  not  been  used  so  far.  Although 
Directive 2007/14/EC was rather comprehensive, the Commission has not exercised 
all  its  implementing  powers  concerning  the  Transparency  Directive.  This  concerns 
the following provisions: 

Table 4.2 – Specific implementing powers NOT exercised 

Specific 
Empowerment 
Article 2(3)(b) 

Articles concerned 

Subject 

Article 2(1)(i)(ii) 

Adjustment of the 3-year period for the choice of the 
Home Member State by third country issuers 
Indicative  list  of  means  which  are  not  to  be 
considered as electronic means 
Conditions  on  the  availability  to  the  public  of  the 
annual financial report 

Article 2(3)(c) 

Article 2(1)(l) 

Article 4(6) 

Article 4(1) 

201 
202 
203 
204 
205 

OJ L 343 of 8.12.2006, p. 96 
OJ L 340 of 22.12.2007, p.66. 
IP/80/20 of 8.1.2008. 
OJ L 340 of 19.12.2008, p.112 
See IP/08/1962 of 12 December 2008. 

EN 

41 

   EN 

 
 
                                                 
Article 4(6) in fine*  Article 4(1) 

Article 5(6)(a) 

Article 5(1) 

Article 5(6) in fine*  Article 5(1) 

Article 5(6)(b) 
Article 12(8)(a) 
Article  13(2)(c),  in 
fine 
Article 17(4) 
Article 18(5) 
Article 19(4) 
Article 21(4)(b) 

Article 5(1) 
Article 12(1) 
Article 13(1) 

Article 17(2)(c) 
Article 18(2)(c) 
Article 19(1) 
Article 21(2) 

Article  21(4), 
sentence 
Article 22(2)* 

Article 23(5)* 

last 

Article 21(1) 

Articles  19(1)  and 
21(2) 
Article 23(2) 

Adaptation of the 5-year period for the availability to 
the public 
Conditions  on  the  availability  to  the  public  of  the 
half-yearly financial report 
Adaptation of the 5-year period for the availability to 
the public 
Nature of the auditors' review 
Standard form for the notification of major holdings 
Standard  form  for  the  notification  of  financial 
instruments 
Type of financial institution 
Type of financial institution 
Filing of information with the competent authority 
Minimum 
mechanism 
List of media for the dissemination of information to 
the public 
Network of central storage mechanisms 

the  central 

standards 

storage 

for 

Type of information disclosed in a third country that 
is of importance to the public in the Community 

4.7. 

4.8. 

Since  the  2008  amendment,  many  of  these  empowerments  are  subject  to  the 
regulatory procedure with scrutiny (i.e. all but the empowerments in Articles 2(3)(c), 
4(6)206, 5(6)(a) and 22(2)). It should also be noted that the degree of compulsion of 
the empowerments market with an asterisk (*) appears lower because of the use of 
the word "may" instead of "shall" in the Directive text.  

Nevertheless,  the  Commission  services  have  undertaken  specific  preparatory  work 
with regard to some of these implementing powers207. This relates in particular to the 
development  of  a  standard  form  for  the  notification  of  major  holdings  and  to  the 
question  of  the  central  storage  of  regulated  information.  The  empowerments  in 
Articles 4(6), 4(6) in fine, 5(6), 5(6) in  fine, 12(8)(a), 12(2)(c),  19(4), 21(4)(b) and 
22(2) are directly or indirectly linked to these areas.  

The specific case of the standard forms for the notification of major holdings of 
voting rights and financial instruments. The aim of the Directive was to establish 
standard forms to be used throughout the Community for the purposes of notifying 
the  required  information  on  major  holdings  of  voting  rights  and  of  financial 
instruments  as  well  as  for  filing  such  information  with  the  national  competent 
authority. Upon request of the Commission, CESR delivered its advice on this point 
in 2005208. In November 2005, DG Internal Market and Services consulted the public 
on  the  possible  content  of  the  implementing  measures  to  the  Transparency 
Directive209.  Part  II  of  the  consultation  document  presented  a  possible  draft 
recommendation  on  the  use  of  the  standard  forms,  which  would  accompany  the 
future  Commission  implementing  measures.  The  main  reason  for  consulting 
stakeholders  on  a  possible  non-biding  text  was  the  difficulty  to  impose  a  form  in 

206 

207 
208 
209 

Interestingly, adapting the five-year period during which the financial reports should remain available to 
the  public  is  subject  to  two  different  procedures  depending  if  it  is  the  annual  report  (regulatory 
procedure) or the half-yearly report (regulatory procedure with scrutiny). 
The empowerments in Articles 17(4) and 18(5) are related to the Directive on Shareholder Rights. 
CESR (June 2005), p.47 and seq. 
See http://ec.europa.eu/internal_market/securities/transparency/index_en.htm#mesures  

EN 

42 

   EN 

 
                                                 
isolation  from  the  development  of  the  network  of  central  storage  mechanisms. 
Discussions  with  Member  States  within  the  European  Securities  Committee  also 
showed  the  difficulty  to  establish  a  single  form,  considering  different  national 
requirements  associated  to  the  disclosure  of  major  holdings.  As  a  result,  in  March 
2007,  at  the  moment  of  the  adoption  of  the  Commission  implementing  measures 
(Directive 2007/14/EC), the Commissioner responsible for internal market called on 
CESR members to perform a market test on the voluntary use of forms developed by 
the Commission services210. In appears that in the vast majority of Member States a 
form for the notification of major holdings is being used, in many cases built up on 
the  model  developed  by  the  Commission  services  but  often  adopted  to  national 
specificities211. 

In this context, CESR has recently undertaken some work with a view to converge 
into  a  single  electronic  notification  form  capable  of  integrating  the  different 
additional  national  requirements.  Considering  the  evolution  of  this  work  as  well  as 
the fact that the development of the form is an issue of technical nature not involving 
policy  choices  (i.e.  the  content  of  the  notifications  requirements  are  established  in 
Article 12 of Directive 2004/109/EC and in Article 11 of Directive 2007/14/EC), the 
Commission  has  recently  proposed  that  the  European  Securities  Markets  Authority 
should  be  entitled  to  develop  technical  standards  in  relation  to  these  forms212.  If 
Council and Parliament accept such proposal, the empowerments in Articles 12(8)(a) 
and 13(2)(c) in fine for the adoption of Commission's implementing measures would 
be repealed (see also Annex 1 – Section B, above). 

4.9. 

4.10.  The specific case of the central storage of regulated information (see also Annex 
15).  The  Directive  requires  Member  States  to  set  up  (at  least)  one  "officially 
appointed mechanism for the central storage of regulated information"213. It foresees 
as  well  the  possibility  for  the  Commission  to  adopt  implementing  measures 
specifying the minimum standards for the central storage of regulated information214. 
As a second step, the Directive encourages the creation of an electronic network (or a 
platform  of  electronic  networks)  of  storage  mechanisms  across  Member  States215. 
Implementing  powers  are  also  foreseen  for  the  Commission  in  this  regard,  after 
having reviewed the guidelines prepared by CESR on this issue. The Directive also 
provides  for  implementing  powers  on  issues  closely  connected  to  the  storage  of 
regulated  information:  (i)  the  technical  conditions  under  which  a  published  (annual 

210 

211 

212 

213 
214 
215 

at: 

the 

available 

to  CESR  of  5.3.2007, 

letter  of  Commissioner  McCreevy 

See 
http://ec.europa.eu/internal_market/securities/transparency/index_en.htm#mesures  
See European Commission (December 2008), p.15: "In 23 of the Member States the use of a form for 
the  notification  of  major  holdings  of  voting  rights  is  recommended  (in  the  case  of  Spain,  the  form  is 
compulsory). Only in AT, MT, PL and SK is a form not yet recommended. The standard form developed 
by  the  Commission  services  is  used  in  many  of  the  23  Member  States,  although  it  has  often  been 
adapted to national specificities, notably in order to accommodate the more stringent requirements." 
Proposal  for  a  Directive  of  the  European  Parliament  and  of  the  Council  amending  Directives 
1998/26/EC,  2002/87/EC,  2003/6/EC,  2003/41/EC,  2003/71/EC,  2004/39/EC,  2004/109/EC, 
2005/60/EC,  2006/48/EC,  2006/49/EC,  and  2009/65/EC  in  respect  of  the  powers  of  the  European 
Banking  Authority,  the  European  Insurance  and  Occupational  Pensions  Authority  and  the  European 
Securities  and  Markets  Authority;  COM(2009)0576  final  of  26  October  2009.  See  draft  Article  7 
modifying Articles 12, 13 and 25 of the Transparency Directive. 
Cf. Article 21(2). 
Cf. Article 21(4). 
Cf. Article 22. 

EN 

43 

   EN 

 
                                                 
or  half-yearly)  financial  report  is  to  remain  available  to  the  public  for  5  years, 
(including  the  possible  adaptation  of  the  five-year  period)216  and  (ii)  filing  of 
disclosed  regulated  information  with  the  competent  authority  in  the  home  Member 
State by electronic means217. In both cases, a working storage mechanism would be 
the reply to the problem. 

4.11.  Upon request of the Commission, CESR prepared in 2005 a progress report218 on this 
issue  and  later  in  2006  a  formal  advice  on  possible  implementing  measures  on 
storage of regulated information and filing with the competent authority219.  

Building on CESR advice, DG Internal Market and Services consulted the public on 
this issue in March 2007. The consultation document220 contained: (i) draft minimum 
quality standards for the central storage and (ii) draft minimum conditions for a pan-
European  network  of  national  central  storage  mechanisms.  Preliminary  discussions 
with  Member  States  within  the  European  Securities  Committee  were  also  held: 
preference was expressed for continuing the work toward the development of a pan-
European  network  of  central  storage  mechanisms  without  limiting  the  flexibility  of 
the  national  mechanism  in  this  process  through  the  enactment  of  Commission's 
implementing measures on minimum quality standards. The issues of governance of 
a  pan-European  network  and  the  question  of  Information  and  Communication 
Technology  convergence  appeared  as  priority  issues  compared  to  the  quality 
standards.  

4.12.  As a result the Commission adopted a non-binding Recommendation221 with a view 
to  give  support  to  work  undertaken  by  CESR  regarding  the  pan-European  network 
and  to  its  suggested  way  forward:  the  so-called  Model  C222.  The  recommendation 
also  contains  suggestions  on  minimum  quality  standards.  CESR  is  currently 
developing Model C. In the recommendation, the Commission also invited CESR to 
draw up, by 30 September 2010 appropriate guidelines for the future development of 
the  electronic  network  beyond  Model  C.  The  possible  exercise  of  implementing 
powers under Articles 4(6), 5(6), 19(4), 21(2) and 22(2) should be considered at that 
time (see also Annex 15 on this issue). 

4.13.  The new developments. It should be noted that in September 2009, the Commission 
proposed the creation of a European Securities Markets Authority that would replace 
CESR (see above Annex 1 – Section B). This new Authority will be empowered to 
develop draft technical standards, to be formally adopted by the Commission, in the 

216 
217 
218 
219 
220 
221 

222 

Cf. Articles 4(6) and 5(6). 
Cf. Article 19(4). 
CESR (March 2005). 
CESR (June 2006). 
See http://ec.europa.eu/internal_market/securities/transparency/index_en.htm#storage  
Commission Recommendation 2007/657/EC of 11 October 2007 on the electronic network of officially 
appointed  mechanisms  for  the  central  storage  of  regulated  information  referred  to  in  Directive 
2004/109/EC of the European Parliament and of the Council, OJ L267, 12.10.2007, p.16. The text of 
the 
at: 
www.ec.europa.eu/internal_market/securities/transparency/index_en.htm 
Under  Model  C,  the  pan-European  network  would  be  accessed  via  a  common  interface  which  would 
contain  a  list  of  all  EU  listed  companies.  By  clicking  on  the  name  of  the  relevant  company,  the  user 
would be directed to the site of the relevant storage mechanism. The data would remain at national level 
and the only common element would be the list of listed companies.  

recommendation 

available 

is 

EN 

44 

   EN 

 
                                                 
securities markets area. Those technical standards will be binding and should clarify 
the  conditions  of  application  of  a  Directive  or,  as  appropriate,  of  its  implementing 
measures.  As  underlined  before,  the  Commission  has  proposed  that  its  current 
implementing powers on the development of the standard forms for the notification 
of voting rights and of financial instruments be repealed and transformed into EMSA 
powers to develop technical standards on this issue.  

4.14. 

The Commission is not precluding from proposing in the future that ESMA receives 
additional  powers  with  a  view  to  developing  technical  standards  on  other  issues 
connected to the Transparency Directive. 

4.15.  Conclusions. This Annex shows that there is a need to maintain the empowerments 
for  Commission's  implementing  measures  regarding  the  areas  in  which  they  have 
been  used,  in  case  adjustments  are  needed  in  the  future.  Also,  there  is  a  need  to 
maintain  the  empowerments  directly  and  indirectly  linked  to  storage  of  regulated 
information  and  filing  with  national  authority  since  work  on  this  issue  is  still  in 
progress (see Annex 15). The empowerments in relation to articles 17 & 18 could be 
maintained too since their future use will depend on the impact of the Directive on 
shareholder rights.  

4.16. 

The  creation  of  ESMA  opens  the  possibility  for  transferring  some  of  these 
empowerments  to  ESMA,  so  that  it  develops  technical  standards  on  some  areas. 
Possible areas for this transfer could be the empowerment for establishing the list of 
electronic means or the conditions for the availability of the financial reports.  

EN 

45 

   EN 

 
ANNEX 5 – COST OF COMPLIANCE WITH THE DIRECTIVE 

5. 

Annex 

5.1. 

This Annex: 

•  A)  introduces  the  scope  and  methodology  of  an  external  study  on  cost  of 

compliance with, inter alia, the Transparency Directive; 

•  B) describes the findings of the study with regard to the one-off costs; 

•  C) equally for the on-going costs; and 

•  D)  shows  the  impact  of  the  minimum  harmonisation  nature  of  the  Transparency 

Directive. 

A) The external study on cost of compliance 

5.2. 

5.3. 

5.4. 

5.5. 

223 

224 

225 

A  recent  external  study  has  examined  for  the  Commission  the  cost  impact  of 
compliance for certain types of firms within the financial industry with six key EU 
directives in the financial services area, including the Transparency Directive223. The 
survey concentrated on firms from four sectors within the financial services industry 
in the EU: banks and financial conglomerates, asset managers, investment banks and 
financial markets. 

The  study  focuses  on  the  so-called  ‘incremental  compliance  costs’  caused  by 
regulation, not on the total costs of activities that happens to contribute to regulatory 
compliance224.  

The study identifies separately cost impacts that are of one-off nature (i.e. those costs 
that  only  have  to  be  incurred  once  in  making  the  transition,  such  as  IT  investment 
and the re-shaping of business processes) from those that are recurring in nature (on-
going costs as a result of regulation). The ongoing costs of compliance for any given 
firm  are  typically  lower  than  the  one-off  costs.  Looking  at  the  different  sectors 
surveyed,  recurring  costs  are  mostly  between  15  and  20  per  cent  of  the 
implementation cost recorded (with some exceptions)225. 

This  study  shows  that  firms  have  adopted  different  strategies  in  approaching  the 
implementation  of  the  Directive  both  regarding  one-off  (in  particular,  in  their 
willingness to put maximum reliance upon the automation of processes) and ongoing 
costs.  The  dispersion  in  the  ongoing  costs  —  and  general  business  experience  — 

Europe  Economics  (2009).  The  six  directives  concerned  are  the  so-called  Prospectus  Directive,  the 
Financial Conglomerates Directive, the Capital Requirements Directive, the Transparency Directive, the 
Markets in Financial Instruments Directive – MiFID and the Anti-Money Laundering Directive. These 
measures were part of the Commission’s Financial Services Action Plan (FSAP) of 1999 (the so-called 
3rd AML Directive of 2005 replaced in the meantime the precedent, second, AML Directive of 2001 
which was the measure addressed in the FSAP). 
Ibid.,  §2.14. For an  explanation of  the  methodology  of  that  study,  see:  section 2;  the  introductions  to 
sections 4 and 5; as well as Appendix 1 of the final report. 
Ibid., §15 and seq. 

EN 

46 

   EN 

 
                                                 
suggest  that  firms  have  experienced  differing  levels  of  success  in  achieving  this 
objective.  Indeed  the  study  shows  a  wide  dispersion  of  results.  Figures  5.1  and  5.2 
illustrate this divergence in scale, by showing the dispersion of the results obtained 
for the Transparency Directive. 

Figure  5.1:  Dispersion  of  the  one-off  costs  of  the  Transparency  Directive  by  firm  size  (asset  managers), 
expressed as a percentage of 2007 operating expenses 

0.5

0.4

0.3

0.2

0.1

0.0

)
s
t
s
o
c

g
n
i
t
a
r
e
p
o
f
o
%
a
s
a
(

e
c
n
a

i
l

p
m
o
c

f
o
s
t
s
o
c

f
f
o
-
e
n
O

Small

Large

Source: Europe Economics (2009), figure 4.10.  

Figure 5.2: Dispersion of the on-going costs of the Transparency Directive by firm size (asset managers), 
expressed as a percentage of 2007 operating expenses. 

0.25

0.20

0.15

0.10

0.05

0.00

)
s
t
s
o
c
g
n
i
t
a
r
e
p
o
f
o
%
a
s
a
(
e
c
n
a

i
l

p
m
o
c

f
o
s
t
s
o
c

i

g
n
o
g
n
O

Small

Large

Source: Europe Economics (2009), figure 5.9.  

EN 

47 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
B) The one-off costs of compliance 

5.6. 

Concerning  the  one-off  costs  of  compliance  (see  Table  5.1)  for  banks,  financial 
conglomerates and investment banks226 compliance with the Transparency Directive 
roughly  accounts  for  1%  of  all  their  financial  services  regulatory  costs227.  If  a 
comparison is done with the costs of compliance for asset managers, Table 5.1 shows 
that  the  one-off  costs  of  compliance  with  the  Transparency  Directive  take  a  higher 
proportion of asset managers’ total costs228. 

TABLE 5.1 – AML Directive – One-off costs of compliance 
Banks & 
financial 
conglomerates 

Investment 
banks 

Asset 
managers 

Mean230 (percentage of 2007 operating expenses) 
Median231 (percentage of 2007 operating expenses) 
Total  financial  services  regulatory  compliance 
costs232 (percentage of 2007 operating expenses) 

Mean:  average  absolute  value  of  the  incremental 
cost changes, per firm (€000s) 
Total financial services regulatory compliance costs 
(€000s)  
Average of operating costs (€000s) 

0.03% 
0.01% 
2.90% 

0.01% 
0.04% 
2.25% 

0.22% 
0.02% 
1.58% 

425 

319 

353 

45,149 

24,569 

5,565 

Financial 
markets
229

0.44% 
0.09% 
3.40% 

89 

694 

1,558,072 

1,030,071 

384,582 

20,403 

Source: Europe Economics (2009), tables 4.1, 4.2 and 4.3. 

5.7. 

Out  of  the six directives examined  by the study, the Transparency Directive  comes 
fourth in terms of cost impact for banks, financial conglomerates, investment banks 
and asset managers, well behind the Capital Requirements Directive, MiFID and the 
Anti-Money Laundering Directive. These three other directives represented the most 
important regulatory changes in this area in recent times and their compliance costs 
are  significantly  higher233:  e.g.  the  Capital  Requirements  Directive  accounted  for 
more than half of the total financial services regulatory compliance costs for banks, 
financial conglomerates and investment banks. For this institutions, the Transparency 
Directive  impact  is  ten  times  lower  that  that  of  the  AML  Directive.  In  the  case  of 
asset  managers  the  impact  of  MiFID  equals  that  of  the  Capital  Requirements 
Directive:  both  together  account  for  around  two  thirds  of  costs.  However,  the  cost 

226 

227 
228 

229 

230 

231 

232 

233 

The study also provides further breakdowns of costs, per size and geographical origin concerning banks 
(and financial conglomerates) and investment banks. See Ibid. §4.20 to 4.25 and 4.93 to 4.94. 
The non-EU regulation costs are reflected in the study, on an aggregated basis, in the total costs. 
The study also provides further breakdowns of costs, per size and geographical origin concerning asset 
managers. See Ibid. §4.64 to 4.68. 
Financial  markets  (e.g.  stock  exchanges  operators)  are  not  directly  subject  to  the  obligations  of  the 
Transparency  Directive,  but  they  incurred  in  some  costs  such  as:  the  re-writing  of  the  Exchange's 
rulebooks and some re-training of relevant surveillance staff. In order to allow for comparisons, their 
costs are also shown in Table 6.1. See also Ibid., §4.108 and seq.. 
The middle value in a series of data points arranged sequentially. The sequence from which this median 
has been selected is based upon the estimated one-off costs of compliance expressed as a percentage of 
the relevant firm’s more recent operating expenditure.  
Aggregate one-off costs of compliance expressed as a percentage of the relevant firms’ aggregated most 
recent operating expenditure. This implies that the experience of the larger firms will carry more weight 
in the sample presented. 
Including other FSAP measures and other financial services regulation, whether EU, nationally or extra-
territorially derived. 
Ibid., tables 4.1, 4.2 and 4.3.  

EN 

48 

   EN 

 
 
 
 
 
 
 
 
                                                 
5.8. 

5.9. 

gap  between  the  AML  Directive  (third)  and  the  Transparency  Directive  (fourth)  is 
smaller than for banks234. 

Concerning  the  possibilities  for  financial  institutions  to  achieve  synergies  between 
application  of  the  Transparency  Directive  requirements  and  those  of  the  other 
measures  mentioned  above,  it  should  be  generally  noted  that  very  few  businesses 
surveyed by the study believed that any significant cost-reducing synergies had been 
achieved  in  the  implementation  of  the  various  measures:  the  variation  in  the 
implementation  dates  was  the  most  frequently  cited  factor  behind  this235.  Another 
component  to  this  problem  was  that  firms  felt  that  the  detail  necessary  to  properly 
prepare  for  IT  changes  was  not  always  forthcoming  from  the  implementing 
authorities in a sufficiently timely manner. In any event, no synergies in connection 
to the Transparency Directive were identified. 

The main source of Transparency Directive related compliance spending for banks, 
investment banks and financial conglomerates (see Table 5.2 for banks and financial 
conglomerates  and  Table  5.3  for  investment  banks)  is  investment  in/updating  IT236 
(similarly high IT costs appear for almost all the directives covered in the study). In 
any event, this Directive was not typically a major source of cost to banks although 
the  innovation  of  parent  company  reporting  introduced  some  additional  cost  to 
affected banks (i.e. largely those with asset management subsidiaries) 237. 

TABLE 5.2 – Cost drivers of the selected directives (banks and financial conglomerates) – one-off costs 

Directive
Familiarisation with Directive 
Consultancy fees
Legal advice 
Training 
Staff recruitment costs
Investment in/updating IT
Project management
Other 

Prospectus
49%
5%
23%
13%
0%
2%
8%
0%

FCD
15%
11%
5%
8%
2%
47%
9%
2%

CRD Transparency
13%
5%
5%
11%
1%
63%
3%
0%

2%
20%
5%
5%
4%
57%
8%
0%

MiFID
3%
13%
7%
15%
2%
52%
7%
0%

Source: Europe Economics (2009), table 4.10. 

TABLE 5.3 – Cost drivers of the selected directives (investment banks) – one-off costs  

Directive
Familiarisation with Directive 
Consultancy fees
Legal advice
Training
Staff recruitment costs
Investment/ updating IT
Project management
Other

Prospectus
9%
13%
18%
14%
4%
27%
14%
0%

FCD
7%
0%
10%
15%
0%
39%
29%
0%

CRD Transparency
7%
10%
4%
4%
10%
36%
29%
0%

3%
19%
2%
2%
1%
62%
10%
1%

MiFID
6%
16%
4%
10%
1%
49%
14%
1%

Source: Europe Economics (2009), table 4.27. 

3AMLD
3%
11%
1%
22%
2%
54%
7%
0% 

3AMLD
5%
12%
6%
13%
0%
53%
12%
0% 

234 
235 
236 

237 

Ibid., tables 4.1., 4.2 and 4.3. 
Ibid., §§4.14 to 4.17. 
The ex ante impact assessment conducted in the UK for the transposition of the Transparency Directive 
indicated an expected cost to a bank of adapting its existing systems to be around €365,000 to €731,000 
in the UK. Based on the average operating cost of all the banks and financial conglomerates in the study 
sample, this would represent between 0.02 and 0.04 per cent of operating costs. The results of the study 
analysis  show  a  lower  one-off  cost  of  0.01  per  cent  of  operating  costs  across  all  participating  banks 
(with the median result below this). See Ibid., §4.44. See also UK Treasury (2005) on cost issues.  
Ibid., §4.43. 

EN 

49 

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5.10. 

For  asset  managers  the  cost  breakdown  is  different,  with  legal  advice  and 
consultancy  fees  involving  similar  or  higher  costs  than  IT  related  expenditure  (see 
Table 5.4 for asset managers)238.  

TABLE 5.4 – Cost drivers of the selected directives (asset managers) – one-off costs  

Directive
Familiarisation with Directive 
Consultancy fees
Legal advice 
Training
Staff recruitment costs
Investment/updating IT 
Project management
Other 

Prospectus
6%
30%
21%
0%
0%
24%
19%
0%

FCD
53%
0%
0%
2%
0%
0%
45%
0%

CRD
5%
19%
0%
0%
2%
62%
11%
0%

Transparency
2%
25%
32%
0%
0%
23%
19%
0%

MiFID
6%
16%
4%
9%
3%
48%
14%
0%

3AMLD
4%
9%
4%
17%
3%
51%
12%
0%  

Source: Europe Economics (2009), table 4.19. 

5.11. 

In  terms  of  asset  managers  IT  spending239,  the  requirement  for  parent  company 
reporting meant that for some asset managers a large IT project was or is required in 
order to allow such an aggregation of holdings across all portfolios. Specific issues 
identified within such projects for flagging share-holdings include: (i) the total actual 
outstanding shares in companies is not held within a single database (this information 
is  required  for  the  denominators  in  calculating  an  asset  manager’s  positions).  The 
requirement  to  look  across  various  databases  incurs  direct  costs  (through  data 
licenses  on  both  a  one-off  and  ongoing  basis)  and  as  a  potential  trigger  to 
establishing  data  warehousing  facilities;  (ii)  where  the  disclosure  threshold  was 
previously five per cent and is now lower, this has magnified the importance of such 
flagging as share-holdings on such a scale are markedly more commonplace; and (iii) 
the need to consider derivative positions is a further complication.  

C) The ongoing cost of compliance 

5.12.  Concerning  the  ongoing  cost  of  compliance  (see  Table  5.5),  for  banks,  financial 
conglomerates  and  investment  banks,  compliance  with  the  Transparency  Directive 
roughly accounts for 2% of all their financial services regulatory costs in the case of 
banks, while the percentages increases to roughly 5% for asset managers240. This is 
partially explained because for asset managers, the on-going cost of compliance with 
the AML Directive take a lower proportion of asset managers’ total costs241. 

5.13. 

In relative terms, these costs are slightly higher than the one-off cost of compliance, 
possibly  explained  by  the  relatively  lower  on  going  costs  of  compliance  with  the 
Capital  Requirements  Directive  and  MiFID.  In  any  event,  as  for  the  one-off  costs, 
these  two  other  directives  bear  the  bulk  of  the  compliance  costs,  with  the  AML 
Directive  ranking  third  and  the  Transparency  Directive  fourth  (except  for  asset 
managers, for which the Prospectus Directive involves more compliance costs) out of 
the six directives examined by the study. 

238 
239 
240 

241 

See generally, Ibid., §§4.79 to 4.81 (for asset managers) 
Ibid., §§4.79 and 4.80. 
The  study  also  provides further  breakdowns  of  costs, per size  and geographical origin.  See  §§5.12  to 
5.17 (for banks), 5.42 to 5.45 (for asset managers) and 5.62 (for investment banks). 
Financial  markets  (e.g.  stock  exchanges  operators)  are  not  directly  subject  to  the  obligations  of  the 
Transparency Directive. But in order to allow for comparisons, their costs are also shown in Table 5.5. 

EN 

50 

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TABLE 5.5 – Transparency Directive – Ongoing cost of compliance 

Mean242 (percentage of 2007 operating expenses) 
Median243 (percentage of 2007 operating expenses) 
Total  financial  services  regulatory  compliance 
costs244 (percentage of 2007 operating expenses) 

Mean: average absolute value of the ongoing costs 
incurred, per firm (€000s) 
Total financial services regulatory compliance costs 
(€000s)  
Average of operating costs (€000s) 

Banks & 
financial 
conglomerates 
0.01% 
0.00% 
0.59% 

Investment 
banks 

Asset 
managers 

Financial 
markets 

0.03% 
0.00% 
0.38% 

0.08% 
0.01% 
0.85% 

0.33% 
0.00% 
1.70% 

147 

245 

127 

8,540 

3,807 

2,532 

67 

347 

1,558,072 

1,030,071 

384,582 

20,403 

Source: Europe Economics (2009), tables 5.1, 5.2 and 5.3. 

5.14. 

The most important ongoing costs of compliance with the Transparency Directive for 
banks,  investment  banks  and  financial  conglomerates  concern  IT  expenditure, 
additional  staff  costs  and  audit  costs  (see  Table  5.6  for  banks  and  financial 
conglomerates and Table 5.7 for investment banks).  

TABLE 5.6 – Cost drivers of the selected directives (banks and financial conglomerates) – ongoing cost 

Additional staff
Internal reporting
IT 
External reporting 
Training 
Audit
Other 

Prospectus
37%
2%
15%
16%
19%
10%
0%

FCD
6%
7%
6%
65%
4%
11%
0%

CRD Transparency
15%
43%
4%
8%
49%
26%
8%
10%
8%
6%
15%
7%
0%
0%

Source: Europe Economics (2009), table 5.10. 

TABLE 5.7 – Cost drivers of the selected directives (investment banks) – ongoing cost 

Directive
Additional staff 
Internal reporting
IT
External reporting
Training
Monitoring/audit
Other 

Prospectus
0%
0%
1%
48%
47%
3%
0%

FCD
0%
23%
35%
12%
31%
0%
0%

CRD Transparency
33%
34%
7%
7%
19%
32%
8%
10%
12%
6%
21%
10%
0%
0%

Source: Europe Economics (2009), table 5.27. 

MiFID
35%
7%
28%
10%
10%
9%
0%

MiFID
26%
6%
45%
13%
6%
4%
0%

3AMLD
37%
4%
31%
5%
13%
10%
0%  

3AMLD
23%
12%
29%
9%
16%
10%
0% 

5.15.  Concerning  asset  managers  (see  Table  5.8),  most  of  the  on-going  costs  relate  from 
additional  staff.  Even  for  those  who  made  specific  IT  investment  in  order  to 
automate  their  ongoing  disclosure  requirements,  typically  there  has  been  a 

242 

243 

244 

The middle value in a series of data points arranged sequentially. The sequence from which this median 
has been selected is based upon the estimated ongoing costs of compliance expressed as a percentage of 
the relevant firm’s more recent operating expenditure.  
Aggregate  ongoing  costs  of  compliance  expressed  as  a  percentage  of  the  relevant  firms’  aggregated 
most recent annual operating expenditure. This implies that the experience of the larger firms will carry 
more weight in the sample presented. 
Including other FSAP measures and other financial services regulation, whether EU, nationally or extra-territorially 
derived. 

EN 

51 

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requirement to increase staffing levels in order to maintain such systems and ensure 
some  oversight  of  them245.  Some  larger  asset  managers  view  the  Transparency 
Directive as something of a missed opportunity to reduce costs due to the minimum 
harmonisation approach adopted in its implementation. The key issue encountered is 
the need to keep an eye on the local implementation which has not (in many cases) 
reduced the number of share-holding limits that a transnational business needs to be 
aware of246. 

TABLE 5.8 – Cost drivers of the selected directives (asset managers) – ongoing cost 

Directive
Additional staff
Internal reporting 
IT
External reporting
Training
Audit
Other

Prospectus
50%
0%
50%
0%
0%
0%
0%

FCD
0%
3%
0%
97%
0%
0%
0%

CRD
25%
6%
13%
30%
11%
15%
0%

Transparency
69%
0%
17%
1%
1%
12%
0%

MiFID
20%
12%
28%
17%
7%
16%
0%

3AM LD
13%
3%
27%
14%
22%
21%

0%  

Source: Europe Economics (2009), table 5.18.  

D) The impact of the minimum harmonisation nature of the Transparency Directive 

5.16. 

The  external  study  also  identifies  some  costs  issues  resulting  from  the  adoption  of 
more  strigent  national  measures  when  implementing  the  Transparency  Directive. 
More  precisely,  the  study  considered  the  ongoing  and  one-off  incremental  costs  of 
complying  with  the  Transparency  Directive  for  the  asset  managers  surveyed, 
comparing the results for transnational asset managers with those that largely operate 
in just one Member State. The results were notably different. The latter consistently 
had  a  lower  cost  of  compliance  with  the  Transparency  Directive.  This  analysis  is 
summarised in the following box. 

BOX 5.1 – The impact of minimum harmonisation on asset managers 

The  approach  adopted  for  the  implementation  of  the  Transparency  Directive  has  been  of  minimum 
harmonisation.  A  number  of  the  asset  managers  surveyed  operate  in  multiple  jurisdictions  and 
therefore  need  to  monitor  the  local  implementation  in  each  of  the  countries  in  which  they  operate. 
Indeed, some of the larger, transnational asset managers participating in our study view the Directive 
as something of a “missed opportunity” to reduce costs for this reason. 

There  are  three  broad  areas of  the  implementation of  the  Transparency  Directive  which  vary  across 
the Member States247. First, the initial threshold for disclosure of the major holdings of voting rights 
by investors. The Directive states that investors should declare when the proportion of voting rights 
reaches, exceeds or falls below the thresholds of 5 per cent, 10 per cent, 15 per cent, 20 per cent, 25 
per  cent,  30  per  cent,  50  per  cent  and  75  per  cent.  With  regards  to  the  initial  disclosure  Italy  and 
Portugal have imposed a lower threshold of two per cent, and Germany, Ireland, Spain and the UK 
have  adopted  three  per  cent.  Whilst  Belgium  and  France  are  at  the  Directive  level  of  five  per  cent, 
they allow issuers to set a lower threshold in their own articles of association. 

Second, the deadlines for reporting major holdings of voting rights by investors vary. The Directive 
states that investors should report major holdings of voting rights as soon as possible after they have 
crossed  the  aforementioned  thresholds,  but  no  later  than  four  days.  Some  Member  States  have 
imposed more stringent timetables: both Greece and Romania have set a limit of three days; Austria, 

245 
246 

247 

Ibid., §5.47. 
Ibid., §5.48. See also the example provided in relation to aggregation of voting rights within a group of 
companies in Germany (§§ 5.49 to 5.50). 
See European Commission (December 2008) 

EN 

52 

   EN 

 
                                                 
Hungary,  Ireland  and  the  UK  have  imposed  a  deadline  of  two  days;  Cyprus,  Denmark  and  Sweden 
have opted for just one day, with Finland requiring reporting without delay. 

A  further  source  of  differentiation  in  implementation  is  with  regards  to  the  calculation  of  group 
holdings — voting rights are not aggregated in a similar fashion in all Member States. In Germany, 
for example, group exemptions to report just at the parent level only apply to share-holdings and not 
voting rights; thus, each legal entity in a group is required to file in respect of what are essentially the 
same voting rights. This issue of aggregation is complicated by the treatment of derivative positions 
and is further clouded by the different approaches to this matter in different Member States. 

Looking  at  both  the  ongoing  and  one-off  incremental  costs  of  complying  with  the  Transparency 
Directive  for  the  asset  managers  surveyed,  the  results  for  transnational  asset  managers  compared  to 
those that largely operate in just one Member State are markedly different. The latter consistently had 
a lower cost of compliance with the Transparency Directive. The mean ongoing cost of compliance 
with the Transparency Directive was 0.05 per cent (of total operating expenses) more for transnational 
asset  managers  compared  to  asset  managers  that  operate  largely  in  just  one  country.  The  one-off 
incremental  costs  were  0.12  per  cent  (of  operating  expenses)  higher.  Looking  at  the  medians,  the 
results are consistent (in the sense that transnational players have higher costs) but are geared more 
towards a higher differential in the one-off costs — where the gap is 0.23 per cent of operating costs. 
However, the median difference in ongoing costs is lower, at just 0.02 per cent. 

Looking at the kind of costs incurred, the differentiated implementation across the EU27 must have 
complicated the design and management of the IT projects required to meet the flagging requirements 
after aggregating holdings across all portfolios. These systems tend not to be fully automated so that 
an ongoing incremental cost exists also. 

Although  it  is  not  possible  to  quantify  how  much  of  the  additional  cost  impact  experienced  by 
transnational  asset  managers  has  been  driven  by  a  minimum  rather  than  maximum  harmonisation 
approach,  it  is  clear  that  there  has  been  some  contribution  to  the  level  of  cost  experienced  by 
transnational  asset  managers  due  to  this  effect.  This  point  was  directly  confirmed  to  us  by  at  least 
some of the affected participants. 

Source: Europe Economics (2009), box 4.1. 

5.17. 

Similar  conclusions  are  found  on  another  study  conducted  for  the  Commission248, 
which  outlines  the  lack  of  harmonisation  impact  of  the  Transparency  Directive. 
Many  interviewees  in  that  study  raised  concerns  that  the  implementation  of  the 
Transparency  Directive  had  brought  considerable  systems  costs.  Some  of  them 
indicated  that  there  were  not-insignificant  ongoing  monitoring  costs  that  were 
incurred  because  of  the  national  differences.  This  means  that  companies  need  to 
continually  monitor  the  local  rules  in  each  member  state  that  they  invest  in. 
Interestingly,  interviewees  did  not  believe  that  investment  decisions  were  being 
distorted by this monitoring cost, but rather this was seen as increasing the fixed cost 
of doing business. 

248 

CRA International (2009), p.173 and seq. 

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53 

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ANNEX 6 – ISSUES FOR TECHNICAL ADJUSTMENTS IN THE DIRECTIVE 

6. 

Annex 

6.1. 

The  review  of  the  operation  of  the  Transparency  Directive  shows  that  some  of  its 
requirements are not always clear, leading to uncertainty as regards those obligations. 
For  instance,  CESR  regularly  publishes  interpretative  documents,  in  a  "questions-
and-answers"  format,  regarding  the  Directive  obligations249.  Also,  stakeholders 
identified some clarification issues in their replies to a call for evidence launched by 
CESR in 2007. The feedback statement published by CESR provides details on those 
issues250.  The  External  Study  also  identified  some  requirements  that  would  benefit 
from further clarity251.  

6.2. 

Some technical adjustments to the text of the Directive would possibly be beneficial 
with a view to clarifying its obligations. The following issues have been identified: 

–  Choice  of  Home  Member  State  for  third  country  issuers.  The  choice  of  third 
country  issuers  is  valid  for  3  years.  However,  this  leads  to  practical  problems 
when such issuer is no longer listed in the regulated market of the Home Member 
State and only remains listed in one host Member State252. 

–  Definition  of  "shareholder".  Interested  parties  explain  that  there  is  a  possible 
contradiction between the definition of shareholder in Article 2(1)(e)(ii)253 and the 
case included in Article 10 (g)254. 

–  Definition of "issuer"255.  

–  Definition of "financial institution" in Articles 17 and 18256. 

–  Treatment  of  global  depository  receipts  when  the  underlying  shares  are  not 
admitted  to  trading  in  a  regulated  market  within  the  EU/EEA.  The  scope  of  the 
Directive rules is not fully clear on these cases. 

249 
250 
251 

252 
253 

254 

255 
256 

CESR (October 2009). 
CESR (February 2008). 
Mazars  (2009),  see  sections  1.4.3  (on  definitions);  2.4.7  (on  financial  reporting);  2.6.5  (content  of 
interim  management  statements);  3.3.7  (on  major  holdings  notifications);  3.6.1.4  (on  stock  lending); 
and  3.6.3.2  (on  financial  instruments)  of  that  study.  At  the  same  time,  it  should  be  noted  that  the 
stakeholders' perception about the overall clarity of the Directive is positive and that, in case of lack of 
clarity, stakeholders tend to attribute such lack of clarity to national laws, guidance or market practices 
more often than to the Directive itself (see sections 1.4.1 and 1.4.2 of that study).  
CESR (October 2009), question 1. 
"'shareholder' means any natural person or legal entity governed by private or public law, who holds, 
directly  or  indirectly:  […]  (ii)  shares of  the  issuer  in  its own name, but  on  behalf  of another  natural 
person or legal entity." 
"The  notification  requirements  defined  in  paragraphs  1  and  2  of  Article  9  shall  apply  to  a  natural 
person or legal entity to the extent it is entitled to acquire, to dispose of, or to exercise voting rights in 
any of the following cases or a combination of them: […] (g) voting rights held by a third party in its 
own name on behalf of that person or entity." 
Mazars (2009), section 1.4.3. 
Mazars (2009), section 1.4.3. 

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54 

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–  Deadline  for the publication of annual financial reports and half-yearly financial 
reports. The text of the Directive is not clear as regards whether the reports to be 
disclosed within the Directive deadline are those approved by the board or by the 
general meeting. 

–  The use of similar terms ("material events" and "important events") in Articles 5 

and 6257.  

–  Meaning of "true and fair view" in Article 5258. 

–  Content of interim management statements in Article 6259. 

–  Disclosure of holdings per class of share (Article 9(1))260. 

–  Notion  of  "acting  in  concert"  in  Article  10(a).  Interested  parties  require  the 
clarification  of  some  elements  of  the  definition  in  Article  10  (a),  namely,  what 
does  "lasting  common  policy  towards  the  management  of  the  issuer"  or 
"agreement"  mean?261  Also,  clarification  of  the  situations  of  joint  investors' 
accounts has also been requested262. 

–  Who  should  notify  in  the  situation  of  joint  control  over  a  controlled 

undertaking263. 

–  The  rules  on  aggregation/dissaggregation  of  holdings  between  parent  company 
and  subsidiary264.  Interested  parties  invoke  that  such  rules  could  be  made 
clearer265.  The  link  between  the  disclosure  obligations  in  the  Transparency 
Directive and the rules in the Directive on takeover bids has also been raised266. 

–  The extension of the exemption of Article 12(4) to non-UCITS asset management 

firms267. 

–  The  rules  on  calculation  on  thresholds268.  Interested  parties  explain  that  the 
exceptions to the aggregation of holdings when calculating whether thresholds are 
reached or crossed could be made clearer. In particular, reference has been made 
to the exceptions for underwriters in case of public offering, the trading book, the 
market makers exemptions or the netting of long and short positions in financial 

257 
258 
259 

260 
261 
262 
263 
264 
265 
266 
267 
268 

Mazars (2009), section 1.4.3. 
Mazars (2009), section 2.4.7. 
Mazars  (2009),  section  2.6.5.  See  additionally  CESR  (February  2008),  p.  3,  where  respondents  to  a 
CESR's  call  for  evidence  on  possible  level  3  work  on  this  Directive  identified  the  need  to  establish 
"principles to prepare interim management statements". See also CESR (October 2009), questions 3 to 
9, which try to clarify part of the requirements of Article 6 of the Transparency Directive. 
CESR (October 2009), question 10. 
ESME (November 2008), pp. 2 and 5.  
CESR (October 2009), question 12. 
Mazars (2009), section 3.3.7. 
CESR (February 2008), p. 3. 
See for instance, CESR (October 2009), question 11. 
ESME (June 2009). 
Mazars (2009), section 3.3.7. 
See generally, CESR (February 2008), p. 3. 

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55 

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instruments269.  Other questions  have also been raised270 such as the treatment of 
the  voting  caps  and  the  total  number  of  voting  rights  for  the  denominator  when 
up-to-date  figures  are  publicly  known  before  the  disclosure  by  the  issuer  under 
Article 15 of the Directive. 

–  The treatment of stock lending under Article 10(b) (see Annex 10)271.  

–  The liability of issuers for false disclosures on major holdings. Issuers disclose to 
the  market  the  notification  of  major  holdings  they  receive.  While  they  have  no 
means  to  control  that  such  notifications  are  correct,  they  are  forced  to  disclose 
them to the market and may incur in liability issues272.  

–  The definition of new loan issues in Article 16(3)273. Interested parties invoke that 

"new loan issues" is an unclear term. 

–  The  responsibility  of  home  and  host  Member  States  when  the  issuer's  securities 
are  not  admitted  to  trading  in  the  home  Member  States  (Article  21(3))  and  the 
filing  of  information  with  the  authority  of  the  home  Member  State  (Article 
19(3))274.  In  accordance  with  Article  21(3),  where  securities  are  admitted  to 
trading  in  the  host  Member  State  and  not  in  the  home  Member  State,  the  host 
Member State shall ensure disclosure of regulated information in accordance with 
Article  21(1).  However,  Article  19(3)  requires  the  filing  of  information  with  the 
competent authority of the home Member State. Some host Member States require 
filing of information also with their competent authority.  

–  The scope of Article 8(2) of Directive 2001/34/EC. The scope of Article 8(2) of 
Directive  2001/34/EC  regarding  issuers  disclosure  of  periodic  and  on-going 
regulated  information  is  unclear  and  seems  to  open  the  door  to  double 
requirements  against  the  spirit  of  the  Home  Member  State  rule  of  the 
Transparency Directive275.  

The Article 30(4) exemption for bond issuers 

6.3. 

6.4. 

269 
270 
271 
272 
273 
274 
275 

Article 33 of the Transparency Directive requires the Commission to report, among 
others,  on  the  appropriateness  of  ending  the  exemption  for  existing  debt  securities 
after the 10-year period as provided for by Article 30(4).  

In accordance with Article 5 of the Transparency Directive, issuers of debt securities 
are  required  to  make  public  half-yearly  financial  reports.  However,  Article  30(4) 
allows Member States to exempt large debt issuers, during a transitional period of 10 
years,  from the obligation to  disclose  half-yearly  financial  reports,  provided  certain 
conditions were met.  

CESR (October 2009), question 13. 
Mazars (2009), section 3.3.7. 
CESR (February 2008), p. 2. 
Mazars (2009), section 3.3.1. 
Mazars (2009), section 2.4.7. Also, CESR (February 2008), p. 3. 
CESR (October 2009), question 16. 
European  Commission  (December  2008),  Annex  4,  in  particular  footnote  90.  See  also  European 
Corporate Governance Forum (March 2009a).  

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The  exemption  could  only  be  granted  by  Member  States  in  respect  of  those  debt 
securities  admitted  to  trading  on  a  regulated  market  prior  to  1  January  2005  which 
may be purchased by professional investors only276. 

6.5. 

6.6. 

At  the  time  of  preparing  the  Transparency  Directive,  stakeholders  feared  extensive 
delisting  by  issuers  of  debt  securities,  and  possible  losses  to  investors  thereby,  if 
issuers  were  not  in  a  position  to  meet  the  new  disclosure  requirements  of  the 
Transparency Directive. Furthermore, issuers had applied for the admission to listing 
of their large debt securities prior to 1st January 2005 on the basis of the then existing 
disclosure  regulatory  framework.  Therefore,  the  Commission  proposed  a  limited 
"grand-father" clause which resulted in a temporary exemption in Article 30(4)277.  

In  principle,  there  are  a  priori  no  compelling  reasons  for  extending  the  exemption 
granted by Article 30(4). Corporate issuers very rarely issue long term bonds beyond 
10  years.  Therefore,  such  transitional  period  should  be  enough  for  those  issuers. 
However, in practice, it is conceivable that large debt securities admitted to trading 
before 1 January 2005 could still be traded after 1st January 2015.  

The number of such debt issuer that could potentially have "Eurobonds" outstanding 
after  1st  January  2015  is  estimated  to  be  rather  low:  a  few  tens  of  issuers  and  few 
hundreds of special purpose vehicles (SPVs)278. However, those concerned are likely 
to  be  a  one  time  or  specialised  issuer  (such  as  financing  SPVs)  or  SMEs.  For  both 
categories, preparing half-yearly financial reports may involve substantial cost279. If 
these estimations are confirmed, it could be conceivable to support the extension of 
the exemption for an additional appropriate period, so as to avoid impacting on small 
issuers.  

6.7. 

In any case, it should be noted that there is no market support for such exemption. In 
the External Study, the stakeholders surveyed did not express a strong opinion on the 

276 

277 

278 
279 

Article 27 of Directive 2001/34/EC stated that: "Where the application for admission to official listing 
relates to debt securities nearly all of which, because of their nature, are normally bought and traded in 
by  a  limited  number  of  investors  who  are  particularly  knowledgeable  in  investment  matters,  the 
competent  authorities  may  allow  the  omission  from  the  listing  particulars  of  certain  information 
provided for by Schedule B of Annex I or allow its inclusion in summary form, on conditions that such 
information is not material from the point of view of the investors concerned." 
Article 27 of Directive 2001/34/EC was repealed by the Prospectus Directive. 
See also recital 12 of the Transparency Directive 
See  European  Commission  (March  2003),  section  5.8.1.  The  transitional  period  proposed  by  the 
Commission was 3 years but the adopted Directive establish it at 10 years. 
Mazars (2009), section 5.3.2 in fine.  
Ibid.  

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opportunity  to  keep  the  exemption  to  publish  half-yearly  for  bond  issuers  listed 
before 2005. When they have expressed an opinion, a small preference is expressed 
in favour of ending such exemption280.  

6.8.  Moreover, when they have expressed an opinion, a majority of stakeholders hold that 
the existence of different transparency regimes for debt securities can create a breach 
in the level playing field281.  

6.9. 

Concerning  issuers  of  debt  securities  admitted  to  listing  after  1st  of  January  2005, 
they  did  so  in  full  knowledge  of  the  new  disclosure  obligations.  In  any  case,  it  is 
noted  that  in  accordance  to  Article  8(1)(b),  the  obligations  of  Articles  4  (annual 
financial  report),  5  (half-yearly  financial  report)  and  6  (interim  management 
statements)  shall  not  apply  to  an  issuer  exclusively  of  debt  securities  admitted  to 
trading  on  a  regulated  market,  the  denomination  per  unit  of  which  is  at  least  EUR 
50 000.  

280 

281 

Mazars  (2009),  section  5.3.1.  This  view  is  expressed  in  particular  by  financial  analysts,  industry 
associations, institutional investors and even debt issuers. On the contrary, exchanges and supervisors 
are more in favour of keeping such exemption. 
Mazars  (2009),  section  5.3.2.  This  view  is  however  not  shared  by  supervisors.  Also  debt  securities 
issuers and exchanges have mixed views on the issue. 

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ANNEX 7 – AGGREGATION OF HOLDINGS OF VOTING RIGHTS AND FINANCIAL INSTRUMENTS? 

7. 

Annex 

7.1. 

7.2. 

One of the novelties of the Transparency Directive in 2004 was the introduction of a 
requirement  to  notify  to  the  issuer  (and  subsequently  disclose  to  the  market)  the 
major holdings of certain financial instruments giving access to shares under certain 
circumstances282.  

The  Commission  proposal  for  a  Directive  of  2003283  merged  this  requirement  with 
the  existing  one  on  the  notification  of  major  holdings  of  voting  rights  already 
existing under the rules of Directive 2001/34/EC. As a result, the holdings of voting 
rights and of (certain) financial instruments would be aggregated for the purposes of 
triggering the notification obligation.  

The proposed Article 9 was drafted as follows: "The home Member State shall ensure 
that,  where  the  security  holder,  or  any  natural  person  or  legal  entity  entitled  to 
exercise  voting  rights  […]  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  reaches,  exceeds  or  falls  below  the  thresholds  of 
[…]". 

This  Article  was  completed  by  the  definition  of  "security  holder"  in  the  proposed 
Article  2(1)(e):  "'security  holder'  means  any  natural  or  legal  entity  governed  by 
private or public law, who, directly or through intermediaries, acquires or disposes 
of: […] (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."284 

7.3. 

Eventually,  the  Commission  proposal  was  amended  on  this  point  by  Council  and 
Parliament  during  the  negotiations.  The  final  text  of  the  Directive  included  a  new 
Article  13  specifically  addressing  the  holdings  of  (certain)  financial  instruments. 
Paragraph (1) of Article 13 states the following:  

"1. The notification requirement laid down in Article 9 shall also apply to a natural 
person  or  legal  entity  who  holds,  directly  or  indirectly,  financial  instruments  that 
result  in  an  entitlement  to  acquire,  on  such  holder's  own  initiative  alone,  under  a 

282 

283 
284 

Financial  instruments  that  result  in  an  entitlement  to  acquire,  on  such  holder's  own  initiative  alone, 
under a formal agreement, shares to which voting rights are attached, already issued of an issuer whose 
shares are admitted to trading on a regulated market.  
European Commission (March 2003).  
According  to  the  Explanatory  Memorandum,  the  "fourth  sub-paragraph  extends  the  definition  of  to 
holders of derivative securities, such as convertible or exchangeable bonds (but not options […]) […]". 
See European Commission (March 2003), section 5.2.2.1. 
The  aggregation  requirements  appears  very  clearly  from  the  proposed  Article  9(3)(a),  where  it  is 
explained  that  Member  States  may  decide  to  set  10%  as  the  first  threshold  where  the  investor  only 
acquire  derivative  securities.  A  contrario,  this  means  that  where  the  investor  acquires  derivative 
securities  in  addition  to  shares  or  voting  rights,  the  5%  threshold  would  necessarily  apply.  See  also 
European Commission (March 2003), section 4.5.3. 

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7.4. 

7.5. 

formal agreement, shares to which voting rights are attached, already issued of an 
issuer whose shares are admitted to trading on a regulated market." 

The introduction of Article 13 has resulted, according to the External Study, in lack 
of clarity as to the exact scope of the obligation285.  

The  question  at  stake  is  whether  investors  must  aggregate  their  holdings  of 
voting rights with their holdings of financial instruments (within the meaning of 
Article  13)  for  the  purposes  of  evaluating  whether  the  relevant  thresholds 
referred  to  in  Article  9  are  reached  or  crossed  and  therefore  the  notification 
obligation triggered. 

7.6.  Member  States  have  taken  different  views  when  implementing  the  Directive  into 
national  law.  A  few  of  them  (AT,  BG,  CY,  ES,  LU286,  IT  and  PL)  consider  that 
Article 13 enacts a notification obligation which is independent of that of Article 9: 
in other terms, the notification obligation is triggered independently. On the contrary, 
in 19 Member States (BE, DE287, DK, EE, EL, FI, FR, HU, IE, LT, MT, NL, PT, SE, 
SI,  SK  and  UK),  as  well  as  in  Norway  and  Iceland,  investors  must  aggregate  their 
holdings  of  voting  rights  with  their  holdings  of  financial  instruments  (within  the 
sense  of  Article  13)  for  the  purposes  of  evaluating  whether  the  relevant  threshold 
referred to in Article 9 is reached or crossed.  

7.7. 

There are different arguments supporting the two positions and there has never been 
a decision of the Court of Justice on this issue. On the one side, those in favour of 
separate  notification  obligations  argue  that  Article  13  comes  after  Articles  9  to  12 
(dealing  with  the  notification  obligations  in  relation  to  voting  rights)  which  would 
show the intention of the co-legislators to establish a distinct notification procedure 
for the financial instruments. Article 13 contains a reference to Article 9 and thus, to 
the  general  notification  thresholds  contained  therein.  However  Article  13  does  not 
refer to Article 12, which sets the modalities for the notification mechanisms. From 
this  perspective,  if  the  intention  of  the  co-legislators  would  have  been  to 
automatically apply the requirements of Article 12 also in the context of Article 13, it 
would have been logical to include in Article 13 a reference not only to Article 9, but 
also to Article 12.  

Moreover, if the intention was that Article 12 would in any event apply also in the 
context  of  Article  13, 
implementing  powers  concerning 
notification  modalities  in  Article  13  would  appear  redundant.  This  interpretation 
would  be  further  supported  by  Article  11  of  Commission  Directive  2007/14/EC: 

the  Commission's 

285 

286 

287 

See  for  instance,  Mazars  (2009),  p.112:  "The  Directive  does  not  specify  whether  holdings  of  shares 
should  be  aggregated  with  holdings  of  financial  instruments.  Certain  Member  States  have  taken  the 
view  that  Articles  9  and  10  on  the  one  hand  and  Article  13  on  the  other  hand  should  be  applied  in 
parallel,  whereas  other  Member  States  require  investors  to  aggregate  the  holdings  of  shares/voting 
rights  with  the  holdings  of  qualifying  financial  instruments.  As  a  result,  when  no  aggregation  is 
required, a shareholder may potentially hold 4.99 % voting rights though shares and another 4.99 % 
through financial instruments without any notification." 
In the case of LU, it is a mixed situation: the threshold is triggered independently, but if the notification 
obligation  arises,  the notifying party  should  disclose  its holdings  in  relation  to both voting  rights  and 
financial instruments irrespective of which of the two categories triggered the threshold) 
DE  changed  in  2008  its  initial  legislation  transposing  the  Directive  on  this  point,  so  as  to  require 
aggregation. 

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Article 11(4) of Directive 2007/14/EC states explicitly that the notification period in 
Article 12(2) of the Transparency Directive shall apply. There would be no need for 
such a reference if all provisions of Article 12 would be generally applicable in the 
context  of  Article  13,  unless  stated  otherwise  in  the  implementing  measures. 
Additionally, the Directive provides in Article 12(8)(a) and 13(2)(c) for the adoption 
of two separate standard notification forms. If the intention of the co-legislators was 
that the modalities of the notification would be the same under Articles 9, 10 and 13, 
it would be illogical to mention the adoption of standards forms through comitology 
in both Articles 12 and 13.  

This  was  also  the  position  of  CESR  in  2005,  which  stated  that  "[t]he  Level  1  text 
does  not  require  aggregation  between  financial  instruments  relevant  under  Article 
13  and  holdings  of  voting  rights  under  Article  9  or  10"288.  From  this  perspective, 
imposing aggregation of voting rights and financial instruments for the purposes of 
calculating whether the thresholds are reached or crossed would be a more stringent 
requirement than that of the Directive289. 

On  the  other  side,  other  parties  consider  that  the  first  sentence  of  Article  13(1) 
requires such aggregation290.For them, it is a matter of interpretation of the Directive 
rather  than  a  question  of  whether  aggregation  is  a  more  stringent  requirement 
acceptable under Article 3(1)291.  

The  discussion  is not  merely  academic.  If aggregation is required by  the Directive, 
the  first  group  of  Member  States  would  be  infringing  it.  If  on  the  contrary,  two 
separate  notification  obligations  exist,  while  imposing  aggregation  would  be  an 
acceptable more stringent requirement under Article 3(1), the applicability of Article 
12  to  the  notification  obligation  foreseen  in  Article  13  would  be,  however, 
questionable.  This would in particular impact on the  applicability  of  the  exemption 
for  management  companies  and  investment  firms  to  aggregate  their  holdings  of 
financial  instruments  with  those  of  their  parent  companies  (see  Article  12(3)  to 
(5))292. 

See CESR (June 2005), §375. 
According to Article 3(1) of the Directive, such more stringent requirements would be acceptable. 
Article 13(1) indicates that "[t]he notification requirements laid down in Article 9 shall also apply to a 
natural  person  or  legal  entity  who  holds,  directly  or  indirectly,  financial  instruments…"  [emphasis 
added] 
See European Commission (December 2008), p.22. 
Article  12  regulates  not  only  the  question  of  the  relations  between  parent  and  subsidiaries  but  also  a 
number of other matters. In principle Article 12 must either be considered to be fully applicable also in 
the  context  of  Article  13,  or  not  applicable  at  all.  An  interpretation  according  to  which  certain 
paragraphs of Article 12 could be "cheery-picked" to apply also in the context of Article 13 would not 
be acceptable. From this perspective, the exemption in paragraphs (4) and (5) of Article 12 could not be 
applied to holdings of financial instruments. National measures extending this exemption would not be 
imposing more stringent requirements but rather more lenient ones. 
The other paragraphs of Article 12 would be however less concerned. Requirements equivalent to those 
of  Article  12(1)  and  (2)  are  already  set  out  in  Article  11(3)  and  (4)  of  Directive  2007/14/EC  for  the 
notification  of  financial  instruments.  Also,  the  requirements  contained  in  Article  12(6)  and  (7)  could 
easily  be  applied  in  national  law  to  financial  instruments  and  would  be  in  any  event  be  covered  by 
Article 3(1). 

7.8. 

7.9. 

288 
289 
290 

291 
292 

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7.10.  Additionally, clarifying the applicable rules regarding this issue would be beneficial 
in  the  event  that  notification  obligations  regarding  cash-settled  derivatives  were 
imposed at EU level293 (see Annex 9).  

7.11. 

Finally,  in  addition  to  the  unclear  legal  points,  it  should  be  noted  that  the 
implementation of Article 13 results in insufficient harmonisation, leading to higher 
cost and burden for cross-border investors in the EU (see Sections 1.2 and 2.4 of this 
Report).  

293 

For instance, in the UK aggregation of cash-settled derivatives with other holdings is required for the 
purposes of calculating whether the relevant thresholds are reached or crossed. 

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ANNEX 8 – LOWERING OF THRESHOLDS FOR THE NOTIFICATION OF MAJOR HOLDINGS 

8. 

Annex 

8.1. 

The  lowest  or  initial  threshold  for  the  disclosure  of  major  holdings  of  voting 
rights was set at 5% by the Transparency Directive in 2004 (cf. Article 9(1)). This 
was a novelty at the time, since Directive 2001/34/EEC, the precedent legal text, had 
set the initial disclosure threshold at 10% (cf. Article 89(1)). Indeed, the disclosure 
thresholds  codified  in  Directive  2001/34/EEC  were  shaped  in  a  way  reflecting 
national company law requirements: e.g. thresholds necessary to represent blocking 
minorities  on  annual  shareholder  meetings;  to  achieve  changes  to  the  company's 
statutes or exercising special rights, etc294. 

The 10% threshold as an initial threshold appeared, however, obsolete over time. On 
the  one  hand,  more  (and  lower)  disclosures  were  needed  both  for  securities  market 
transparency purposes (in particular from the perspective of preventing market abuse 
or market manipulation, given the impact on pricing of dealings in major holdings) 
and  for  corporate  governance  purposes  (given  the  increased  interest  of  investors  in 
the  company  performance)295.  On  the  other  hand,  most  Member  States  had  already 
lowered the initial threshold before the amendment introduced by the Transparency 
Directive.  Indeed,  the  Commission  explained  in  2003  that  in  12  of  the  then  15  EU 
Member States, the initial disclosure threshold was already set at a lower level than 
10%: 2% for IT, 3% for UK and 5% for the rest. Only in LU, PT and SE the initial 
disclosure threshold was set at 10%296. 

The Transparency Directive allowed Member States to set out (or, as applicable, to 
maintain)  disclosure  requirements  on  major  holdings  of  voting  rights  at  an  earlier 
stage  than  5%.  As  a  result,  other  Member  States  joined  Italy  and  the  United 
Kingdom in establishing such lower thresholds. As of end 2009297, the following 
Member States have introduced those lower disclosure thresholds: 2% (IT, PT); 3% 
(CZ, DE, ES, IE, UK)298. It should also be noted that the initial disclosure threshold 
is  also  indirectly  lowered  in  those  Member  States  in  which  aggregation  of  voting 
rights and of financial instruments giving access to  voting  rights299 is required (see 
Annex 7).  

European Commission (March 2003), section 4.5.1. 
When describing the proposed new regime in 2003 of what later became the Transparency Directive the 
Commission was referring to the proposed rules, by contrast to those of Directive 2001/34/EEC in the 
following terms: "[…] 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  directive  transparency  regime  at  national  level.  […]".  See  European  Commission 
(March 2003), section 4.5.1. 
Ibid.  
See European Commission (December 2008); Annex 5, p.25.  
The  possibility  of  establishing  the  3%  threshold  as  initial  threshold  is  being  considered  in  the 
Netherlands. A proposal has been submitted to the national parliament. 
Financial  instruments  that  result  in  an  entitlement  to  acquire,  on  such  holder's  own  initiative  alone, 
under a formal agreement, shares to which voting rights are attached, already issued of an issuer whose 
shares are admitted to trading on a regulated market. 

8.2. 

294 
295 

296 
297 
298 

299 

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Additionally, in several Member States issuers of shares can set lower thresholds for 
notification300  of  major  holdings  in  their  own  articles  of  association,  either  on  the 
basis  of  an  explicit  authorisation  in  the  law  or  in  the  absence  of  an  express 
prohibition  (in  which  case,  freedom  of  contract  would  apply)301.  The  law  may 
specify which is the lowest threshold: for instance, in FR, it can be set at 0,5% while 
in BE is can be set at 1%. Both in FR and BE, this is possibility is regularly used302. 

8.3. 

Therefore,  there  appears  to  be  a  convergence  towards  the  setting  of  a  lower 
disclosure threshold at 3%. The European Parliament called on the Commission in 
2008  to  prepare  legislation  lowering  the  threshold  for  the  disclosure  of  major 
holdings to 3%303. Although warning about setting too low disclosure levels, ESME 
also expressed an opinion in favour of setting the 3% threshold304. 

This appears to be the market trend too. In practice, the seven Member States with 
lower  disclosure  thresholds  account  for  around  60%  of  the  market  capitalisation 
(issuers of shares) in the EU regulated markets305. 

8.4. 

The  external  study  conducted  for  the  Commission  on  the  operation  of  the 
Transparency Directive explains that stakeholders views, as expressed in the survey 
conducted, are mixed on the need to lower the initial disclosure threshold to 3% (or 
to 2% (see Chart 8.1). 

Chart 8.1 – Views on whether the initial threshold should be lowered to 2% or 3%, breakdown 
per stakeholder category. Cf. Mazars (2009), p.93. 

300 
301 

302 

303 
304 
305 

for 

the 

instance, 

information  disclosed  by 

the  Belgian  supervisor  on 

To the issuer, but not to the market. 
AT,  BE,  CY,  CZ,  DK,  EE,  FI,  FR,  HU,  IT,  LU,  LV  and  PT.  See  European  Commission  (December 
2008); Annex 5, p.26 and CESR (September 2008), Annex 2, replies to questions 13 and 14. 
See 
http://www.cbfa.be/eng/gv/ah/not/dbeginfrmemittenten.asp  
European Parliament (September 2008), annex to the Resolution. 
ESME (December 2007), p.5. 
Source: own elaboration with FESE data of December 2009. The regulated markets in CZ, DE, ES, IT, 
IE and UK account for 59% of market capitalisation value. The data for PT regulated market have not 
been taken into account for this calculation since FESE only discloses Euronext aggregated data.  
Having said this, if Euronext countries were added to this calculation (considering that in practice, in 
FR and BE lower disclosure thresholds are regularly applied by listed companies themselves, and that 
in  the  NL  there  is  a  legislative  proposal  to  set  a  3%  threshold),  the  percentage  of  total  market 
capitalisation would raise above 75%.  

issue: 

this 

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45% of stakeholders do not consider that lowering the initial threshold is necessary 
but  there  is  some  disagreement:  users  of  information  (financial  analysts  and 
institutional investors) are generally in favour of lowering it; supervisors are split on 
the matter; and, on balance, issuers of shares do not favour a lowering of the legal 
initial threshold to 2 or 3%306. 

8.5. 

According  to  this  study,  however,  during  interviews  issuers  were  less  negative  on 
this possibility307 and other stakeholders were more openly in favour of a harmonised 
lowering  of  the  initial  threshold.  However,  emphasis  on  harmonisation  was 
particularly exercised: issuers and investors made clear  that full harmonisation of a 
number  of  provisions  of  the  Directive  is  a  priority  for  them.  If  the  price  to  pay  to 
have  a  full  harmonisation  of  thresholds  is  to  lower  the  initial  threshold,  then  a 
number  of  stakeholders  would  be  prepared  to  support  this.  In  addition,  generally, 
issuers  are  of  the  opinion  that  the  5%  initial  threshold  is  too  high.  The  most 
frequently figure mentioned for a harmonised initial threshold in the EU was 3%308. 

Of those against lowering the initial threshold, the more cautious were intermediaries 
that use the “trading book” exemption309. They would be against lowering the level 
of exemptions. 

306 
307 

308 
309 

Mazars (2009), section 3.4.1. 
It  appeared  that  issuers  were  relatively  neutral  or  have  nothing  against  more  precise  requirements 
allowing them to identify their shareholders: 
"It  should  be  noted  that,  generally  speaking,  issuers  are  indifferent  as  regards  the  level  of  the  initial 
threshold. The issuers’ priority is to better identify their shareholders, in order to anticipate evolutions 
that may impact the general strategy of the company. The legal thresholds are an important source of 
information but the level of granularity resulting from the Directive is not considered sufficient. Issuers 
use specialised procedures or require external consultants to identify their shareholders below 5% (the 
services  are  often  proposed  by  custodians  and/or  data  disseminators).  In  Top  Companies,  this 
identification of shareholders is often done twice a year. 
In  terms  of  the  methodology  of  the  study,  it  should  be  said  that  several  issuers  confessed  during 
interviews that their main priority in participating in this study was to make sure that a revision of the 
Directive  will  not  result  in  a  new  wave  of  requirements.  In  other  words,  they  have  adopted  a  very 
conservative attitude when responding to the on-line questionnaire. […]". 
Ibid. 
Ibid.  
Cf. Article 9(6) of the Transparency Directive. 

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8.6. 

There  are  arguments  supporting  such  lowering  of  the  threshold,  such  as  better 
capturing  shareholders'  movements  of  interest  to  the  market  or  facilitating 
shareholders'  activism.  For  instance,  the  external  study  outlines  that  investors 
consider  that  "transparency  of  ownership  is  one  of  the  parameters  of  investment 
decisions  and  that  'shareholder  activism'  can  have  significant  impact  even  if  those 
shareholders have less than 5% of the voting rights"310. Indeed, in some cases, it may 
be  necessary  to  go  below  such  level  if  one  wants  to  capture  the  major 
shareholders311.  

According  to  the  external  study,  for  intermediaries  and  institutional  investors  the 
lowering of the initial threshold would have no effect on investment decision when 
the initial threshold is known. In fact, the burden to notify is not on the one that takes 
the  investment  decision  but  on  a  separate  department  of  the  intermediary  or  of  the 
institutional investor or on the custodian312.  

In terms of administrative burden for investors, establishing a new (lower) threshold 
may increase the likelihood of having to notify holdings, but does not result in major 
difficulties. Indeed, the new threshold will be added to existing monitoring software 
alerting of the crossing of the relevant threshold. The difficulty for investors would 
rather lie on the calculation of relevant voting rights313.  

Finally, the external study anticipates that there would not be market disruptions as a 
result  of  the  lowering  of  the  threshold.  Indeed,  interviews  with  supervisors  in 
Member States that decided to lower the initial threshold to 3% when transposing the 
Directive did not report any disruptions in the market caused by such change. It is a 
fact that they were confronted with a wave of notifications and therefore provided for 
a transition period. The purpose of the transition period was to allow those investors 
holding  an  interest  between  3%  and  5%  in  a  company  to  realise  that  they  were 
required  to  notify  such  interest.  Generally,  that  transition  period  lasted  6  months. 
Finally, they did not receive complaints from the industry about the lowering of the 
initial threshold314. 

8.7. 

There  are  also  arguments  against  the  enhanced  transparency  resulting  from 
lower disclosure thresholds, as already described by the Commission staff working 
document of 2008: there is a risk that enhanced disclosure requirements may result in 
immaterial  disclosures  that  distract  the  attention  of  the  market  from  the  disclosures 
that  reveal  significant  changes  in  the  structure  of  voting  control315;  thresholds  for 
disclosure  may  act  as  a  brake  for  investors  with  a  non-control  taking  strategy316  or 
discourage those willing to discretely build a stake317. This may have an impact on 

310 
311 

312 
313 
314 
315 
316 
317 

Mazars (2009), section 3.4.1. 
See  European  Commission  (December  2008),  §15  regarding  the  ownership  structure  of  listed 
companies.  At  the  same  time,  this  paper  was  also  explaining  that  the  "median  largest  block"  was 
different depending of the Member State considered and that those differences would justify, from an 
economic perspective, different regulation: i.e. not necessarily supporting maximum harmonisation.  
Mazars (2009), section 3.4.1. 
See Mazars (2009), sections 3.3.5; 3.5; 3.6.2 and Possible Improvement N°7. 
Mazars (2009), section 3.4.1. 
ESME (December 2007), p.5. See also footnote 311 of this paper.  
ESME (December 2007), p.4; and European Commission (December 2008), §16. 
ESME (December 2007), p.2; and European Commission (December 2008), §16. 

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the  market  for  corporate  control,  facilitating  the  defensive  strategies  of  entrenched 
managers318.  

8.8. 

The external study concludes that lowering the initial threshold to 3% could be 
a  possible  improvement  to  the  Directive,  to  the  extent  that  such  measure  permits 
maximum harmonisation without disrupting the market (see Box 8.1).  

Box 8.1 - Possible improvement n°8 to the Transparency Directive. Cf. Mazars (2009), p. XIV 
and 77. 

318 

European Commission (December 2008), §21 and ESME (December 2007), p.5. 

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ANNEX 9 – DISCLOSURE OF HOLDINGS OF CASH-SETTLED DERIVATIVES 

9. 

Annex 

9.1. 

This Annex presents: 

•  A) Financial innovation and the increased use of cash-settled equity derivatives 

•  B) The existing disclosure requirements under the Transparency Directive 

•  C) The problems regarding market transparency 

•  D) Reaction of some Member States 

•  E) Need for action at EU level 

•  F) Content of possible disclosure regime 

•  G) Alternative approaches 

A) Financial innovation and the increased use of cash-settled equity derivatives 

9.2. 

The equity derivatives market has grown considerably over the last decade, as shown 
in the table below319. 

9.3. 

According to BIS figures, even if in the context of the financial crisis market values 
remain  16%  below  the  level  of  end-year  2008,  notional  amounts  of  OTC  traded 
equity derivatives rose by 7% to $6,6 trillion at the end of June 2009320.  

319 
320 

IOMA (May 2009)  
Bank of International Settlements (2009), p. 5. Given the financial crisis, these figures have gone down 
from a notional amount of $10,2 trillion at the end of June 2008. See Bank of International Settlements 
(2008), p.3. 

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9.4. 

9.5. 

9.6. 

Due  to  this  rapid  growth  and  innovation  in  the  financial  markets,  a  number  of 
financial instruments are now extensively used to acquire economic interest in shares 
of public listed companies without acquiring direct control over or ownership in such 
shares. 

Also,  following  the  recent  financial  crisis,  the  increased  regulatory  capital 
requirements  for  banks  may  spur  banks  to  use  derivatives  to  fund  acquisitions  of 
strategic stakes. With greater focus on banks' core capital, banks may look for ways 
to use equity derivatives to help clients take stakes in troubled companies in Europe 
and Asia321.  

Cash-settled equity derivatives 

Cash-settled equity derivatives refer to equity linked transactions settled by the payment of cash only 
without any physical delivery of the underlying equity. Such transactions can include options, futures 
and swaps over a single share, an index or a basket of shares. They are usually based on the difference 
between  a  pre-agreed  settlement  price  and  the  then  prevailing  market  price  of  the  shares.  Thus, 
without  physically  buying  or  selling  the  underlying  shares,  the  contracting  parties  to  a  cash-settled 
equity  derivative  are  able  to  acquire  or  dispose  of  an  economic  interest  in  the  shares  (i.e.  acquire 
exposure to equity price movements). 

This  financial  innovation  has  an  impact  on  the  notification  of  major  holdings  and 
could  be  seen,  under certain circumstances, as unsatisfactory with regard to market 
transparency,  as  new  market  practices  or  financial  products  can  be  conceived  in  a 
manner  that  they  are  not  covered  by  the  notification  requirements  of  Transparency 
Directive.  In  fact,  new  financial  instruments  are  increasingly  used  by  investors  in 
order  to  escape  from  the  traditional  categories  of  securities  (i.e.  ordinary  shares, 
depositary receipts, etc.) that trigger an obligation to disclose voting rights under the 
Transparency Directive. Some practices may even come close to market abuse, when 
such financial instruments are used to squeeze the free float of the underlying shares 
and thus increase their market price. 

321 

See, for instance, Crompton (2010). 

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B) The existing disclosure requirements under the Transparency Directive 

Transparency Directive: relevant legal provisions 

Article  9(1)  of  the  Directive  2004/109/EC:  “The  home  Member  State  shall  ensure  that,  where  a 
shareholder  acquires  or  disposes  of  shares  of  an  issuer  whose  shares  are  admitted  to  trading  on  a 
regulated market and to which voting rights are attached, such shareholder notifies the issuer of the 
proportion  of  voting  rights  of  the  issuer  held  by  the  shareholder  as  a  result  of  the  acquisition  or 
disposal where that proportion reaches, exceeds or falls below the thresholds of 5 %, 10 %, 15 %, 20 
%, 25 %, 30 %, 50 % and 75%. 

Article 10 of the Directive 2004/109/EC: “The notification requirements defined in paragraphs 1 and 
2 of Article 9 shall also apply to a natural person or legal entity to the extent it is entitled to acquire, 
to dispose of, or to exercise voting rights in any of the following cases or a combination of them: 

(a) voting rights held by a third party with whom that person or entity has concluded an 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; 

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

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

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

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

(f) voting rights attaching to shares deposited with that person or entity which the person or entity can 
exercise at its discretion in the absence of specific instructions from the shareholders; 

(g) voting rights held by a third party in its own name on behalf of that person or entity; 

(h) voting rights which that person or entity may exercise as a proxy where the person or entity can 
exercise  the  voting  rights  at  its  discretion  in  the  absence  of  specific  instructions  from  the 
shareholders.” 

Article  13(1)  of  the  Directive  2004/109/EC:  “The  notification  requirements  laid  down  in  Article  9 
shall  also  apply  to  a  natural  person  or  legal  entity  who  holds,  directly  or  indirectly,  financial 
instruments  that  result  in  an  entitlement  to  acquire,  on  such  holder's  own  initiative  alone,  under  a 
formal  agreement  shares  to  which  voting  rights  are  attached,  already  issued,  of  an  issuer  whose 
shares are admitted to trading on a regulated market.” 

Article  11(1)  of  the  Directive  2007/14/EC:  “Transferable  securities,  and  options,  futures,  swaps, 
forward  rate  agreements  and  any  other  derivative  contracts  shall  be  considered  to  be  financial 
instruments,  provided  that  they  result  in  an  entitlement  to  acquire,  on  the  holder's  own  initiative 
alone,  under  a  formal  agreement,  shares  to  which  voting  rights  are  attached,  already  issued,  of  an 
issuer whose shares are admitted to trading on a regulated market” and that “the instrument holder 
must  enjoy,  on  maturity,  either  the  unconditional  right  to  acquire  the  underlying  shares  or  the 
discretion as to his right to acquire such shares or not”. 

Article  11(1)  of  the  Directive  2007/14/EC:  “a  formal  agreement  means  an  agreement  which  is 
binding under the applicable law”. 

9.7. 

Under  the  Transparency  Directive,  there  is  currently  no  general  disclosure 
requirement in respect of economic interests under cash-settled equity derivatives.  

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9.8. 

Article  9  of  the  Transparency  Directive  applies  only  to  voting  shares  in  the  issuer. 
According  to  Article  10  of  the  Transparency  Directive,  the  notification  provisions 
also  apply  to  any  person  who  has  the  right  under  an  agreement  or  collateral 
arrangements  to  exercise  the  relevant  voting  rights  or  to  direct  the  holder  of  the 
shares as to how to exercise such rights. This provision would, therefore, only apply 
to cash-settled equity derivates if the counterparty has the right to direct voting rights 
over the shares or is granted collateral over the shares provided under the collateral 
arrangements.  However,  most  cash-settled  equity  derivatives  do  not  give  the 
counterparty to the transaction the right to vote or influence the voting rights of the 
shares  subject  to  them.  These  would  therefore  fall  outside  the  scope  of  the 
Transparency  Directive322.  Article  13  of  the  Transparency  Directive  extends 
disclosure obligations to financial instruments conferring the right to acquire or sell 
shares323. However, this article does not cover cash-settled equity derivatives which 
do not grant a right to the holder to acquire or dispose of the underlying shares but 
are only settled in cash324. 

C) The problems regarding market transparency 

9.9. 

Although  cash-settled  equity  derivatives  are  an  important  source  of  liquidity  to  the 
market and are usually used for purely economic and hedging purposes, recent cases 
in  different  EU  Member  States  and  third  countries  suggest  that  cash-settled  equity 
derivatives can also be used in order to acquire and exercise potential influence in a 
listed company or build a secret stake in such a company without any disclosure325. 
These cases have demonstrated the limits of the current disclosure obligations with 
respect to these financial instruments.  

Continental versus Schaeffler327 

Recent cases in the European Union326 

July/August  2008:  Schaeffler  built  an  economic  interest  of  36%  in  Continental  by  entering  equity 
swaps with some banks before it declared a public offering on the outstanding capital of Continental. 

322 

323 

324 

325 

326 
327 

See,  for  instance,  ESME  (November  2009).  In  its  opinion  ESME  states  that  Article  10  (g)  "was  not 
introduced for large positions in cash settled derivatives, but for the market practice of custodians or 
for situations of “at arms length” investment management. The provision is rather narrowly framed to 
support a widening of disclosure rules to cash settled financial instruments". Ibid. p. 13. 
However, some scholars are of the view that a contractual scheme leads to the short party holding the 
underlying  shares  'on  behalf'  of  the  long  party  if  the  latter  bears  the  economic  risk  and  is  capable  of 
influencing  how  voting rights  are  exercised.  In  those  circumstances,  they  are  of  the  view  that  Article 
10(g) should be applicable. See Zetzsche (2009), p.133. 
The main novelty of Article 13 has been to extend the notification requirement to "financial instruments 
that result in an entitlement to acquire, on the holder's own initiative alone, under a formal agreement, 
shares to which voting rights are attached, already issued, of an issuer whose shares are admitted to 
trading on a regulated market".  
ESME  underlined  in  its  opinion  that  there  "usually  is  no  specific  agreement  on  voting;  it  is  not  that 
often that there is actually a formal right to require the delivery of voting securities. Yet in reality there 
is often an expectation on the part of the acquirer that the counterparty to the trade would be able to 
deliver  the  underlying  stock  if  asked  to  do  so.  The  mere  aspect  of  the  commercial  relation  gives  an 
incentive  to  the  bank  to  listen  to  the  opinion  of  the  underlying  client  and,  finally,  to  deliver  voting 
securities in lieu of cash settlement". See ESME (November 2009), p.11. 
On the issue of cash-settled equity instruments and transparency, see generally Schouten (2009) and Hu 
& Black (2007). 
For other cases in third countries, see Hu & Black (2008).  
See generally Zetzsche (2009). 

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Schaeffler was exempted from the lunch of a mandatory bid, since it made a voluntary public offering 
and wanted to pay a fair price. However, this fair price was lower than would have been the case if the 
control  position  was  built  by  normal  share  acquisitions  instead  of  by  equity  swaps.  The  German 
regulator BaFin ruled that the build-up of an economic interest by cash settled financial instruments 
does  not  need  to  be  notified  under  current  German  law.  It  should  be  noted  that  none  of  the  banks 
involved held more than 3% of the shares to hedge the equity swaps so as to avoid having to notify 
themselves under the rules on holding of shares. 

Porsche versus Volkswagen 

October  2008:  Porsche  announces  that  it  has  built  a  direct  share  interest  of 42,5%  in  its  competitor 
Volkswagen.  Porsche  discloses  an  additional  economic  interest  of  31,5%  by  cash  settled  options. 
There were  discussions  if  the  “free  float’  in  shares of Volkswagen  was effectively  reduced  to  5,8% 
since the land of Low Saxony held an interest of 20,1% in Volkswagen company. Market parties had 
not taken into account the existence of such a large economic interest with only one party. They had 
speculated on a share price fall and were short for about 13% of outstanding shares. The closing of 
these  positions  led  to  a  price  explosion  of  the  Volkswagen  shares.  In  order  to  improve  liquidity, 
Porsche settled 5% of its position into cash and thereby apparently profited from the market disorder 
caused by itself. 

SGL Carbon / Susanne Klatten / SKion GmbH 

March  2009:  according  to  an  ad  hoc  announcement  pursuant  to  §  15 WpHG  dated  16  March  2009, 
SGL Carbon notified that the “Board of Management of SGL Carbon SE was informed that SKion, 
the  investment  company  of  Mrs.  Susanne  Klatten,  has  acquired  an  equity  stake  of  7.92%  in  SGL 
Carbon SE. According to their notification, SKion is interested in further purchases of additional SGL 
Carbon SE shares; will however remain below the threshold of 25% of voting rights. SKion has built 
positions  within  this  percentage  scope  through  derivative  capital  market  instruments.”  Different 
business journals (e.g. Handelsblatt, Manager Magazin) reported that SKion had followed the example 
of Porsche by entering into cash settled equity swaps. On 8 April 2008, SKion notified SGL Carbon 
that the voting interest in SGL Carbon AG has exceeded the thresholds of 10% and 15%. At this time 
the  stake of  SKion  amounted  to 16.48%. All  voting rights  of  SKion  are  to be  attributed  to  Susanne 
Klatten. 

Fiat328 

April 2005: EXOR, a company controlled by the Agnelli family (controlling, through IFIL, FIAT at 
the time with around 30% of the voting rights, through a pyramid structure) enters into an equity swap 
agreement  for  around  7%  of  the  shares,  which  remains  undisclosed  until  executed.  While  the 
originally equity swap agreement would be settled in cash, the agreement was eventually modified in 
August  2005  to  allow  physical  settlement  in  shares.  Physical  delivery  of  the  shares  to  the  Agnelli 
family took place on the date in which a group of banks were executing a convertible loan agreement 
not being repaid in cash by FIAT and therefore diluting the Agnelli's original stake to 23%. The equity 
swap allowed the Agnelli family to keep their shareholdings in FIAT constant at 30% and with it the 
attached control rights intact without having to launch a takeover bid for the remaining of the capital. 
For reporting obligations, Italian law takes into account the way financial derivatives may be settled: 
only in cash or possibly in underlying physical instruments.  

9.10. 

Indeed, cash-settled equity derivatives do not trigger notification duties to the extent 
that they do not entitle the holder/the buyer to acquire the underlying shares. But in 
practice, cash-settled options may facilitate the localization of blocks of shares at a 
later point in time, even though a legal entitlement to purchase such shares does not 
exist. In fact, the seller of a long equity derivative, usually a bank, will have a strong 
economic  incentive  to  acquire  a  matching  number  of  physical  securities  at  the 
beginning of the equity  derivative period to  hedge  its  position.  When  the  holder  of 
the  derivative/the  buyer  closes  its  position,  the  seller  has  an  economic  incentive  to 
sell  the  hedge  shares  simultaneously  at  the  equity  derivative  settlement  price.  The 
holder of the derivative/the buyer will normally be aware of the identity of the seller 

328 

See also Kirchmaier et al. (2009), p.12. 

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and  when  the  seller  will  be  likely  to  dispose  of  the  shares.  The  holder/the  buyer  is 
therefore  in  a  privileged  position  to  acquire  the  hedge  shares  when  the  contract 
ends329.  

9.11. 

This situation can also arise from the fact that the seller promises to the buyer of a 
cash-settled  derivative  via  a  side  agreement  to  sell  the  shares  it  has  purchased  to 
hedge  its  exposure  from  the  sale  of  the  contract  on  to  the  buyer  once  the  contract 
expires330. 

9.12.  Also, the holder of long derivatives position/the buyer could influence the voting of 
the  actual  shares  by  exerting  pressure  on  the  holder  of  the  corresponding  short 
position/the seller who holds the underlying shares331. It is argued that the bank that 
holds  the  shares  for  hedging  purposes  and  relating  voting  rights  without  any 
economic interest in the underlying company could use such "empty" voting rights in 
a way which suits the holder of the economic interest/the buyer, i.e. by following the 
voting instructions of the buyer, in order to attract future business. 

D) Reaction of some Member States 

9.13. 

9.14. 

Some  EU  Member  States  have  decided  to  generally  extend  major  notification 
requirements to cash settled derivatives or are planning to do so.  

The United Kingdom332 has introduced a new regime that requires the disclosure of 
(gross)  long  positions  on  cash  settled  derivatives  from  1  June  2009  onwards333.  It 
requires reporting once the threshold of 3% has been reached, aggregating both the 
derivative transactions and any actual holdings of the voting shares.  

The UK FSA position on cash-settled derivatives 

In its consultation paper of 2007334, the UK regulator (Financial Services Authority, FSA) considered 
the  question  of  whether  the  regime  as  set  out  in  the  Transparency  Directive  was  open  to  abuse  and 
whether  specific  rules  should  be  introduced  to  legislate  for  the  potential  loopholes.  The  FSA 
considered  that  cash  settled  contracts  for  difference  (CFD)  and  similar  instruments  were  not 
disclosable under the terms  of the Transparency Directive (as implemented by UK rules) given that 
they do not constitute a legal right to acquire the underlying share. 

329 

330 

331 
332 

333 
334 

For  example,  in  Continental/Schaeffler  case,  Schaeffler was  a  holder of  a  total  return  equity  swap on 
Continental shares sold by Merrill Lynch (the writer of the total return equity swap), who, with other 
investment banks, held the underlying Continental shares to hedge its position. Although Schaeffler did 
not  have  any  legal  right  to  purchase  the  underlying shares,  after  the  termination  of  the  swap  contract 
Merrill  Lynch  and  other  banks  had  to  sell  the  underlying  shares  which  they  no  longer  needed. 
Schaeffler should be the likely buyer as the only commercially reasonable way for Merrill Lynch and 
other investment banks to dispose of the shares is to sell them to Schaeffler, because otherwise the sale 
of  the  block  of  the  shares  on  the  market  in  such  a  large  amount  would  overwhelm  the  market  and 
potentially depress the share price. 
Depending  on  the  content  of  the  agreement  this  situation  could  be  caught  by  Article  13  of  the 
Transparency Directive. 
See footnote 322 on the discussion on the applicability of Article 10(g) of the Transparency Directive. 
In  the  United  Kingdom,  the  UK  Takeover  Code  already  required  the  disclosure  of  economic  interest 
during the offer periods: see Rule 8(3). In Ireland, similar rules were contained in the Irish Takeover 
Code. 
See UK FSA (March 2009). 
UK FSA (2007). 

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The FSA noted the 2 main problems with this position being: 

1) The issuer of the CFD will almost always seek to hedge its position on the derivative by acquiring 
the underlying share; and 

2)  Those  with  a  pure  economic  interest  in  the  shares  of  a  company  may  still  seek  to  influence  its 
management. 

This resulted in the following potential problems335 for market transparency: 

• The situation where a CFD, although intended to be cash settled, is in fact physically settled. By this 
route the person taking the derivative could instantly take ownership of a substantial percentage of the 
shares in the company with no disclosures having been made during the building of the stake. 

• The majority of issuers of CFDs claim that they do not exercise the votes attaching to the shares they 
hold  for  hedging  purposes  and,  specifically,  do  not  follow  the  instructions  of  those  holding  the 
relevant CFDs. However, there is widespread recognition that, where issuers have no real interest in 
the affairs of the company whose shares they hold, they can easily be influenced by the holder of the 
CFD. 

• Even if the issuer of the CFD does not vote its hedged shares, this can take a large proportion of the 
votes out of the voting pool, effectively increasing the significance of other holders. 

• The cost in management time of investigating enquiries and demands from those who claim to hold 
an interest in the company to verify their equity with little information.  

In its consultation paper, the FSA also put the arguments for the opposing view, that the rules should 
remain unchanged. The principal points of this argument being: 

• The majority of issuers state that they do not settle CFDs by physical delivery of the shares; 

•  The  majority  of  issuers  state  that  they  do  not  vote  shares  which  they  hold  in  relation  to  hedge 
positions and do not allow themselves to be influenced in this regard by the holders of CFDs; 

• Too much disclosure can cause problems for market participants in their understanding of the true 
position  in  relation  to  control  of  companies  and  can,  therefore,  harm  transparency.  Specifically  the 
disclosure could lead to: 

-  confusion  of  the  investor  community  as  to who holds underlying  interests  and  the  motives behind 
acquisitions and disposals; 

-  complex  situations  where  the  community  tries  to  second  guess  potential  shareholdings  creating  a 
false feeling of interest/disinterest in the market; 

- increasing volatility in the market; and 

- the additional costs associated with the extra disclosure burden. 

The FSA clearly saw the merit in many of these arguments. However, it was ultimately convinced by 
the view in the market that, whatever CFD issuers may imply about their practices, taking positions in 
CFDs is an effective and widespread method for building a stake in a company without the burden of 
disclosure. This was a clear loophole that the FSA sought to close. This resulted in the FSA revising 
the applicable rules to include CFDs and similar instruments in the obligation to notify interests. 

335 

See  also  Schouten  (2009),  p.  40  and  seq.  for  a  summary  assessment  of  why  hidden  ownership  is 
problematic. 

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9.15. 

9.16. 

9.17. 

9.18. 

9.19. 

In France, new rules came into force on 1 November 2009. These rules require that 
once  a  threshold  has  been  crossed  by  holdings  of  shares  and  options,  gross  long 
positions  held  through  financial  instruments  of  similar  economic  effect  to  holding 
shares  also  need  to  be  reported.  There  is  no  separate  threshold  for  financial 
instruments of similar economic effect to holding shares. 

In Portugal, the supervisor (CMVM) has published draft rules for public consultation 
requiring the disclosure of all instruments of similar economic effect to the holding 
of shares336. According to the proposal, all instruments would need to be aggregated 
towards  the  existing  thresholds.  The  introduction  of  additional  thresholds  is  also 
under consideration. 

In  the  Netherlands,  the  Ministry  of  Finance  has  published  draft  legislation  for 
consultation in 2009. The draft law would create the presumption that the holder of 
an  instrument  which  creates  an  economic  long  position  but  is  not  settled  in  shares, 
controls the underlying shares. Such instruments would have to be aggregated to with 
shares and entitlements to acquire shares. 

In Italy, the national authority Consob issued a public consultation in October 2009 
on the topic337.  

The  Germany  regulator  (BaFin)  has  experienced  a  lot  of  public  pressure  to  modify 
regulation.  Finance  directors  of  some  large  German  listed  companies  have  asked 
BaFin to change notification rules.  

9.20.  Outside the EU, Switzerland, Hong Kong and Australia have also taken action 

–  The Swiss regulator has extended the scope of notification rules at end of 2007. 
Disclosures  on  cash  settled  derivatives  only  are  seldom,  in  many  cases  such 
disclosures  are  done  in  connection  with  disclosures  on  other  participations 
(shares) in the respective companies. The disclosures have become more complex 
by  expanding  the  disclosure  requirements  to  cash  settled  derivatives,  but  the 
disclosures contain more information. 

–  In  Hong  Kong,  all  types  of  equity  instruments  of  similar  economic  effect  to  the 
holdings  of  shares  are  in  scope  of  the  significant  holdings  regime.  A  person 
holding, writing or issuing instruments of similar economic effect is  taken  to be 
interested  in  the  underlying  shares.  These  interests  must  be  aggregated  with 
physical holdings on a gross basis. 

–  The  Australian  Treasury  has  started  a  consultation  to  determine  whether  equity 
instruments  of  similar  economic  effect  should  be  included  in  the  definition  of 
substantial holding, and, if so, on what basis they should be included. It considers 
that while equity instruments of similar  economic effect give  economic interests 
but  not  voting  rights,  they  may  give  a  degree  of  effective  control  over  the 
referenced shares. 

336 
337

http://www.cmvm.pt/NR/exeres/9ADECEA9-1A6C-47FD-9526-5A9E9664D7F8.htm  

  http://www.consob.it/main/documenti/Regolamentazione/lavori_preparatori/position_paper_derivati_
20091008.htm?hkeywords=&docid=2&page=0&hits=10 

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9.21.  China and India do not require specific disclosure, which is mostly due to the lack of 
general  regulation  regarding  cash-settled  derivatives.  Japan  does  not  require 
disclosure either. Canada, has also been considering amending the existing rules, but 
has not done so yet. 

The  US,  which  traditionally  did  not  require  disclosure,  is  now  in  an  intermediate 
position,  as  a  court  ruled  that  cash-settled  derivatives  could  not  be  used  to  avoid 
notification requirements (see below Section G of this Annex).  

E) Need for action at EU level? 

9.22. 

9.23. 

In its opinion on cash settled derivatives, ESME stressed the importance of having a 
fully  harmonized  and  regulated  regime  for  disclosure  of  cash-settled  equity 
derivatives on a European level, based on the experience related to the operation of 
the current disclosure regime of major holdings and its implementation by Member 
States338.  The  same  conclusion  results  from  the  External  Study  which  says  that 
"based  on  the  magnitude  of  the  loophole,  which  clearly  goes  against  the  very 
principles of the Directive and has permitted the development of improper conduct in 
several highly visible cases involving major companies, and in consideration of the 
position  taken  by  the  respondents  to  our  questionnaire,  we  believe  the  loophole 
should be closed".339 

In its Consultation paper to extend major shareholding notifications to instruments of 
similar  economic  effect  to  holding  shares  and  entitlements  to  acquire  shares340, 
CESR  argues  that  the  scope  of  major  shareholding  disclosure  should  include  all 
instruments  that  give  similar  economic  effect  to  holding  shares  or  entitlements  to 
acquire  shares,  irrespective  of  whether  such  an  instrument  is  settled  in  cash  or 
physically.  Consequently,  CESR  considers  that  the  scope  of  the  Transparency 
Directive should be extended to instruments of similar economic effect to holdings of 
shares and entitlements to acquire shares because it is likely that an investor with a 
significant economic long interest will seek to influence the issuer. CESR also argues 
that a pan-European approach would limit the required systems changes and thereby 
reduce  the  associated  costs  compared  to  diverging  national  approaches.  A  pan-
European approach would also improve legal certainty as to which instruments need 
to be included across the EU. 

9.24.  However, it is  also argued that systematic disclosure of economic  interest  could be 
problematic  and  cumbersome  in  practice  and  result  in  an  overflow  of  extraneous 
information  to  the  public  that  could  have  an  adverse  impact  on  the  efficient 
functioning of the markets. Because the information could appear duplicative or even 
contradictory,  this  would  hinder  transparency  rather  than  promote  it  and  therefore 
damage  the  liquidity  of  cash  settled  derivatives.  It  could  also  be  seen  as  an 

338 

339 
340 

Given that the notification requirements of major holdings of the Transparency Directive are minimum 
harmonisation rules and that the present differences in implementation of the Transparency Directive in 
all  member  states  lead  to  administrative  costs  for  asset  management  companies  operating  on  a  cross 
border  scale, ESME  pleads for  a reporting  obligation  that  is  general  and harmonized at  EU  level  and 
therefore separate from reporting of normal shares. See ESME (November 2009), p.11. 
Mazars (2009), section 3.6.3.2 in fine.  
See CESR (January 2010). 

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unnecessary  intrusion  into  the  privacy  of  market  participants  and  overprotective  of 
the issuer at the expense of a dynamic market for corporate control341.  

9.25.  According  to  the  External  Study342,  the  final  decision  on  whether  cash-settled 
derivatives  should  fall  within  the  disclosure  requirements  should  depend  on  an 
assessment of the following criteria : 

–  whether  it  is  acceptable  to  keep  such  a  significant  loophole  in  the  notification 
regime provided by the Transparency Directive, in particular in view of Recital 18 
which states that “The public should be informed of changes to major holdings in 
issuers  whose  shares  are  traded  on  a  regulated  market  situated  in  or  operating 
within  the  Community.  This  information  should  enable  investors  to  acquire  or 
dispose of shares in  full  knowledge  of the changes in voting structure; it  should 
also enhance effective control of share issuers and overall market transparency of 
important capital movements”. 

–  whether  imposing  disclosure  would  have  an  adverse  impact  on  contestability  of 
control and would outweigh the benefit of an increased transparency. It has been 
argued, for instance, that during a takeover bid, the obligation to disclose interests 
in derivatives at an early stage could detrimentally increase the price of shares in 
the  target  company,  rendering  it  unviable,  and  that  if  the  target  company  is  on 
notice, it may wish to defend the bid. 

F) Content of possible disclosure regime 

9.26.  According to the External Study343 and to CESR344, if a disclosure regime for cash-
settled equity derivatives were to be adopted345, the following five issues should be 
considered:  

9.27. 

The first issue relates to the scope of the disclosure. Notification requirements could 
be  extended  to  all  instruments  of  similar  economic  effect  to  holding  shares  and 
entitlements to acquire shares, or it may be limited to include only instruments that 
do not contractually preclude access to voting rights. An extension to all instruments 
would mean a holder needs to include all instruments that give him, in effect, a long 
economic exposure to an issuer. At the same time this raises the issue of the need for 
exemptions as it is likely to yield a large number of disclosures. 

9.28.  An  alternative  to  a  general  approach  combined  with  exemptions,  is  to  prescribe  a 
limitative  approach.  Such  an  approach  would  be  based  on  contractual  terms  that 

341 

342 
343 
344 
345 

29 

June 

2006: 

Directive, 

Transparency 

See, for instance, ISDA's response to the UK FSA consultation paper CP06/4 on the Implementation of 
the 
at: 
https://www.isdadocs.org/conf/agm2006/index_agm2006agenda.html.  See  also  ESME  (November 
2009), p.10. 
Mazars (2009), section 3.6.3.2 in fine.  
Ibid.  
CESR (January 2010), pp. 10 and seq. 
The  analysis  conducted  in  Schouten  (2009)  concludes  that  the  Transparency  Directive  in  its  present 
form  does  not  effectively  prevent  hidden  ownership,  and  that  hidden  ownership  severely  undermines 
the  mechanisms  through  which  ownership  disclosure  improves  market  efficiency  and  corporate 
governance.  For  this  scholar,  "this  strongly  suggests  that  the  Commission  should  consider  expanding 
the scope of the disclosure rules". See Schouten (2009), p.52. 

Available 

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preclude the possibility of the holder obtaining the voting rights or influencing their 
exercise.  

9.29.  However,  even  if  robust  contractual  agreements  were  created  regarding  explicit 
influence  over  voting  rights  and  disposal  of  shares,  it  would  be  possible  to 
circumvent  the  purposes  of  the  disclosure  obligation346  simply  by  changing  the 
contract  terms  of  the  instrument  immediately  prior  to  the  contract  being  closed347. 
Also,  such  a  regime  would  be  partly  based  on  the  intention  of  the  holder  of  the 
instrument. This means that even if holders might comply strictly with the terms of 
contractual  arrangements,  it  would  not  with  certainty  prevent  the  building  up  of 
stakes on an undisclosed basis. 

9.30.  CESR  and  ESME  consider  in  their  respective  analyses  that  such  an  approach  that 
creates  a  ‘safe  harbour’  for  certain  types  of  contractual  agreements  would  be 
unworkable in practice. 

9.31. 

The  second  issue  relates  to  aggregation  of  shares  with  derivatives:  The  most 
transparent  system  would  be  to  provide  for  full  aggregation:  the  number  of  shares 
corresponding to the derivatives is aggregated with the number of shares held by the 
same investor, as in the UK system. However, this means that a full harmonisation of 
notification requirements will not be possible, as the existing rules for notification of 
holdings  of  shares  under  the  Transparency  Directive  are  minimum  harmonisation 
rules348.  A  less  transparent  system  would  be  to  provide  for  a  separation  of  the  two 
notification requirements: when a threshold is crossed in shares or in derivatives, a 
notification is required. The least transparent system would provide for information 
on  cash-settled  derivatives  only  when  a  threshold  in  shares  is  crossed,  as  in  the 
French  system.  This  would  allow  a  full  harmonisation  of  notification  of  derivative 
instruments. However, it could be misleading, as any further acquisition or disposal 
of  derivatives  would  not  be  notified.  If  no  update  is  required,  the  market  would 
remain with outdated information. 

9.32. 

The  third  issue  is  whether  specific  thresholds  should  be  applied  to  cash-settled 
derivatives.  As  there  are  many  transactions  on  derivatives  (for  instance,  it  is 
estimated that up to 40% of trading in the UK regulated market has been carried out 
through  similar  derivatives),  a  significant  number  of  which  may  have  little  interest 
for  the  market,  it  may  make  sense  to  provide  for  a  safe  harbour  using  specific 
thresholds. The regime could be such that, below a certain threshold, no notification 

346 

347 

348 

Concerning the limitations of securities laws on this issue and the risk of circumvention, see Schouten 
(2009), p. 54. 
This was, for instance, the experience in the Fiat case described above. See Kirchmaier et al. (2009), 
p. 14. 
For example, ESME pleads for a uniform reporting obligation of large positive and negative positions 
in synthetic instruments, separate from the reporting of positions in the underlying shares, because the 
reporting arrangements for those positions is diffuse and continues to be not harmonized. Although the 
ultimate  goal  could  be  aggregation  of  share  and  derivatives  positions  into  one  reporting  requirement, 
ESME concludes that it cannot be implemented in a fully harmonized way within the foreseeable future. 
See ESME (November 2009), p. 13. 

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is required, provided appropriate rules are laid down to avoid any fraudulent use of 
the safe harbour349.  

9.33. 

The fourth issue is how the equivalence between the cash-settled derivatives and the 
number  of  underlying  shares  should  be  established.  In  the  United  Kingdom,  the 
computation  is  made  on  a  “delta-adjusted”  basis,  which  takes  into  account  the 
potential variations in the hedging position and allows for a netting of long and short 
positions. In France, the notional amount of the referenced number of shares is used, 
which is simpler but leads to disclosure of a higher number of shares350. The netting 
of  long  and  short  positions  is  also  an  issue  with  regard  to  the  calculation  of 
thresholds351. 

9.34. 

The last issue relates to derivatives using a basket of securities. When the basket is a 
standard, well-diversified one, there is  no  issue:  no notification should be required. 
However,  if  the  basket  includes  only  a  limited  number  of  securities,  specific  rules 
should be applicable. Technical provisions have been implemented in this respect in 
France and the United Kingdom. 

G) Alternative approaches 

9.35. 

The  External  Study352  argues  that  there  is  also  another  way  to  address  cash-settled 
derivatives. 

In  the  US,  in  a  case  involving  the  use  of  cash-settled  derivatives  to  avoid  a 
notification requirement, it has been held that this conduct was fraudulent (CSX/TCI 
case353).  A  way  to  address  the  issue  would  be  to  have  a  broad  anti-fraud  provision 
stating, in substance, that cash settled derivatives may not be used when the purpose 
or effect of such use is to avoid the applicable notification requirements. Under such 
provision, the courts would be left with the task to decide, on a case by case basis, 
which  conduct  is  acceptable  or  not.  This  may  act  as  a  potentially  strong  deterrent 
against  sophisticated  fraudulent  practices  but  may  not  serve  best  the  transparency 
requirements of the market.  

9.36. 

It  should  however  be  noted  that  Member  States  that  have  not  introduced  specific 
legislation  regarding  cash-settled  derivatives  have  not  been  able  to  rely  on  general 
principles  or  fraud  theories  to  curb  practices  such  as  described  above.  This  is 
particularly  the  case  in  Germany  where  the  BaFin,  after  investigating,  did  not  find 
that Porsche or Schaeffler were in violation of their disclosure requirements354.  

349 

350 

351 

352 
353 
354 

For example, according to ESME, the disclosure obligation threshold for cash settled derivatives should 
not be set too low (at least 5% or 10%), because in the majority of cases positions in these instruments 
are  never  intended  to  hide  ownership  and/or  make  unethical  price  gains  and  are  mostly  used  for  risk 
management purposes and to improve liquidity. See ESME (November 2009), pp. 9 and 12. 
CESR  in  its  consultation  paper  also  discusses  this  problem  and  notes  that  calculation  of  thresholds 
based  on  a  nominal  amount  is  in  line  with  the  current  wording  of  Article  13  instrument  of  the 
Transparency Directive. CESR (January 2010), p. 10. 
ESME  recommends  to  notify  large  positive  and  large  negative  positions  separately  and  not  on  a  net 
basis in order to achieve true transparency on the potential of hidden ownership and in order to avoid 
double-counting of positions. See ESME (November 2009), p. 13. 
Mazars (2009), section 3.6.3.2. 
For a description of this case, see Schouten (2009), p. 35. 
See press release from BaFin of 21 August 2008. 

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ANNEX 10 – THE QUESTION OF STOCK LENDING AND EMPTY VOTING 

10. 

Annex 

10.1.  Another issue linked to the disclosure of major holdings has been recently identified 
as leading to difficulties for market transparency and shareholder identification. This 
issue concerns (i) stock lending carried out by banks and investment firms; and (ii) 
the possibility  granted to intermediaries under MiFID355, to use clients' instruments 
for  their  own  account  or  for  the  account  of  other  clients  (Article  19  of  the  MiFID 
Implementing Directive356). Though the usefulness of such practices for the efficient 
functioning  of  markets  is  recognised357,  they  may  create  difficulties  –  especially  in 
the case of intermediaries' chains – in reconstructing in a timely manner the identity 
of  shareholders  or  in  locating  voting  rights  correctly.  For  instance,  at  the  time  of 
annual shareholders’ meetings, specific parties may borrow specific securities for the 
primary  purpose  of  participating  and  voting  at  an  annual  general  meeting.  Also,  in 
some cases lenders and borrowers may both report major holdings in respect of the 
same  shares  and  there  are  occasions  when  the  total  number  of  shareholders  that 
consider that they are eligible to vote at a general meeting would exceed 100% of the 
total outstanding capital of the issuer. Since these issues are not MiFID-specific, they 
have not been addressed under this directive, which focuses on the safeguarding of 
clients rights when the use of their financial instruments is allowed (clients consent, 
information requirement and record-keeping obligations).  

A) Stock lending and the Transparency Directive 

10.2. 

The  External  Study  on  the  application  of  the  Transparency  Directive  shows  that  a 
majority of stakeholders (55.9%) believe that the lending of shares should be made 
transparent and consider that voting rights obtained through the borrowing of shares 
should be included in the calculation of the notification threshold358. 

355 
356 
357 
358 

Directive 2004/39/EC 
Directive 2006/73/EC. 
See, for instance, ESME (December 2007). 
See generally Mazars (2009), Section 3.6.1. 

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10.3. 

The  way  the  Transparency  Directive  addresses  stock  lending  is,  however,  not  fully 
clear to all parties. According to the External Study, in all 14 Member States covered 
by the review, typical stock lending agreements lead to a transfer of ownership of the 
lent shares from the lender to the borrower359. This principle is applicable to shares in 
bearer form and to nominative shares. Therefore, it would appear that, prima facie, 
Article  9  of  the  Transparency  Directive  should  be  applicable.  This  would  lead  to  a 
notification  obligation  imposed  on  both  the  lender  and  the  borrower  when  relevant 
thresholds  are  reached  or  crossed.  Alternatively,  as  advanced  by  the  External 
Study360, stock lending would be caught by Article 10(b) of the Directive: 

Article 10: “The notification requirements defined in paragraphs 1 and 2 of Article 9 shall also apply 
to a natural person or legal entity to the extent it is entitled to acquire, to dispose of, or to exercise 
voting rights in any of the following cases or a combination of them: 

…  (b)  voting  rights  held  by  a  third  party  under  an  agreement  concluded  with  that  person  or  entity 
providing for the temporary transfer for consideration of the voting rights in question.” 

10.4.  However, the Directive has not been implemented in the same manner in all Member 

States. For instance, according to the External Study361: 

– 

– 

– 

– 

In  the  United  Kingdom,  the  position  has  been  that  only  the  borrower  has  to 
disclose  the  transaction.  The  logic  is  that,  under  a  standard  stock  lending 
arrangement, whereby the lender maintains a right to call for redelivery of the 
shares, there is a simultaneous disposal of rights in the shares and acquisition 
of  a  corresponding  right  to  reacquire  them.  The  lender  under  such  an 
arrangement  is  permitted  to  "net  off"  the  disposal  and  acquisition  and, 
therefore, not consider the transaction as triggering disclosure obligations. On 
the other hand, as the right to call back the shares on notice is at the lender's 
initiative,  there  is  no  immediate  corresponding  disposal  by  the  borrower  and 
therefore  the  two  positions  cannot  be  netted  off,  triggering  the  obligation  for 
the borrower to notify the transaction. 

In  France,  the  law  used  to  be  interpreted  in  a  way  that  made  notification 
compulsory for lenders. However, it seems that the French transposition of the 
Transparency Directive has introduced some confusion in this respect, and the 
current interpretation of applicable rules tends now to be the reverse. 

Recent case law in Germany provides that the duty to notify is imposed on the 
lender only if it has transferred the voting rights to the borrower. In this case, 
both  the  lender  and  the  borrower  need  to  disclose  the  transaction.  If  control 
over the voting right is retained by the lender, then only the borrower needs to 
notify.  

Luxembourg has a similar system to Germany, where the transfer of the voting 
rights  to  the  borrower  triggers  a  notification  requirement  for  both  the  lender 
and the borrower.  

359 
360 
361 

See Mazars (2009), Section 3.6.1.4. 
Ibid.  
Ibid. See also CESR (September 2008), replies to questions 21 to 25. 

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10.5. 

10.6. 

The rationale behind a non-notification by the lender is a concern that disclosure on 
both  sides  of  the  transaction  would  lead  to  confusing  and  conflicting  disclosures 
which may harm the market information362. In particular, due to the number of stock 
lending transactions, systematic notification by lenders may swamp the market with 
useless  information,  making  material  information  less  easy  to  identify.  In  addition, 
when stock lending is used by banks to hedge positions of activist shareholders in the 
setting of influence-seeking transactions, imposing notification requirements to such 
banks  may  result  in  both  providing  an  advance  warning  to  the  target  issuer  and 
creating business issues for the bank in its relationship with the target issuer. Finally, 
there  is  a  risk  that  placing  a  disclosure  obligation  on  all  stock  lenders  may  affect 
liquidity in the lending arena363. 

The  reverse  position,  in  favour  of  transparency  for  the  both  the  lender  and  the 
borrower, is supported by the need to have a full picture of the situation at any time. 
The  only  way  to  provide  complete  and  consistent  information  to  the  market  is  to 
have the transaction declared both by the lender (who would disclose his move from 
full owner to holder of a right to re-acquire the shares) and the borrower (who would 
declare his status of owner and his obligation to return the shares). There would be 
no risk  of confusion in such a  case. On the contrary, it would eliminate the risk of 
double  counting  the  shares  (a  first  time  for  the  lender  and  a  second  time  for  the 
borrower, which is misleading). The system would also be simple, as the same rule 
would  apply  to  all  stock  lending  transactions,  irrespective  of  specific  contractual 
terms (whose complexity may always lead to diverging interpretations)364.  

10.7.  According to the External Study, the correct application of article 9 of the Directive 
leads to a notification requirement by the lender and the borrower. Consequently, the 
External Study recommends that the application of this principle should be enforced; 
subject however to specific exemptions, such as the exemptions for very short term 
transactions applicable in some Member States (borrowed shares which are on loan 
by  close  of  business  the  next  day)  (see  Box  10.1).  A  specific  exemption  for 
transactions below a certain percentage could also be provided for. 

Box 10.1 – Possible improvement n°9 to the Transparency Directive. Cf. Mazars (2009), p. XIV.  

362 
363 
364 

See Mazars (2009), Section 3.6.1.4. 
See ESME (December 2007). 
See Mazars (2009), Section 3.6.1.4. 

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B) Empty voting 

10.8. 

10.9. 

“Empty  voting”,  i.e.  voting  without  the  economic  exposure  usually  attached  to 
shares,  such  as  voting  with  borrowed  shares,  is  a  subject  which  has  received  much 
attention in recent years365.  

It is usually considered that company law confers voting power to the shareholders in 
view of the fact that they will bear the positive and negative consequences of their 
decisions. On the contrary, “empty voting” includes the possibility to exert influence 
on  companies  without  financial  consequences  for  the  investors.  In  other  words,  the 
person who exercises the voting rights is not the one who bears the consequences of 
the  decision.  As  a  result,  decisions  detrimental  to  other  investors  and  to  the  issuer 
could be taken, in particular in a situation where the holder of the voting rights finds 
himself  in  a  conflict  of  interest,  e.g.  because  he  has  an  economic  interest  in  a 
competing company366. 

10.10.  A  number  of  high  profile  cases  have  shown  the  potential  for  abuse  resulting  from 
empty  voting.  Among  the  most  famous  are  the  Laxey  case  in  the  UK,  the  OMV  / 
MOL case in Hungary, the Perry/Mylan case367 in the US and the Henderson Land 
case in Hong Kong.  

10.11.  As  described  in  the  External  Study,  the  position  taken  by  a  number  of  financial 
industry  representatives  shows  that  the  concern  regarding  empty  voting  is  widely 
shared. For instance: 

– 

– 

– 

In the United Kingdom, the Shareholder Voting Working Group stated in 2004 
that "borrowing of shares for the purpose of voting is not appropriate".368  

In July 2005, the International Securities Lending Association stated that "the 
practice of borrowing shares specifically to vote is unacceptable".369  

The International Corporate Governance Network (ICGN) also stated that "the 
exercise  of  a  vote  by  a  borrower,  who  has,  by  private  contract,  only  a 
temporary  interest  in  the  shares,  can  distort  the  result  of  general  meetings, 
bring  the  governance  process  into  disrepute  and  ultimately  undermine 
confidence  in  the  market"370.  As  a  result,  according  to  the  ICGN,  "the 
borrowing of shares for the primary purpose of exerting influence or gaining 
control of a company without sharing the risks of ownership is a violation of 
best practice" and "the borrowing of shares for the purpose of exercising the 
right of the shareholder's vote is to be discouraged by all lenders".  

365 

366 

367 
368 
369 
370 

See  generally  Schouten  (2009),  Hu  &  Black  (2006),  Hu  &  Black  (2007)  and  European  Parliament 
(December 2009). 
See  also  Schouten  (2009),  p.  50  and  seq.  for  a  summary  assessment  of  why  empty  voting  is 
problematic. 
See a summary description in Schouten (2009), p.46. 
"Review of impediment to voting UK shares", the "Myners Report", January 2004. 
ISLA (2005). 
International Corporate Governance Network (2007), pp. 5 and 9.  

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10.12.  The French financial supervisor (Autorité des Marchés Financiers) set up in 2007 a 
working group whose report (the “Mansion Report”) proposed improved disclosure 
of empty voting and suggested the need of an outright ban371. 

10.13. 

In 2007, the European Commission therefore consulted interested parties on the need 
to deal with stock lending and empty voting. A majority of respondents considered at 
the  time  that  the  EU  should  address  these  issues  in  order  to  prevent  an  abuse.  In 
particular  measures  enhancing  transparency  met  with  general  support.  However, 
many  respondents  highlighted  the  importance  of  stock  lending  in  ensuring  market 
liquidity  and  warned  of  measures  that  could  reduce  the  attractiveness  of  stock 
lending  altogether.  Respondents  were  furthermore  opposed  to  the  suggestion  that 
borrowers  of  stock  should  only  vote  if  they  obtain  voting  instructions  from  the 
lenders of stock372. At the same time, the empirical evidence that stock lending abuse 
was taking place on a wide scale could not be gathered through the consultation and 
subsequent  inquiries.  The  main  findings  were  rather  that  borrowers  of  shares 
refrained  from  voting  altogether  thus  contributing  to  low  general  meeting 
participation rates. 

10.14.  Although  it  is  not  possible  to  have  statistical  data  to  quantify  precisely  the  use  of 
empty  voting  as  empty  voting  is  not  disclosed,  there  is  still  significant  anecdotal 
evidence  and  a  general  feeling  that  this  practice  is  regularly  used373.  Also  the 
External Study has shown that a clear majority among the stakeholders is in favour 
of preventing further development of “empty voting” practices by the Transparency 
Directive.  

371 
372 
373 

AMF (2008). 
See European Commission (September 2007), p. 6-10. See also Schouten (2009), p. 47. 
See generally Mazars (2009), Section 3.6.2. 

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10.15.  Empty voting, and more in particular the phenomenon of "record date capture"374 are 
one  of  the  arguments  in  favour  of  shareholder  identification  (see  Annex  11). 
However,  shareholder  identification  is  not  the  only  way  to  deal  with  the  problem. 
Thus,  the  External  Study  recommends  to  introduce  a  requirement  that  any  sale  of 
shares above a certain threshold (or other reduction in the net economic exposure of 
a shareholder of record) between the record date and the date of the general meeting 
should be immediately notified to the issuer and to the market in such a way that the 
relevant  information  is  fully  disclosed  prior  to  the  date  of  the  general  meeting  (see 
Box 10.2). 

Box 10.2 – Possible improvement n°10 to the Transparency Directive. Cf. Mazars (2009), p. XIV 
and 78.  

10.16.  As  advanced  in  the  External  Study,  there  are  also  arguments  that  are  being  voiced 
against  the  regulation  of  "empty  voting"  practice.  Some  argue  that  empty  voting 
makes  shareholder  activism  easier  and  thus  promotes  a  stronger  control  by 
shareholders  on  the  management  of  companies.  Also,  as  empty  voting  is  mostly 
based on stock lending, regulating the former should not result in an impediment for 
the latter. In particular, when stock lending is used for “tax optimization” purposes at 
the  time  dividends  are  paid,  there  is  a  fear  voiced  by  banks  promoting  this 
optimization that any regulation in this area may jeopardize their interest. Generally 
speaking, there is also a view, mostly voiced by financial intermediaries, that more 
disclosure is not necessary better disclosure. 

10.17. 

It should be noted that, in the United Kingdom, in 2009 the Takeover Panel issued a 
consultation paper in which it reached the conclusion that no further regulation was 
required, for the time being, on this issue375. 

374 

375 

"Record  date  capture"  is  a  specific  type  of  empty  voting,  which  may  be  described  as  follows:  an 
investor  purchases  shares  on  the  record  date  of  a  general  meeting  of  shareholders  and  sells  them 
immediately thereafter; at the general meeting, this shareholder is legally entitled to vote although it has 
no longer any economic interest in the issuer; if the sale takes place shortly before the general meeting, 
the  other  shareholders  will  not  be  aware  of  the  situation  –  this  may  be  the  case,  for  instance,  if  the 
shares are sold two days before the general meeting and notification is made the day after the meeting. 
For a long time, the issue of the record date capture was mostly a concern in the United States, where 
the  practice  of  the  record  date  has  been  well  established  for  a  long  time.  The  Shareholders’  Rights 
Directive,  which  mandates  the  use  of  record  dates  and  prohibits  any  blocking  of  shares  between  the 
record  date  and  the  date  of  the  general  meeting,  makes  it  possible,  at  least  in  theory,  to  capture  the 
record date of all EU companies listed on a regulated market. See Mazars (2009), section 3.6.2.3. 
UK Takeover Panel (2009).  

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10.18.  According to the External Study, if "empty voting" practice were to be regulated, two 
different options seem to be possible: (i) an improved transparency system; and (ii) a 
ban on empty voting376. 

10.19. 

(i)  Improved  transparency  system.  The  first  option  would  be  an  improved 
transparency system, allowing for a clear identification of “empty voters” in general 
meetings.  As  shown  above  (§ 10.15),  this  could  be  done  by  amending  the 
Transparency  Directive377.  It  could,  for  instance,  be  required  that  the  borrower 
specifies that it holds its shares as borrower (or, more generally, under a temporary 
transfer  agreement).  This  would  be  simple  but  would  not  address  all  empty  voting 
issues. 

10.20. 

It  could  also  be  required  that,  within  a  certain  period  of  time  before  and  up  to  a 
general meeting of shareholders (for instance, during the 30 days preceding a general 
meeting), the shareholders notify immediately any change (above a certain threshold) 
in their net economic exposure. This requirement would provide a complete picture 
of  the  shareholder  base  at  the  time  when  the  information  is  most  meaningful.  This 
system would be comprehensive but may be viewed as burdensome. 

10.21.  Another  way  to  improve  transparency  would  be  to  require  –  as  proposed  in  the 
External Study (see above, box 10.2) - that the economic exposure of all shareholders 
(above  a  certain  threshold)  be  notified  on  the  day  of  the  record  date,  to  the  extent 
such net economic exposure was not disclosed pursuant to a previous notification (no 
double notification should be required if it does not provide new information). This 
system  would  be  comprehensive  and  would  not  be  very  burdensome  as  only  one 
extra notification would be required (subject to updates, which should be limited). 

10.22.  Finally,  the  European  Corporate  Governance  Forum  proposes  in  its  statement  of 
February 2010378 as a first step to deal with empty voting that the borrower of shares 
should notify the company prior to the general meeting that he does not have the full 
financial interest in the shares (only) if he intends to exercise the voting rights on the 
shares.  According  to  the  Forum,  this  duty  to  notify  should  apply  to  positions  that 
correspond to a certain threshold, for example, 1 % or more of the outstanding shares 
with voting rights. Any false or omitted statement in this context should be dealt with 
under  the  national  rules  on  misleading  information.  Furthermore,  the  Forum 
recommends  the  introduction  of  a  rule  that  the  company  and  its  subsidiaries  may 
only  lend  the  company’s  own  shares  if  the  lending  contract  stipulates  these  shares 
will  not  be  voted  upon  by  the  borrower.  The  company  should  disclose  prior  to  the 
general meeting to what extent it and its subsidiaries have lent the company’s own 
shares to third parties.  

10.23. 

(ii)  Ban  on  empty  voting.  However,  disclosing  empty  voting  would  make  it  more 
apparent but, if it is considered an improper practice, would not provide an adequate 

376 
377 

378 

Mazars (2009), section 3.6.2.3, in fine.  
The analysis conducted in Schouten (2009) concludes that the "Transparency Directive sheds virtually 
no light on empty voting", and that empty voting severely undermines the mechanisms through which 
ownership  disclosure  improves  market  efficiency  and  corporate  governance.  For  this  scholar,  "this 
strongly  suggests  that  the  Commission  should  consider  expanding  the  scope  of  the  disclosure  rules". 
See Schouten (2009), p.54. 
European Corporate Governance Forum (February 2010). 

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remedy.  According  to  the  External  Study,  the  second  option  would  therefore  be  to 
restrict or ban “empty voting”, based on appropriate disclosure obligations, although 
the  legislative  instrument  to  achieve  this  result  would  not  be  the  Transparency 
Directive379. 

10.24.  There are two main ways to restrict or ban empty voting. A classical proposal would 
be  to  require  shareholders  who  have  lent  their  shares  to  recall  them  before  any 
general meeting. However, it is generally considered burdensome, may go too far, as 
it would prevent stock lending at the time of the general meeting, whereas it is not 
the stock lending per se which is wrong but rather the use of borrowed shares to vote, 
and this option would only address empty voting based on stock lending and would 
thus be limited in scope. 

10.25.  A more radical system would be to prohibit voting with borrowed shares (or shares 
held under a temporary transfer agreement or pursuant to a scheme having a similar 
impact). According to the External Study380, this would be the most simple and clear 
solution  and  also  the  one  which  could  appear  the  most  consistent  in  view  of  the 
principles at stake; but would raise considerable issues regarding the enforcement of 
any such rule. 

379 
380 

Mazars (2009), section 3.6.2.3, in fine.  
Ibid. 

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ANNEX 11 – THE IDENTIFICATION OF SHAREHOLDERS BY ISSUERS  

11. 

Annex 

A) The problem 

11.1.  One  of  the  objectives  of  the  rules  of  the  Transparency  Directive  on  disclosure  of 
major  holdings  is  to  provide  transparency  to  the  issuer  and  to  the  market  about 
holdings  relevant  for  some  company  law/corporate  governance  purposes:  e.g. 
holdings resulting in possible blocking minorities on annual shareholders meetings; 
holdings allowing to presume a significant influence on the company etc381.  

11.2. 

In  recent  times,  however,  there  have  been  demands  for  EU  action  to  increase  the 
level  of  investor  transparency  towards  issuers  of  shares.  In  the  field  of  corporate 
governance,  the  adoption  of  the  Shareholders  Rights  Directive  has  modified  the 
situation.  It  obliges  Member  States  to  provide  that  the  rights  of  a  shareholder  to 
participate  in  a  general  meeting  and  to  vote  in  respect  of  his  shares  shall  be 
determined  with  respect  to  the  shares  held  by  him  on  a  specified  date  prior  to  the 
general meeting (record date). The proof of qualification, however, shall be limited 
to  requirements  that  are  necessary  and  proportionate  to  ensure  the  identity  of 
shareholders (cf. Article 7(4)). 

11.3. 

Listed  companies  in  particular  argue  in  this  context  that  they  have  an  interest,  for 
their  corporate  governance  purposes,  to  know  who  ultimately  owns  the  shares  and 
who their "real" investors are.  

Such identification is not always easy. Shareholders and issuer can be separated by a 
chain  of  intermediaries,  which  are  sometimes  recognised  as  shareholders  by  the 
applicable national law. On other occasions, intermediaries may act like or give the 
appearance  of  a  shareholder.  Due  to  the  number  of  intermediaries  in  the  chain, 
identification of the real shareholder can be burdensome if not impossible for issuers 
and questions arise as to who is ultimately entitled to control the voting right. Even 
companies  using  registered  shares  could  not  necessarily  rely  on  the  register  as  the 
ultimate investor does not in all cases have to be identical with the legal shareholder.  

11.4.  Considering this evolution in the corporate governance area, the question that arises 
is whether the Transparency Directive's rules on disclosure of holdings are adequate. 
The  Commission  services  had  already  asked  interested  parties  in  an  open 
consultation in 2007382 whether more work was needed to create more transparency 
of the investors' side. In the past, a number of stakeholders had taken the view that 
the Transparency Directive puts in place a comprehensive framework, which should 
give issuers a fairly precise picture of the breakdown of voting rights. A majority of 
respondents had accordingly answered that the implementation of the Transparency 
Directive should be reviewed before any further action was to be envisaged383. 

381 

382 
383 

European  Commission  (March  2003),  section  4.5.1;  and  European  Commission  (December  1985), 
section II.3.  
European Commission (April 2007).  
More than 70% of the interested parties who responded to this question (representing about 56% of the 
total  number  of  respondents)  agree  that  the  implementation  of  the  Transparency  Directive  should  be 

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B) The existing rules in the Transparency Directive 

11.5. 

The  Transparency  Directive,  in  its  Articles  9  and  10,  imposes  on  holders  of  voting 
rights  the  obligation  to  notify  to  the  issuer  whenever  the  share  of  the  voting  rights 
they hold reaches, exceeds or falls under certain thresholds. The lowest threshold is 
set  at  5%.  This  obligation  falls  not  only  on  shareholders,  but  also  on  depositary 
receipt  holders  that  are  entitled  to  direct  the  exercise  of  the  voting  right  by  the 
depositary  and  persons  who  otherwise  control  voting  rights,  e.g.  as  a  result  of  a 
shareholders'  agreement  or  by  way  of  proxies,  etc.  These  notifications  are 
subsequently disclosed by issuers to the market.  

It should be added that, by virtue of Article 3 of the Directive, Member States may 
impose on their issuers lower disclosure thresholds than that of 5% provided for in 
the  Directive.  Indeed,  transposition  of  the  Directive  has  resulted  in  a  number  of 
Member States establishing (or maintaining) lower (initial) thresholds for disclosure 
of major holdings than provided for in the Directive and some have done so384. This 
lower threshold has been set at either 2% or 3%. 

Additionally, the Transparency Directive does not prevent issuers from setting their 
own  thresholds  in  their  articles  of  associations.  13  Member  States  allow  for  this 
possibility: for instance in FR, issuers may set that threshold at 0.5% and in Belgium 
at  1%  (see  Annex  8).  It  should  be  noted  that  this  type  of  notifications  are  not 
disclosed to the market, only to the issuer. 

11.6. 

The  Transparency  Directive  rules  have  some  limitations  in  this  context:  first,  the 
lowest disclosure threshold, even at 2% or 3%, is generally considered too high for 
identifying  shareholders  in  view  of  engaging  into  corporate  governance  related 
discussions  between  issuers  and  investors;  and  second,  while  the  rules  of  the 
Directive  will  give  a  breakdown  of  holders  of  voting  rights,  issuers  will  only  be 
informed where a shareholder crosses one of the thresholds for major holdings, but 
not of other movements without crossing the threshold (e.g. from 9% to 6% or 2,5% 
to 1%). 

According  to  the  external  study  on  the  application  of  the  Transparency  Directive, 
"issuers’  priority  is  to  better  identify  their  shareholders,  in  order  to  anticipate 
evolutions that may impact the general strategy of the company. The legal thresholds 
are an important source of information but the level of granularity resulting from the 
Directive is not considered sufficient. Issuers use specialised procedures or require 
external consultants to identify their shareholders below 5% (the services are often 
proposed  by  custodians  and/or  data  disseminators).  In  Top  Companies,  this 
identification of shareholders is often done twice a year."385 

reviewed  before  any  further  action  is  undertaken  at  EU  level.  However,  some  of  these  respondents 
consider that this should not stop the Commission from exploring certain issues. This view is shared by 
a number of the respondents who consider that, precisely for that reason, further action is needed at EU 
level. 
See Annex 8, §8.2 of this Report. 
Mazars (2009), section 3.4.1. 

384 
385 

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Similar  views  are  expressed 
the  2005  global  Survey  on  Shareholder 
Transparency386,  showing  that  the  5%  threshold  is  perceived  as  too  high  for  the 
purposes of identifying shareholders and that there is interest from companies to go 
as low as 0,1% of holdings or even below that (see Chart 8.1): 

in 

Chart 8.1: Source: International Investor Relations Federation (2005), p.13. 

C) The requests for establishing a shareholder identification mechanism 

11.7.  Given the perceived limitations of the Transparency Directive rules for the objective 
of  facilitating  communication  between  issuers  and  shareholders  for  the  purposes  of 
improving corporate governance, issuers consider that they need different systems to 
identify their shareholders387. The existing British and French mechanisms are often 
cited as examples of functioning systems (see Box 11.1).  

Box 11.1 – Existing national mechanisms388 for identifying shareholders: France and the United 
Kingdom. 

386 
387 

388 

International Investor Relations Federation (2005), p. 13. 
According  to  external  surveys,  there  is  demand  by  issuers  for  shareholder  identification  reports 
regardless  of  the  fact  whether  the  national  law  provides  for  a  mandatory  or  voluntary  identification 
system.  This  is  illustrated  by  the  Global  Survey  on  Shareholder  Transparency,  commissioned  by  the 
International  Investor  Relations  Federation  (September  2005).  The  results  were  based  on  interviews 
with  346  companies  worldwide.  In  Europe,  companies  carry  out  surveys  on  a  regular  basis.  The 
frequency  of  these  requests  is  closely  interrelated  with  their  average  costs.  In  the  EU,  the  frequency 
ranges from 12 (UK), 8 (FI), 4 (SE), 3 (ES), 2 (DK, NL, FR) to 1 (DE). This body of data is backed up 
by information provided by Euroclear on SE and FR for 2008. See also Mazars (2009), p.94. 
In  the  Netherlands,  following  the  May  2007  advice  of  the  Monitoring  Commission  Corporate 
Governance Code (Commission Frijns) a legislative proposal amending the Financial Supervision Act 
was prepared to introduce (among others) a system for shareholder identification. The proposal was sent 
to Parliament on 24 July 2009, after delays during 2008 due to reactions on the consultation document. 
The proposal is being discussed in Parliament. 
The  proposed  Dutch  system  is  inspired  by  the  existing  French  system  and  provides  for  a  method  of 
getting the information on the ultimate investor through Euroclear and the intermediaries lower in the 
chain. Different is that companies will have the opportunity to contact the intermediaries lower in the 
chain themselves (so not through Euroclear) and could also outsource this. The system will cover bearer 
shares and registered shares. Another difference in relation to the French system is that there will be a 
maximum number of identification rounds per year (although this could change in the future; the French 
system was also more limited when it started). 
Finally,  the  proposed  Dutch  system  will  include  the  possibility  for  companies  to  send  relevant 
information  directly  by  mail  to  the  identified  shareholders  and  a  possibility  for  shareholders  to  send 
information  to  the  company,  which  then  will  distributed  to  the  other  shareholders,  together  with  the 
information sent by the company. 

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In France, Article L 228-2 of the Code du Commerce provides for a method of getting a clear and 
detailed  picture  of  the  shareholder  base  through  the  central  depository  (“dépositaire  central”), 
currently Euroclear. 

The  Identifiable  Bearer  Securities  service  ("Titres  au  Porteur  Identifiable"  -  TPI)  is  a  solution  for 
bearer  securities  held  in  Euroclear  France  that  allows  issuers  to  receive  detailed  information  on  the 
identity  of  their  shareholders.  The  TPI  service  was  created  under  the  Saving  Law  ("Loi  sur 
l'Epargne") of 17 June 1987 in order to provide, upon request, the list of their shareholders to issuers. 
Euroclear processes around 500 requests annually. 

Another law ("Loi de nouvelles régulations économiques" [Loi no. 2001-420 du 15 mai 2001]) allows 
issuers  to  ask  for  the  identity  of  foreign  shareholders.  In  order  to  comply  with  this  regulatory 
requirement,  Euroclear  France  has  set  up  a  dedicated  service  "TPI  Loi  NRE"  which  allows  the 
identification of ultimate foreign shareholders. 

In  the  United  Kingdom,  Section  793  of  the  Companies  Act  2006  (formerly  Section  212  of  the 
Companies Act 1985) allows a public company to investigate who has an interest in its shares. Where 
a person fails to give the company the required information in response, the company can apply for a 
court order imposing restrictions on the shares in question389. 

A  company  has  the  right  to  enquire  of  any  person  whether  they  are  interested  in  the  shares  of  the 
company,  the  nature  of  that  interest  and  if  they  hold  the  shares  on  behalf  of  someone  else  and  to 
provide details of that other person. The information so requested must be given within a “reasonable 
period” and if no response is received, the company can apply to the Court (s794) for imposition of 
restrictions on the shares (restriction on transfer of shares, voting rights, payment of dividends) (s797). 
There are criminal sanctions (s795). 

The whole section is very widely drafted, i.e. the inquiry of interests may go back three years, there 
just  needs  to  be  a  reasonable  cause  for  the  issuer  to  believe  the  person  asked  has  an  interest  in  the 
company and that person does not need to be a shareholder.  

11.8.  However, these national systems are also limited. Issuers believe that EU regulation 
is needed because existing national systems cannot extend cross-border, so if there is 
a cross-border element in the chain, an identification request under existing national 
law  will  not  produce  any  result  unless  the  foreign  intermediaries  cooperate  on  a 
voluntarily basis. 

In  addition  to  the  issuers'  demand,  institutional  investors  gathered  in  the  European 
Sustainable  Investment  Forum  (Eurosif)390  recommend  that  the  Commission 
proposes  measures  to  allow  issuers  to  know  who  their  shareholders  are  at  any 
moment so that they can communicate with them efficiently. 

11.9. 

Issuers'  views  have  been  upheld  by  the  European  Parliament  in  a  resolution  of 
23 September  2008,  which  suggested  the  introduction  or  implementation  of  a  more 
horizontal system of EU-wide shareholder identification391.  

D) Arguments in favour of and against action in this area 

389 

390 

391 

It should be noted that the UK system was copied by the majority of Commonwealth countries, which 
use  the  British  Companies  Act  as  their  model  with  the  important  difference  that  the  register  is  not 
available for public scrutiny as in the UK, only to the company or its appointed agent. 
Eurosif  regroups  about  80  member  affiliates  including  mainstream  institutional  investors  such  as 
pension funds and asset managers representing assets of over EUR 1 trillion. See Eurosif (2009). 
European  Parliament  (September  2008).  In  this  resolution,  the  European  Parliament  asked  the 
Commission  to  establish  rules  that  enhance  the  transparency  of  voting  policies  of  hedge  funds.  The 
resolution was based on an own-initiative report by Mr Klaus-Heiner Lehne. 

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11.10.  Several  arguments 

in  favour  of  establishing  an  EU-wide  shareholder 
identification  mechanism  are  advanced.  The  possibility  to  engage  with  investors 
throughout the year to keep them informed of activities and to receive their feedback 
is identified as a key advantage. 

Other possible benefits outlined are the possibilities to: 

–  better analyse the type of investor who is interested in the company, which allows 
the  company  to  adapt  their  strategies  better  to  the  needs  and  interests  of  that 
population ; 

–  detect, at an early stage, stake building including outside the general meeting and 

thus avoid surprises and contentious discussions during the general meeting; 

–  extend  incentive  arrangements  for  retail  shareholders  to  those  in  omnibus 

accounts which currently cannot be identified; 

–  increase  participation  of  shareholders  in  general  meetings.  Although  the 
Shareholders'  rights  Directive  has  improved  the  conditions  for  shareholders  to 
participate, issuers consider that establishing a direct contact with the shareholders 
would improve and accelerate the ways to provide them with information on the 
general  meeting  and  allow  issuers  to  encourage  their  shareholders  actively  to 
make use of their voting rights; 

–  testing whether there is likely to be shareholders' support for draft resolutions to 

be submitted to the general meeting; 

–  increase the transparency and integrity of the voting process (by avoiding double 

voting, loss of votes, record date capture, possibly empty voting)392; and 

–  facilitate  engagement  of  shareholders  in  environmental  and  social  governance 

(within a wider corporate social responsibility policy)393. 

11.11.  Furthermore, current developments in securities markets infrastructures are advanced 
as  a  further  argument  supporting  the  development  of  an  EU-wide  shareholder 
identification mechanism. Thus, issuers are concerned that the T2S project394 which 
will  provide  a  common  platform  for  settlement  services  to  Central  Securities 
Depositories  could  impact  on  the  functioning  of  the  current  national  systems  for 
identification of shareholders and render the situation even more opaque395.  

392 
393 
394 

395 

On the problems related to empty voting and record date capture, see Annex 10. 
See Annex 14. 
The  TARGET2-Securities  (T2S)  project  steered  by  the  European  Central  Bank  seeks  to  contribute  to 
deliver  a  single  integrated  securities  market  for  financial  services  and  to  bring  forward  the  Code  of 
Conduct on Clearing and Settlement and the harmonisation efforts through the Giovannini process. T2S 
will  provide  a  single,  borderless  pool  of  pan-European  securities,  as  well  as  a  neutral  settlement 
process. Market users will be able to access these assets through Central Securities Depositories (CSDs) 
in a way which should accommodate national and regional differences.  
There  is  a  concern  that,  by  adding  extra  holding  layers  and  introducing  more  omnibus  accounts, 
identification  would  be  encumbered  even  for  issuers  located  in  those  Member  States  where  an 
identification  system  currently  exists  under  national  law.  There  is  a  task  force  hosted  by  the  ECB, 
which  should  propose  measures  to  ensure  that  T2S  does  not  negatively  affect  existing  identification 

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11.12.  At  the  same  time,  there  are  arguments  against  the  development  of  an  EU-wide 
shareholder  identification  mechanism.  In  the  first  place,  some  consider  that 
existing  rules  may  be  enough  for  transparency  purposes.  For  instance,  the 
introduction  of  a  "record  date"  system  by  the  Shareholder  Rights  Directive  already 
increases transparency and integrity of the voting process. Also, the means that the 
Directive offers to facilitates the participation in general meetings and the exercise of 
shareholder  rights  are  considered  sufficient  (electronic  means  –  if  offered  by  the 
company,  proxy  voting,  minimum  convocation  periods).  Shareholders  interested  in 
making their voice heard should henceforth have the necessary tools at their disposal, 
also in a cross-border context396.  

Furthermore, if issuers want to inform shareholders, they can contact them through 
their websites and their investor relations departments. Listed companies are required 
to  inform  the  public  at  large  of  their  performance  and  strategy  and  not  only  their 
current shareholders397. Enhancing company communication with a selected group of 
existing shareholders could conflict with this principle. Also, it should be noted that 
any  price-sensitive  information  would  need  to  be  disclosed  to  the  public  anyway 
(under  the  Market  Abuse  Directive).  Moreover,  contacts  between  issuers  and 
shareholders  should  be  enhance  through  the  possibility  to  introduce  a  uniform 
shareholder certificate as proof of entitlement in the future proposal for a Directive 
on legal certainty of securities holding and transactions398. 

The  possibility  for  listed  companies  to  voluntarily  introduce  specific  disclosure 
thresholds  at  company  level  in  the  company's  articles  of  association  should  be 
highlighted as another existing possibility, at least in half of the Member States, for 
identifying  shareholders  beyond  the  Transparency  Directive  requirements  (see 
Annex 8). In this context, an alternative solution to the mandatory (for the investor) 
shareholder  identification  mechanism  of  the  type  in  place  in  France  or  the  United 
Kingdom  (see  Box  11.1  above)  could  be  that  national  law  provides  for  voluntary 
disclosures to the issuers by investors holding voting rights above a predefined low 
threshold  (e.g.  0,1%).  Those  voluntary  disclosures  could  be  structured  along  the 
Transparency Directive requirements. 

11.13.  Secondly,  technical  difficulties  for  the  enacting  of  a  shareholder  identification 
mechanism  of  the  type  in  place  in  France  or  the  United  Kingdom  should  not  be 
underestimated.  For  instance,  there  is  no  wide  agreement  on  a  definition  of  the 
“ultimate  investor”.  Where  does  the  chain  end  and  which  kind  of  investor  is  to  be 
made more transparent?399  

396 

397 

398 
399 

practices (i.e. in particular for registered shares), but instead contributes to the identification of the end 
holders of bearer shares.  
The deadline for the transposition of the Shareholders Rights Directive into national law was 3 August 
2009.  
It should be kept in mind in this regard that listed companies are open companies, so investors can join 
at  any  time  as  well  as  quit  the  company  –  market  liquidity  is  a  principle  in  regulated  markets  and 
investors also vote with their feet.  
See http://ec.europa.eu/internal_market/financial-markets/securities-law/index_en.htm  
At  the  same  time  they  may  not  be  insurmountable.  In  the  meantime,  the  UNIDROIT  Diplomatic 
Conference which had been working on the harmonisation of substantive rules regarding securities held 
with  an  intermediary  has  achieved  considerable  progress  in  this  respect.  The  draft  UNIDROIT 
Convention on Substantive Rules regarding Intermediated Securities adopted in Geneva on 9 October 

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11.14.  Moreover,  there  are  other  possible  drawbacks  from  a  mandatory  shareholder 
identification  mechanism.  Shareholder  dialogue  could  be  a  pretext  for  management 
entrenchment.  Early  detection  of  stake  building  (see  above,  §11.10)  allows  in 
particular reinforcing takeover defences400. Also, shareholders are the owners of the 
listed companies. If anybody, it is the shareholders who should be entitled to a high 
level of transparency. Any obligation to disclose a financial position or the investor's 
intention  interferes  with  the  investor's  investment  strategy  which  may  privilege 
anonymity/discretion (also for cost reasons), as well as with his/her privacy and also 
property rights. Any interference would need to be carefully justified. 

11.15.  Any  new (mandatory)  measure  will entail costs401. Ultimately, shareholders will be 
required to pay for the system, either through intermediary fees or through a cut in 
their  dividends.  It  has  to  be  said,  though,  that  issuers  even  today  make  use  of  all 
available  resources  to  gather  this  kind  of  information  and  pay  for  the  costs402.  In 
Europe, the amount spent on a yearly basis ranges from an average EUR 9,000 (DK) 
to EUR 36,000 (ES). The total average amount spent comes down to EUR 26,000 per 
year403. 

400 

401 

402 

403 

2009  gives  a definition of  the  "account holder" which  could perhaps  be  used  for  the  purposes of  any 
initiative on shareholder identification. 
For the impact of enhanced transparency of major holdings of voting rights on the market for corporate 
control, see European Commission (December 2008), §21. 
The requests will have to be managed and processed, the data will have to be gathered and treated and 
reliable (multilingual) systems for the transfer of data will have to be established. The burden of cost 
will have to be attributed. 
The Global Survey on Shareholder Transparency shows the different sources of information issuers use 
today to get a better picture of their shareholder base. There are considerable differences as to the means 
used  which  depend  largely  on  the  geographical  origin  of  the  companies.  See  International  Investor 
Relations Federation (2005), p. 9. 
Cf. International Investor Relations Federation (2005), based on figures gathered from UK, FI, DK, SE, 
ES, DE, NL and FR. The original figures mentioned in the study are based on USD, and they have been 
converted for this paper on the basis of the currency rates of 16 September 2005. 

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ANNEX 12 – ENHANCED DISCLOSURE REQUIREMENTS FOR SIGNIFICANT HOLDINGS  

12. 

Annex 

12.1.  Debate has arisen in recent times regarding whether investors holding major interests 
in EU issuers of shares should be requested to provide to the issuer and the market 
qualitative information currently not requested by the Transparency Directive and, if 
so,  under  which  circumstances.  This  applies  in  particular  to  the  information  on  the 
intentions  with  holdings  (and  the  financing  of  their  acquisition)  or  to  information 
regarding the voting policies of major investors.  

A) Disclosures on intentions with holdings (and the financing of their acquisition) 

12.2.  While  the  Transparency  Directive  does  not  contain  any  obligation  regarding 
disclosure on intentions with holdings, such an obligation is not unknown within the 
EU.  Disclosure  on  intentions  with  holdings  is  already  requested  in  France  and 
Germany  (see  Box  12.1)  and  its  possible  application  has  been  considered  in  other 
Member  States404.  However,  the  vast  majority  of  Member  States  have  not  imposed 
such a requirement405. It should be noted that disclosure on intentions with holdings 
also  bears  some  similarity  with  the  US  disclosure  system,  which  requires  filing  of 
extensive information on Schedule 13 D when thresholds of 5% and each additional 
1%  are  crossed.  In  China,  information  about  investors'  intentions  may  also  be 
required406. 

Box 12.1 – Disclosure on intentions with holdings: France and Germany 

In France, pursuant to a longstanding regime, which has been tightened in 2009, enhanced disclosure 
is  required  when  certain  thresholds  are  met,  i.e.  10%,  15%,  20%  and  25%.  The  information  to  be 
disclosed includes how the acquisition of the shareholding is being financed, guarantees given in this 
respect  and  the  acquirer’s  planned  strategy  with  regard  to  the  issuer.  The  investor  needs  also  to 
disclose  whether  the  shares  are  held  in  full  ownership  or  through  stock  lending.  The  declaration  is 
made to the company and to the French competent authority within 10 working days. Then, it is made 
public. 

Under  the  new  regime,  declaring  investors  are  now  allowed  to  file  an  updated  version  of  their 
declaration  if  their  intent  has  changed;  this  update  is  no  longer  subject  to  material  changes  in  the 
economic environment, situation or ownership of the entities concerned, but simply to the filing of a 
new  declaration  that  runs  for  another  6  months.  This  unconditional  right  to  update  the  filing  is  the 
counterparty to the new requirement that more precise information be given. 

In Germany, the Risk limitation Act of 2008 introduced similar requirements although they are only 
applicable since May 2009. Investors reaching or exceeding the 10% threshold (or a higher threshold) 
of  voting  rights  in  a  listed  company  must  disclose  the  intentions  they  pursue  with  this  investment 
within 20 trading days following their reaching or exceeding such threshold (unless the threshold is 
only crossed temporarily for a short period). Investors are in particular requested to disclose whether: 
(1) the acquisition is for the purpose of implementing strategic objectives or achieving trading profits; 

404 
405 

406 

For instance, in the NL.  
See  also  CESR  (September  2008),  Annex  2,  replies  to  question  71.  Interestingly,  the  former  Belgian 
legislation provided for a requirement to disclose intentions when the investor reached or crossed the 
20%  threshold.  This  requirement  has  disappeared  from  the  new  legislation  transposing  the 
Transparency Directive. 
See Mazars (2009), section 6.3.1 and 6.3.2. 

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12.3. 

12.4. 

(2) they intend to acquire further voting rights in the following 12 months; (3) they intend to exercise 
any influence on the administrative, management or supervisory bodies of the issuer; (4) they seek a 
material change in the capital structure of the company, in particular in relation to the ration between 
debt  financing  and  equity;  and  (5)  they  seek  a  major  change  in  the  dividend  policy.  In  addition, 
investors will need to provide information on the origin of the funds used for acquiring such shares by 
indicating whether the funds used to acquire the voting rights are debt or equity. 

If  the  objectives  change,  the  investor  in  question  is  required  to  update  its  previous  statement.  The 
deadline  is  also  20  trading  days.  There  are  some  exceptions  to  the  notification  for  certain  types  of 
companies.  Also,  issuers  may  waive  (in  their  articles  of  association)  this  notification  obligation. 
Issuers should disclose the notifications received (or the failure to have done so).  

Those  in  favour  of  requesting  qualified  investors  to  disclose  their  intentions  with 
holdings  (as  well  as  other  related  information)  generally  underline  the  benefits  of 
enhanced 
improving  corporate  governance:  such  enhanced 
transparency would help in building at better relationship between management and 
qualified shareholders as well as between shareholders.  

transparency  for 

The majority of stakeholders surveyed in the external study on the operation of the 
Directive407 appear to be in favour of requesting qualified investors (those acquiring 
a  significant  holding  of  voting  rights  such  as  10%,  15%  or  20%)  to  provide  more 
detailed information on the intention pursued with the investment (see Chart 12.1)408, 
although  views  differed  significantly  depending  on  the  geographical  location409.  In 
any event, views were also expressed that, if implemented, such requirement should 
be accompanied by a clear statement that declarations of intent should not be used by 
national authorities as a protectionist tool. 

Chart  12.1  –  Views  on  whether  qualified  investors  should  provide  information  on  intentions 
with holdings. Cf. Mazars (2009), p.117. 

12.5.  Concerning the type of information that could be disclosed, this study410 shows that 
stakeholders would favour the following information, by order of priority (see Chart 
12.2):  (1)  intent  to  acquire  control  (20%);  (2)  intent  to  continue  to  buy  shares 

407 
408 
409 

410 

Mazars (2009), section 3.7.  
Nevertheless, industry associations have mixed views. Ibid. section 3.7.1. 
The  idea  would  be  strongly  supported  by  stakeholders  from  Ireland,  Germany,  France,  Spain,  Italy, 
Hungary,  Slovakia,  Poland,  Romania  and  Austria.  However,  a  majority  of  stakeholders  would  not 
support the idea in Luxembourg, Sweden and the UK. Ibid. 
Ibid. section 3.7.2. 

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(16.4%);  (3)  intent  to  request  the  appointment  or  the  removal  of  board  members 
(15.8%); (4) intent to request changes in the issuers’ strategy (15%); (5) time horizon 
of  the  investment  (12.3%);  (6)  intent  to  request  specific  transactions  or  decisions 
(11.4%);  and  (7)  details  on  the  financing  sources  (8.2%).  It  can  be  noted  that 
supervisors  and,  to  a  lesser  extent,  institutional  investors  consider  the  “intent  to 
request  change  of  strategy”  and  the  “intent  to  acquire  control”  to  be  equally 
important.  For  retail  investors  associations,  the  information  on  the  “source  of 
financing” is considered of high importance.  

Chart  12.1  –  Information  to  be  disclosed  when  acquiring  certain  significant  holdings.  Cf. 
Mazars (2009), p.118. 

12.6. 

The  study411  outlines  that  stakeholders  (in  interviews)  consider  that  declarations  of 
intent  are  considered  useful.  Although  these  declarations  may  be  worded  in  such  a 
way  as  to  preserve  some  flexibility  for  the  declaring  investor,  it  is  generally 
acknowledged that they provide some valuable information. It is considered that the 
declaring investor must be reasonably serious in its declaration and consistent in its 
subsequent  behaviour.  This  declaration  is  seen  as  important  information  for 
investment purposes, because they give an indication to existing shareholder on the 
likelihood  of  a  take-overbid  and,  to  potential  shareholders,  on  the  estimated  future 
value of the company. 

12.7.  However,  as  explained  by  the  Commission  staff  working  document  of  2008, 
enhanced  transparency  requirements  may  also  have  adverse  consequences,  in 
particular  in  the  market  for  corporate  control412.  Indeed,  the  obligation  to  disclose 
information regarding the intention to acquire control in a company (i.e. anticipating 
on a forthcoming takeover bid) at an earlier stage may increase the price of the target 

411 
412 

Ibid. 
See European Commission (December 2008), §21. 

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company's shares and could therefore increase the price of a future bid (which could 
render  it  unattractive).  Furthermore,  such  disclosure  gives  the  management  of  the 
target company an "early warning signal" of a potential bid, which allows it to take 
defensive  measures  in  an  attempt  to  frustrate  the  bid.  The  surprise  effect  of  the 
takeover is key, however, in terms of its success. The notification of intentions at a 
10% level takes this surprise effect away. As a result, future bids are more difficult or 
costly.  An  additional  effect  of  the  declaration  is  that,  when  an  investor  declares  he 
has no intention of acquiring control, he may be prevented from launching a bid in 
the  immediate  period  (unless  a  new  declaration  is  made),  thereby  significantly 
limiting the contestability of control. Finally, in order to avoid having to declare their 
intentions,  potential  bidders  are  discouraged  from  acquiring  holdings  above  the  set 
threshold (generally 10%) or from reaching a higher notification threshold as long as 
they are not prepared to launch a takeover bid. 

12.8. 

ESME also outlines that requesting disclosure on intentions may not give the desired 
effect:  recent  cases  show  that  the  question  whether  a  party  wants  to  disclose 
significant holdings, depends on the intention behind the building of these positions. 
As a result, the investment community is somewhat sceptical about the effectiveness 
of declaration of intentions. Besides, ESME underlines that there is the fundamental 
concern that there are no objective criteria to judge investors’ intentions (one cannot 
blame people on their intentions)413. 

12.9. 

The  external  study  on  the  operation  of  the  Transparency  Directive  concludes  by 
recommending  the  introduction  of  enhanced  disclosure  requirements  for  significant 
holdings (see Box 12.2) 

Box 12.2 - Possible improvement n°12 to the Transparency Directive. Cf. Mazars (2009), p. XV 
and 78. 

12.10.  The European Parliament also called in 2006 and 2008 for enacting legislation in this 

area414. 

B) Information on major investors' voting policies 

12.11.  The  European  Commission  Company  Law  and  Corporate  Governance  Action  Plan 
had already suggested as early as 2003 that institutional investors should be obliged 
to  disclose  their  investment  policy  and  their  policy  with  respect  to  the  exercise  of 
voting  rights  in  companies  in  which  they  invest  and  to  disclose  to  their  beneficial 
holders at their request how these rights have been used in a particular case. In the 
Action Plan, the Commission's intention was expressed to propose a Directive in the 

413 
414 

ESME (November 2009), p.10. 
European  Parliament  (June  2006), §43,  in  relation  to  institutional  investors;  and  European  Parliament 
(September 2008), annex to the Resolution. 

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mid-term period of 2006-2008415. Although the suggestion found large support as to 
its  objective,  the  idea  of  dealing  with  it  in  a  Directive  was  much  more  cautiously 
received by respondents416. 

12.12.  When  the  Directorate  General  for  Internal  Market  and  Services  on  20  December 
2005  launched  a  public  consultation  on  future  priorities  for  the  Action  Plan  on  the 
Modernisation  of  Company  Law  and  Corporate  Governance  to  adapt  it  to  the 
economic and societal changes, it came back on the question417 and received similar 
reactions as in 2003418. 

12.13.  More  recently,  the  European  Parliament  in  its  Resolution  on  transparency  of 
institutional  investors419  asked  for  an  obligation  to  be  imposed  on  hedge  funds  and 
private  equity  to  disclose  and  explain  vis-à-vis  the  companies  whose  shares  they 
acquire or own, retail and institutional investors, prime brokers and supervisors their 
investment policy and associated risks. 

415 
416 
417 
418 
419 

European Commission (May 2003), p.13. 
European Commission (November 2003), p. 9-10.  
European Commission (December 2005b), p.7-8. 
European Commission (May 2006), p. 12-13.  
European  Parliament  (September  2008).  The  European  Parliament  had  previously  recalled  that 
"transparency  is  needed  with  regard  to  "voting  policy"  of  institutional  investors,  see  European 
Parliament (June 2006), §43. 

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ANNEX  13  –  ALTERNATIVE  SYSTEMS  FOR  THE  NOTIFICATION  OF  MAJOR  HOLDINGS  OF 

VOTING RIGHTS 

13. 

Annex 

13.1. 

In the general context of a financial crisis related in part to insufficient transparency 
from investors and market players (see Annex 2), useful lessons may be drawn from 
international  comparisons  on  disclosure  of  material  shareholdings,  in  particular  the 
existing regimes in US, China, Japan and Switzerland. 

A) Thresholds 

13.2. 

In  case  of  acquisition  or  disposals  of  major  holdings,  notifications  are  usually 
required  upon  crossing  thresholds  in  most  jurisdictions.  They  are  computed  on  the 
basis  of  both  increases  and  decreases  of  shares  and  voting  rights,  except  in 
Switzerland where only voting rights are taken into account. The initial threshold is 
set at 5% in all jurisdictions, except Switzerland (where it is set at 3%). It should be 
noted  that  it  is  often  authorized  for  companies  to  impose  lower  thresholds  (for 
instance in China), although doing so is not a market practice. 

13.3. 

The  subsequent  notification  thresholds  may  be  either  every  5%  (China  and 
Switzerland)  or  every  1%  above  5%  (Japan  and  US).  In  the  US,  notification  may 
even be required for moves smaller than 1%, if it is otherwise significant. 

B) The overall notification system 

13.4. 

It is interesting to describe in particular the notification regimes in China and in the 
US which have sophisticated systems that take into account the relative position of 
the shareholder or its intent.  

13.5. 

In the US, notification requirements are different for the initial reporting and for the 
subsequent amendment to the initial notification. 

Notifications in the US 

Initial Reporting 

A  person  (or  a  group  of  persons)  that  acquires  beneficial  ownership  of  more  than  5%  of  a  class  of 
voting equity securities must report such acquisition to (i) the SEC), (ii) any stock exchange on which 
the securities are listed, and (iii) the issuer. 

A  person  is deemed  to  be  a beneficial  owner  of  any  equity  security  of  such person or group has  or 
shares: 

(i) voting power (including the power to vote, or to direct the voting of, the security) or 

(ii) investment power (including the power to dispose, or to direct the disposition of, the security). 

In  addition,  a  person  is  deemed  the  beneficial  owner  of  any  equity  security  underlying  other  equity 
linked instruments if: 

(a) such instruments were acquired with the purpose or effect of changing or influencing control of the 
issuer or 

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(b)  their  holder  has  the  right  to  acquire  the  underlying  equity  security  within  60  days  through  the 
exercise  or  conversion  of  such  instruments;  provided  that  the  exercise  or  conversion  of  the  equity-
linked  instruments  is  not  subject  to  a  material  contingency  outside  the  control  of  the  holder  of  the 
instruments. 

Any person acquiring beneficial ownership of more than 5% must report it by filing a form with the 
SEC under cover of Schedule 13D, with the exception of certain specified categories of investors who 
may instead file a simpler form under cover of Schedule 13G. 

Any  person  acquiring  beneficial  ownership  must  notify,  inter  alia,  the  source  and  amount  of  funds 
used to acquire the securities, the purpose of the acquisition, including any plans or proposals of the 
acquirer for future purchases or sales of issuer’s stock or for any changes in the issuer’s management 
or  board  of  directors  or  any  major  corporate  transaction  affecting  control  of  the  issuer  and  any 
arrangements  to  which  the  acquirer  is  a  party  relating  to  the  issuer’s  securities  (including  debt 
securities and securities not registered under the Exchange Act). 

Passive investors, i.e. any persons not seeking to acquire or influence control of the issuer who own 
less  than  20%  of  a  registered  class  of  the  issuer’s  securities  are  subject  to  simpler  notification 
requirements. 

Amendments to previous filings 

Upon the occurrence of any material change in the information included in a previously filed report 
including the acquisition or disposition by such reporting person of 1% or more of the relevant class 
of equity securities, such information should be amended. 

13.6. 

The Chinese notification system is worth mentioning because it provides for different 
requirements depending on the actual situation of the investor acquiring an interest in 
the issuer. 

Notification in China 

If an investor and its concerted parties are not the largest shareholder or actual controller of a listed 
company,  and  they  together  hold  shares  more  than  5%  but  less  than  20%  of  the  issued  shares  of  a 
listed company, they shall file a standard report on the change of equities. If the aforesaid investor and 
concerted parties (holding more than 5% but less than 20% of the shares) are the largest shareholder 
or actual controller of a listed company, they shall file a detailed report. 

If the shares held by an investor and its concerted parties reach or exceed 20% but do not exceed 30% 
of the issued shares of a listed company, they shall also file a detailed report on the change of equities. 
If such investors are the largest shareholders or actual controllers of such listed company, they shall in 
addition provide independent third party verification. 

The triggering event of the notification is an increase or decrease of 5% in the number of shares or 
voting rights within the two bands. 

The system may thus be summarized as follows: 

largest  nor 

is  not 

Investor 
controlling shareholder 
Investor 
controlling shareholder  

is 

largest 

Percentage  above  5%  and 
below 20% 
Standard notification 

Percentage  at  least  20%  but  below 
30% 
Detailed notification 

or 

Detailed notification 

Detailed 
with 
independent third party verification 

notification 

C) Content of the disclosure 

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13.7. 

13.8. 

13.9. 

In  addition  to  the  percentage  of  voting  rights  held  and  number  of  shares,  the 
percentage of capital held, most of the jurisdictions require the description of chain 
of control, the date of the transaction and the identity of the shareholder. 

In  the  US,  the  sources  of  funding  of  the  investor  for  the  acquisition  must  be 
disclosed, which, in some cases, may provide useful information about short term or 
long  term  investment  strategy  of  the  holder  (short  term  active  investors  are  often 
highly leveraged). The US system also requires the disclosure of the purpose of the 
acquisition420, including any plans or proposals of the acquirer for future purchases 
or sales of issuer’s stock or for any changes in the issuer’s management or board of 
directors  as  well  as  the  filing  of  supporting  documents  (such  as  contracts)  which 
allow  almost  simultaneous  verification  of  the  accuracy  of  the  statements  made  by 
investors.  

In  China,  in  the  standard  declaration  the  investor  must  notify  purposes  for 
shareholding,  whether  the  investor  and  concerted  parties  intend  to  continuously 
increase  their  equities  in  the  listed  company  within  the  next  12  months  and  brief 
information on the purchase and sale of the shares of the said company through the 
securities  transactions  at  the  stock  exchange  within  the  preceding  6  months  of  the 
change of equities. When investors become significant (holding of more than 20%), 
the  identity  of  controlling  shareholders  and  actual  controllers  of  the  investor  and 
concerted  parties,  the  structure  chart  on  their  equity  control  relationship  should  be 
disclosed,  the  prices,  necessary  capital,  sources  of  capital  or  other  payment 
arrangements  for  acquiring  relevant  shares,  as  well  as  other  information.  If  the 
investor  is  the  controlling  shareholder,  the  information  provided  in  the  notification 
must be verified by an independent third party. In this case, the investor needs to hire 
a financial consultant to issue verification opinions concerning the contents disclosed 
in the report on the change of equities.  

420 

It  should  be  noted  that  some  jurisdictions  within  the  EU  (such  as  Germany  and  France)  also  require 
disclosure of intent when certain thresholds are crossed. 

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ANNEX 14 – CORPORATE GOVERNANCE-RELATED AND NON-FINANCIAL DISCLOSURES 

14. 

Annex 

A) Corporate governance-related disclosures 

14.1. 

In  addition  to  the  disclosure  of  financial  reports  required  by  the  Transparency 
Directive, EU law also requires (or, as appropriate, recommends) listed companies to 
make  some  periodic  non-financial  (but  corporate  governance-related)  disclosures, 
generally in connection with the annual financial report. This relates in particular to: 
(i)  the  Corporate  Governance  Statement;  (ii)  the  Report  under  Article  10  of  the 
Takeover  Bids  Directive  (when  not  included  into  the  Corporate  Governance 
Statement); (iii) the disclosures related to the remuneration policy of the company; or 
(iv) the disclosures connected to the independence of directors. 

14.2. 

The Corporate Governance Statement421: must contain:  

–  "(a)  a  reference  to:(i)  the  corporate  governance  code  to  which  the  company  is 
subject, and/or (ii) the corporate governance code which the company may have 
voluntarily  decided  to  apply,  and/or  (iii)  all  relevant  information  about  the 
corporate  governance  practices  applied  beyond  the  requirements  under  national 
law.  Where  points  (i)  and  (ii)  apply,  the  company  shall  also  indicate  where  the 
relevant texts are publicly available; where point (iii) applies, the company shall 
make its corporate governance practices publicly available; 

–  (b)  to  the  extent  to  which  a  company,  in  accordance  with  national  law,  departs 
from  a  corporate  governance  code  referred  to  under  points  (a)(i)  or  (ii),  an 
explanation by the company as to which parts of the corporate governance code it 
departs from and the reasons for doing so. Where the company has decided not to 
apply  any  provisions  of  a  corporate  governance  code  referred  to  under  points 
(a)(i) or (ii), it shall explain its reasons for doing so; 

–  (c)  a  description  of  the  main  features  of  the  company's  internal  control  and  risk 

management systems in relation to the financial reporting process; 

–  (d)  the  information  required  by  Article  10(1),  points  (c),  (d),  (f),  (h)  and  (i)  of 
Directive 2004/25/EC of the European Parliament and of the Council of 21 April 
2004 on takeover bids, where the company is subject to that Directive; 

–  (e)  unless  the  information  is  already  fully  provided  for  in  national  laws  or 
regulations,  the  operation  of  the  shareholder  meeting  and  its  key  powers,  and  a 
description of shareholders’ rights and how they can be exercised; 

–  (f)  the  composition  and  operation  of  the  administrative,  management  and 

supervisory bodies and their committees." 

421 

Article 46a of the 4th Company Law Directive. 

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Depending  on  national  legislation,  the  Corporate  Governance  Statement  may  be 
included in the annual report or be a separate report (but published together with the 
annual report).  

A recent external study conducted for the Commission provides an overview of the 
various  monitoring  and  enforcement  mechanisms  in  the  Member  States  of  the 
European Union concerning corporate governance rules that are laid down in codes 
of corporate  governance. It  assesses  the  level of compliance of companies with the 
provisions of corporate governance codes and examines the availability and quality 
of explanations for deviations from these codes for a sample of 270 listed companies 
from  18  Member  States.  Two  surveys  were  conducted  in  the  framework  of  this 
Study.  They  aimed  at  evaluating  the  perception  of  corporate  governance  codes  by 
director institutes and business associations on the one side, and EU shareholders on 
the  other  side.  On  this  basis,  the  Study  evaluates  the  effectiveness  of  the  different 
monitoring  and  enforcement  systems  and  presents  suggestions  to  improve  their 
effectiveness422. 

14.3.  Article 10 of the Takeover Bids Directive requires disclosure by issuers of shares of 
some corporate governance related information, such as: the structure of their capital, 
restrictions on the transfer of securities, significant direct and indirect shareholdings, 
agreements between shareholders, powers of board members, etc.  

14.4.  Concerning 

the  company423, 

the  remuneration  policy  of 

the  Commission 
Recommendation  2004/913/EC424  recommends  that  listed  companies  disclose  a 
statement  of  the  remuneration  policy  of  the  company,  as  part  of  a  remuneration 
report or the annual report, and publish the statement on its website. The statement 
should  focus  on  the  structure  of  directors´  remuneration  policy  for  the  following 
financial  year  and  contain  an  overview  of  the  implementation  of  the  remuneration 
policy in the previous financial year. A number of elements, such as information on 
variable  remuneration,  performance  criteria  and 
termination  payments,  are 
recommended  to  be  included  in  the  statement.  It  is  also  recommended  to  disclose 
information  on  the  decision  making  process  as  regards  the  remuneration  policy, 
including 
listed 
companies  should  disclose  the  total  remuneration  and  other  benefits  granted  to 
individual  directors  in  detail  in  the  annual  accounts  or  the  remuneration  report.  In 
this  respect,  a  number  of  possible  remuneration  elements,  such  as  bonuses, 
termination  payments  or  share  based  remuneration,  are  recommended  to  be 
disclosed.  Commission  Recommendation  2009/385/EC425,  which  complements  the 
abovementioned  Recommendation,  contains  additional  elements  that  should  be 
included  in  the  remuneration  statement,  such  as  information  on  long  term 
performance  criteria,  methods  applied  to  determine  whether  performance  criteria 

the  Remuneration  Committee.  Furthermore, 

information  on 

422 
423 
424 

425 

Riskmetrics (2009).  
On this issue, see also European Corporate Governance Forum (March 2009b). 
Commission Recommendation 2004/913/EC of 14 December 2004 fostering an appropriate regime for 
the remuneration of directors of listed companies, OJ L 385, 29.12.2004, p. 55. Available at: 
http://ec.europa.eu/internal_market/company/directors-remun/index_en.htm  
Commission  Recommendation  2009/385/EC  of  30  April  2009  complementing  Recommendations 
2004/913/EC  and  2005/162/EC  as  regards  the  regime  for  the  remuneration  of  directors  of  listed 
companies, OJ L 120, 15.5.2009, p. 28. See also European Commission (April 2009). 

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have  been  fulfilled  and  deferment  and  vesting  periods  for  variable  and  share-based 
remuneration. 

14.5.  Regarding 

the 

independence  of  directors,  Commission  Recommendation 
2005/162/EC  recommends  that  the  board  (of  listed  companies)  makes  public  "at 
least once a year (as part of the information disclosed by the company annually on 
its  corporate  governance  structures  and  practices)  adequate  information  about  its 
internal  organisation  and  the  procedures  applicable  to  its  activities,  including  an 
indication of the extent to which the self-evaluation performed by the (supervisory) 
board has  lead to any material  change".  It also recommends that  the (supervisory) 
board should ensure that shareholders are properly informed as regards the affairs of 
the  company,  its  strategic  approach,  and  the  management  of  risks  and  conflicts  of 
interest426. 

14.6. 

The  issue  has  been  raised  as  to  whether  these  disclosure  requirements  should  be 
integrated into the Transparency Directive regime.  

14.7. 

Some of the possible consequences of such integration could, inter alia, be:  

–  (i)  facilitating 

listed  companies'  compliance  with  all  periodic  disclosure 
obligations,  including  through  the  full  application  of  the  home  Member  State 
principle of the Transparency Directive; or 

–  (ii) providing more clarity on the relation between such disclosures and the annual 

financial report427.  

B) Other non-financial disclosures 

14.8.  Disclosures  of  non-financial  character  made  by  listed  companies  in  connection  to 
Environmental, Social and Governance (ESG) issues428 also appear as an important 
area of debate.  

14.9. 

There are some related provisions in EU law. For instance, Article 46(1)(b) of the 4th 
Company  Law  Directive  requires  since  1  January  2005  companies  to  include 
information relating to environmental and employee matters in their annual report to 
the  extent  necessary  for  an  understanding  of  the  company's  development, 
performance  or  position.  Considering  the  additional  administrative  burden  such 
reporting may place on companies of certain size, Member States have the option to 
exempt  small-  and  medium  sized  companies  from  those  provisions.  Similar  non-

426 

427 
428 

p. 

51. 

See 

particular 

Commission  Recommendation  2005/162/EC  of  15  February  2005  on  the  role  of  non-executive  or 
supervisory directors of listed companies and on the committees of the (supervisory) board, OJ L 52, 
25.2.2005, 
at: 
and 
in 
http://ec.europa.eu/internal_market/company/independence/index_en.htm  
This could also facilitate some content harmonisation of these reports (see also §17) of this Paper. 
There is neither a precise definition of ESG for regulatory purposes, nor a clear delineation of its scope. 
It  appears  nevertheless  that  ESG  disclosures  would  fit  within  the  larger  debate  on  Corporate  Social 
Responsibility  (CSR).  CSR  has  been  defined  by  the  Commission  as  "a  concept  whereby  companies 
integrate social and environmental concerns in their business operations and in their interaction with 
their  stakeholders  on  a  voluntary  basis."  For  more  information  on  CSR,  see  European  Commission 
(March 2006). 

Available 

9.2. 

9.1 

§§ 

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financial reporting rules apply in relation to the consolidated annual reports429. The 
provisions  concerning  non-financial  disclosures  are  consistent  with  Commission 
Recommendation  2001/453/EC430  dealing  with  environmental  issues  in  companies' 
financial  reports.  Some  Member  States  have  ESG  disclosure  requirements  that  go 
significantly beyond the requirements of the 4th Company Law Directive431. 

14.10.  A  number  of  stakeholders  (non-governmental  organisations,  some 

investor 
organisations, some individual enterprises)432, as well as the European Parliament433 
and  some  Member  States  governments,  are  regularly  requesting  to  include  further 
provisions  regarding  ESG  disclosures  in  EU  legislation  applying,  at  least,  to  listed 
companies. They call for harmonisation and propose to put a European framework of 
non-financial  reporting  in  place.  Some  would  favour  such  a  framework  to  become 
mandatory and/or being integrated into the financial reports of companies.  

14.11.  Better and more widespread disclosure of ESG information could potentially: help to 
improve  the  accountability  of  business;  help  enterprises  themselves  to  better 
integrate sustainability issues into operations and strategy; and contribute to a more 
efficient allocation of capital and to the reduction of systemic risks. 

14.12.  The  European  Commission  has  recently  hosted  a  series  of  multistakeholder 
workshops  on  ESG  disclosure434.  Stakeholders  frequently  state  the  need  for  ESG 
disclosure to be: comparable (between companies of the same sector and over time); 
material  (relevant  to  the  particular  circumstances  and  strategy  of  the  individual 
company);  credible  and  accurate  (so  probably  assured  by  a  3rd  party  or  subject  to 
scrutiny  by  stakeholders);  forward-looking  (so  addressing  future  risks  and 
opportunities);  and  cost  effective  (so  avoiding  unnecessary  costs  falling  on 
enterprises). Much ESG disclosure is currently not perceived to correspond to these 
characteristics. Some non-governmental organisations also stress the need for a legal 
“right  to  know”,  allowing  communities  potentially  affected  by  actual  or  future 
company activities to access relevant information on demand. Employers federations 
argue that a “one-size-fits-all” framework for ESG disclosure should not be imposed 
on enterprises.  

14.13.  There is on-going work regarding non-financial reporting at different levels, such as 
the  Global  Reporting  Initiative  (GRI),  the  draft  ISO  26000  standard  on  social 
responsibility,  the  OECD  guidelines  for  Multinational  Enterprises,  the  UN  Global 
Compact, the Association of Chartered Certified Accountants (ACCA) Guide to Best 
Practice  in  Environmental,  Social  and  Sustainability  Reporting,  the  European 

429 
430 

431 

432 

433 
434 

See Article 36 (1) of the 7th Company Law Directive. 
European  Commission  Recommendation  2001/453  of  30  May  2001 on  the  recognition,  measurement 
and disclosure of environmental issues in the annual accounts and annual reports of companies, OJ L 
156, 13/06/2001, p.33. 
The French Loi sur les Nouvelles Régulations Economiques (2001) requires public listed companies to 
report against a set of social and sustainability issues. In December 2008 Denmark passed a law making 
it  mandatory, on  a  comply  or  explain basis,  for  the  1000 largest  Danish  enterprises,  listed  companies 
and state-owned enterprises to report on corporate social responsibility in their annual reports.  
E.g.  European  Coalition  for  Corporate  Justice  (ECCJ),  European  Sustainable  Investment  Forum 
(Eurosif), European Federation of Financial Analysts Societies (EFFAS). 
European Parliament (March 2007), §27. 
See 
here: 
discussions 
business/corporate-social-responsibility/reporting-disclosure/swedish-presidency/index_en.htm  

http://ec.europa.eu/enterprise/policies/sustainable-

summaries 

of 

EN 

106 

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Federation  of  Financial  Analysts  Societies  (EFFAS),  and  the  EU  Eco-Management 
and Audit Scheme (EMAS) in addition to country-level guidelines and obligations in 
place.  

14.14.  There  is  growing  interest  in  the  concept  of  integrated  reporting  financial  and  non-
financial  reporting435.  An  International  Connected  Reporting  Committee  (ICRC)  is 
due to be established by the end of 2010, to oversee the development of a connected 
and integrated reporting model that covers financial and sustainability information.  

14.15.  TheTransparency Directive could be an appropriate vehicle to address, with regard to 
listed  companies,  some  of  the  perceived  short-comings  of  current  ESG  disclosure 
rules and practice.  

14.16.  A specific issue concerns Recital 14 of the Transparency Directive, which contains 
an  indirect  reference  to  this  type  of  disclosure.  This  recital  states  that  the  "home 
Member State should encourage issuers whose shares are admitted to trading on a 
regulated  market  and  whose  principal  activities  lie  in  the  extractive  industry  to 
disclose  payments  to  governments  in  their  annual  financial  report.  The  home 
Member  State  should  also  encourage  an  increase  in  the  transparency  of  such 
payments within the framework established at various international financial fora." 
The  main  objective  of  such  disclosure  is  to  contribute  to  the  transparency  of 
budgetary  resources  in  developing  countries  which  depend  on  the  exploitation  of 
natural resources. 

14.17.  So far, none of the EU Member State has transposed the recommendation of recital 
14 into national binding legislation. Some of the issuers concerned by recital 14 are 
voluntarily  reporting  on  payments  to  governments  under  certain  circumstances. 
Cooperation between issuers and governments  is taking place in some international 
fora such as the Extractive Industries Transparency Initiative436.  

435 
436 

See Eccles & Krzus (2010) 
www.eiti.org  

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ANNEX 15 – ACCESS TO AND STORAGE OF INFORMATION ON LISTED COMPANIES 

15. 

Annex 

15.1. 

This Annex: 

•  A)  introduces  the  EU  legislative  framework  concerning  the  information  about 

listed companies which should remain available or disclosed to the public; 

•  B) explains the vision of the Transparency Directive regarding access to regulated 

information and how such vision has been implemented; 

•  C)  describes  the  first  steps  taken  towards  the  interconnection  of  Officially 

Appointed Storage Mechanisms (OASMs);  

•  D) provides a comparison with the third country systems; 

•  E) presents the issues for further reflection in terms of enhanced interconnection 

(E1) and common input formats (E2); and 

•  F) explains the parallel process on the interconnection of business registries.  

A) Relevant information about listed companies available or disclosed to the public 

15.2.  Companies whose securities are listed in EU regulated markets are subject to several 
disclosure requirements under EU law (as well as under national law not necessarily 
connected  to  EU  law).  These  obligations  usually  require  that  disclosed  information 
remain available to the public or to interested parties. However, the way in which the 
information should remain available is not fully harmonised: 

–  The 1st and 11th Company Law Directives (which apply also to non-listed limited 
companies)  require  companies  to  file  certain  documents  and  particulars  (such  as 
annual  accounts,  statutes/articles  of  associations  etc.)  with  the  business  (or 
commercial) registries; 

–  The  Shareholders  Rights  Directive  (which  applies  only  to  listed  companies) 
requires  listed  companies  to  communicate  certain  information  (essentially  in 
relation to the organisation of general meetings) to shareholders and to keep such 
information  available  in  their  websites.  This  directive  is  partially  linked  to 
Articles 17 and 18 in the Transparency Directive; 

–  The  Directive  on  Takeover  Bids  foresees  (Article  8)  that  the  bid  documents 

should be "available" to shareholders but it is silent on the means; 

–  The Prospectus Directive requires that the prospectuses are available to the public. 
Different means are foreseen (as alternatives): newspapers, printed form available 
at  the  premises  of  the  issuer  or  the  regulated  market;  issuer's  website  (and 
financial intermediaries' websites); website of the regulated market; or website of 
the competent authority; 

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–  The Market Abuse Directive (Article 6(2)) requires issuers to, without prejudice 
to the measures taken to comply with the obligation to inform the public of inside 
information,  post  on  their  Internet  sites  all  inside  information  that  they  are 
required to disclose publicly. 

–  The  Transparency  Directive  (Article  21)  requires  that  'regulated  information' 
(essentially,  disclosures  on  major  holdings,  on  financial  reporting  and  certain 
disclosures  pursuant  to  the  Market  Abuse  Directive)  is  filed  with  a  registry  (so-
called  "storage  mechanism")  where  it  would  remain  available  to  market 
participants. 

15.3. 

The resulting situation is not attractive for users of financial information which need 
to produce quality financial research. The Transparency Directive has been a step in 
facilitating access to financial information, and recognised as such. Users of financial 
information surveyed in the External Study believe that the Directive has improved 
or  not  changed  the  quality  of  information  necessary  to  produce  quality  financial 
research (although some financial analysts are of the opinion that the quality of this 
research has declined437.  

15.4.  However, easing access for users of information would require additional steps, such 
as establishing (at a minimum) a single action access point to disclosed information, 
comprehensive databases, electronic filing with straight through processing facilities 
and harmonisation of input standards so as to make information comparable. This is 
not yet achieved today. 

B) The vision of the Directive on access to regulated information and its implementation 

B1) Immediate access to regulated information: dissemination 

15.5.  Concerning immediate access to regulated information, Article 21(1) of the Directive 
requires issuers to disclose regulated information in a manner ensuring fast access to 
such  information  on  a  non-discriminatory  basis  and  without  charging  investors  any 
specific  cost  for  providing  such  information.  According  to  the  Directive,  the  home 
Member  State  shall  require  the  issuer  to  use  such  media438  as  may  reasonably  be 

437 
438 

Mazars (2009), section 4.3.2.4. 
Recital  8  of  the  Directive  clarifies  that  the  Home  Member  State  has  the  right  to  request  the  issuer  to 
publish parts of or all regulated information through newspapers.  

EN 

109 

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relied  upon  for  the  effective  dissemination  of  information  to  the  public  throughout 
the  EU,  but  may  not  impose  an  obligation  to  use  only  media  whose  operators  are 
established in its territory. Article 12 of Directive 2007/14/EC set out some minimum 
technical standards in this regard. 

15.6. 

The  external  survey  conducted  for  the  Commission  shows  that  the  dissemination 
rules  of  the  Directive  requiring  the  pushing  of  regulated  information  to  media  are 
positively perceived439.  

Interestingly,  this  external  study  outlines  that  even  if  practices  are  very  diverse  in 
Member States, the way companies comply with the obligation to disseminate their 
Regulated  information  has  not  radically  changed  with  the  Directive440:  70%  of 
stakeholders using the information believe that issuers use the appropriate media to 
disseminate  the  financial  information  that  they  produce441;  45%  do  not  believe  that 
the Directive has changed the way financial information is made public442 and 50% 
of  users  of  financial  information  feel  that  the  information  easily  reaches  the 
investor443.  

15.7. 

15.8. 

The study outlines nevertheless that no enforcement by supervisors of the obligation 
to publish on an "EU wide" basis is happening444. 

The  poor  cross-border  dissemination  of  regulated  information  by  smaller  listed 
companies and the low interest shown by analysts and investors in such information 
(and a fortiori in those companies) remains, however, an issue (the so-called "black 
hole" problem445).  

While  large  investors  seem  to  believe  that  the  Directive  has  facilitated  access  to 
information  disclosed  by  smaller  listed  companies,  many  smaller  listed  companies 
generally  complaint  about  the  lack  of  interest  by  foreign  investors:  investors  and 
analysts  are  considered  to  concentrate  on  major  companies  and  the  cross-border 

439 
440 

441 
442 
443 
444 

445 

to  send  regulated 

issuers,  with  only  one  “click”, 

See generally Mazars (2009), section 4.3.  
According  to  Mazars,  in  practice,  issuers  continue  to  use  data  disseminators  to  ensure  a  wide 
dissemination of the regulated information. Some Member States have introduced a formal procedure to 
approve data disseminators and check their efficiency and integrity: (UK, DE). Others have put in place 
electronic  systems  allowing 
information 
simultaneously to the Supervisor, the Exchange and a data disseminator that will spread it to the press: 
(PL,  PT  and  ES).  In  PT  and  ES  the  Supervisor  acts  as  a  disseminator.  In  PL,  the  information  is  also 
automatically  stored.  But  all  in  all,  for  the  dissemination  of  regulated  information,  the  means  put  in 
place for issuers to comply with the requirement of the Directive have not changed and have no induced 
new costs. See Mazars (2009), section 4.3.1.3. 
Ibid., section 4.3.1.2. 
Ibid., section 4.3.1.1. 
Ibid., section 4.3.2.1. 
Ibid., section 4.3.1.3. It should be noted that in some countries (such as PT or ES) supervisors have an 
active role in disseminating regulated information. According to this study, in general supervisors in the 
EU  confirmed  their  reticence  to  play  a  role  in  disseminating  Regulated  Information:  they  considered 
themselves not to be ill equipped to spread information. Exchanges have expressed the same view but 
they are more prepared to play a role in giving access, or even storing, Regulated Information. However 
major  exchanges  have  recently  sold  their  specialised  subsidiaries  offering  dissemination  storing  and 
“added  value”  information  services  (NYSE  Euronext  and  Deutsche  Börse).  Both  categories  of 
stakeholders  would  clearly  prefer  that  the  dissemination  of  Regulated  Information  be  left  to  market 
forces.  
Mazars (2009), sections 4.3.2.5 and 4.3.2.6.  

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visibility  of  smaller  listed  companies  is  poor.  The  external  study  outlines  that 
“market players seem to be in a “catch 22” situation: SMEs regret the low level of 
cross-border interest of Analysts and Investors and therefore are reluctant to spend 
money  to  ensure  wider  dissemination  (translation  into  English  in  particular).  On 
their  side,  analysts  and  investors  believe  that  they  do  not  receive  sufficient 
information from non domestic SMEs, and therefore are reluctant to invest in those 
companies.”446 

The solution for the so-called “black hole” problem is not necessarily legislative, but 
improvements  on  the  mechanisms  to  access  regulated  information  over  time  could 
perhaps  be  explored  as  a  gateway  to  get  interest  into  smaller  listed  companies  (see 
below, section E of this Annex) 

15.9. 

It  has  also  been  outlined  that  some  Member  States  still  require  a  paper-based 
publication  of  some  regulated  information  in  newspapers,  which  would  go  against 
the  modernisation  spirit  of  the  Directive447.  The  cost  of  publication  of  regulated 
information in printed press is also invoked as a particular problem for smaller listed 
companies. They expressed the view that posting information on their website should 
be sufficient to comply with the dissemination obligation of the Directive448. 

B2) Access to regulated information over time: storage 

15.10.  Concerning  access  to  regulated  information  over  time,  the  Transparency  Directive 
has established a specific regime providing for a publicly accessible database on 
disclosed  information.  Article  21(2)  of  the  Transparency  Directive  requires  each 
Member State to officially appoint at least one "mechanism for the central storage of 
regulated information"449. Unlike the US model (see sub-section D1 of this Annex) 
the  Directive  tries  to  establish  some  centralisation  at  Member  State  level  not  at 
European  level.  A  certain  centralisation  is  also  recommended  by  IOSCO450.  The 
Directive is, however, not prescriptive as to the practical solutions. 

–  Designation of OASMs. OASMs storing regulated financial information are to be 
appointed  nationally  by  Member  States.  There  should  be  at  least  one  OASM 
storing this information at the Member State level. Legally speaking, this does not 
preclude different Member States from appointing a common OASM.  

–  How is the storage to be organised in practice? The Directive is not prescriptive 
on  this  issue.  It  simply  states  that  the  OASM  should  comply  with  minimum 
quality standards of security, certainty as to the information source, time recording 
and easy access by end users. The Directive foresees as well the possibility for the 

446 
447 
448 
449 

450 

Ibid, section 4.3.2.5. 
Mazars (2009), section 4.3.1.1. However, see also recital 8 of the Transparency Directive. 
Mazars (2009), section 4.3.1.1. 
Before  the  enactment  of  the  Directive,  regulated  financial  information  was  already  (usually  partially) 
stored in many Member States and made available to the public, either by the Competent Authorities 
themselves, by Stock Exchanges, by business registries (e.g. annual accounts) or by others (issuers or 
private service providers). 
IOSCO (February 2010), p.25. 

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Commission to adopt implementing measures specifying the minimum standards 
for the central storage of regulated information451.  

–  Who should be in charge of operating the OASM? The Directive is silent on this. 
It  is  a  national  decision.  It  can  be  a  public  authority  (such  as  supervisors)  or  a 
private  party  (such  as  the  stock  exchange),  provided  it  has  been  officially 
appointed.  In  their  daily  work,  OASMs  will  be  supervised  by  the  national 
Competent Authorities described in Article 24 of the Directive.  

–  Who  should  pay  for  the  cost  of  the  OASM?  There  is  no  prescription  in  the 
Directive  as  to  the  cost  model,  but  recital  25  points  out  that  "information  which 
has  been  disseminated  should  be  available  in  the  home  Member  State  in  a 
centralised  way  allowing  a  European  network  to  be  built  up,  accessible  at 
affordable prices for retail investors […]" [emphasis added] 

15.11.  One  advantage  of  the  Directive  model  is  that  if  the  development  of  OASMs  is 
successful,  it  would  allow  investors  to  have  better  access  to  information  (to  be 
disclosed  under  the  Directive  obligations)  on  issuers,  including  on  small  issuers.  It 
would also allow for further centralisation of the storage obligations, so as to find all 
information on one company in a single place. 

15.12.  Among the disadvantages of the Directive model is the risk that the OASMs adopt 
divergent  incompatible  standards  and  formats  that  would  make  further  integration 
cumbersome and lengthy, preventing the users from:  

–  accessing business information in a timely fashion, in the language of choice; 

–  processing business information automatically, in a computer readable format; 

–  effective  use  of  the  European  regulated  information  for  cross-border  purposes, 

either of regulatory or business nature. 

15.13.  Member States have implemented Article 21(2) in different manners. In most of 
the  Member  States  either  the  competent  authority  (BE,  BG,  DK,  EE,  ES,  HU,  LV, 
NL,  PL,  PT,  RO,  SE,  UK)  or  the  stock  exchange452  (CY,  EL,  FI,  IE,  IT,  LT,  LU, 
MT) has been appointed to the national OASM. In three Member States, some other 
body  has  been  appointed  as  OASM:  AT  (Oesterreichische  Kontrollbank  AG);  DE 
(Business  register);  and  FR  (Official  Journal).  Member  States  have  not  appointed 
common OASMs but the Finnish, Icelandic and Lithuanian OASMs  are in practice 
operated in the same database453. In some Member States, the appointed OASM is an 
interim solution. 

Table 18.1 – Links to national OASMs 

Country 

Link to OASM 

451 

452 
453 

Cf.  Article  21(4).  The  Commission  addressed  the  content  standards  in  its  Recommendation  on  the 
network (see section C of this Annex). 
Also in Iceland and Norway. 
This  is due  to the  fact  that  the  local  stock  exchanges belonging  to  the  NasdaqOMX group have  been 
appointed  as  national  OASMs.  Even  though  the  legal  responsibility  lies  within  each  national  stock 
exchange, the OASM system is operated at the group level. 

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Austria 

Belgium 

Bulgaria 

Cyprus 

Czech 
Republic 
Denmark 

Estonia 

Finland 

France 

Germany 

Greece 

Hungary 

Ireland 

Italy 

Latvia 

Lithuania 

Luxembourg 

Malta 

The 
Netherlands 
Poland 

Portugal 

Romania 

Slovak 
Republic 
Slovenia 

Spain 

Sweden 

United 
Kingdom 
Source: CESR 

OeKB (central securities depository) 
http://issuerinfo.oekb.at/startpage.html 
Interim solution 
http://www.cbfa.be/eng/gv/info/links/dBeginFrmLinksWebsite.asp  
Competent authority 
http://www3.fsc.bg/eregnews/index.jsp?action 
Stock exchange 
http://www.cse.com.cy/en/Announcements/Announce_Index.asp 
Competent authority 

Competent authority 
http://oasm.dfsa.dk/ 
Competent authority 
http://www.baltic.omxnordicexchange.com  
Stock exchange 
http://www.oam.fi 
Official Journal 
http://www.info-financiere.fr 
Company Register 
http://www.unternehmensregister.de 
Stock exchange 
http://www.athex.gr 
Competent authority 
http://www.kozzetetelek.hu 
Stock exchange 
http://www.ise.ie/app/announcementList.asp 
Stock exchange 
http://www.borsaitaliana.it 
Competent authority 
http://www.oricgs.lv 
Stock exchange 
http://www.crib.lt 
Stock exchange 
http://www.bourse.lu 
Stock exchange 
http://www.borzamalta.com.mt/announcements/default.aspx 
Competent authority 
http://www.afm.nl/publicdatabase 
Competent authority 
http://www.knf.gov.pl/rynek_kapitalowy/OAM/index.html 
Competent authority 
http://web3.cmvm.pt/english/sdi2004/emitentes/index.cfm 
Competent authority 
http://www.cnvmr.ro/InfoUtile/en/RapoarteEmitenti/RapoarteEmitenti.html 
Competent authority 

Stock exchange 
www.oam.si 
Competent authority 
http://www.cnmv.es/english/consultas/reg_ofi_ent_emisoras/reg_ofi_ent_emi_e.htm 
Competent authority 
https://fiappl.fi.se/FinansCentralen/search/Search.aspx 
Interim solution 
http://www.fsa.gov.uk/Pages/Doing/UKLA/RIS/FAQ/index.shtml#sip 

15.14.  The Directive also provides for implementing powers on issues closely connected to 
the  storage  of  regulated  information:  (i)  the  technical  conditions  under  which  a 

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published (annual or half-yearly) financial report is to remain available to the public 
for  5  years,  (including  the  possible  adaptation  of  the  five-year  period)454  and  (ii) 
filing  of  disclosed  regulated  information  with  the  competent  authority  in  the  home 
Member State by electronic means455. In both cases, an advanced storage mechanism 
could be a working reply to the problem.  

C) The interconnection of OASM 

C1) The Commission Recommendation as a first step 

15.15. 

In  addition  to  the  creation  of  national  OASMs,  the  Directive  encourages  the 
establishment  of  some  kind  of  networking  across  Member  States456:  (i)  electronic 
networks at national level linking OASMs to existing national business registers and 
(ii) the linkage of those national electronic networks at European level. However, the 
Directive  is  neutral  as  regards  the  architecture  of  OASMs  and  it  does  not  directly 
make those networks compulsory.  

The aim of such an interlinked network(s) would be to provide a single action point 
(or  a  one  stop  shop)  for  investors  (and  other  interested  parties)  when  looking  for 
regulated  financial  information  on  listed  companies.  The  existence  of  such 
network(s)  would  also  facilitate  the  provision  of  added  value  services  to  investors 
(e.g. processed information, comparative information etc.). 

15.16. 

Implementing  powers  are  also  foreseen  for  the  Commission  in  this  regard,  after 
having reviewed the guidelines prepared by CESR on this issue457. 

15.17.  Upon request of the Commission, CESR prepared in 2005 a Progress Report458 on 
this issue. This Progress Report was followed by a Report on cost issues459 in 2006 
which provides estimates in relation to the cost of setting a national OASM and the 
cost of setting a European network of national OASMs. Finally, CESR delivered in 
later in 2006 a formal Advice on possible implementing measures on storage of 
regulated  information  and  filing  with  the  competent  authority460.  In  its  advice, 
CESR  (i)  presents  4  alternative  models  (A  to  D)  for  the  European  network  with  a 
varying degree of centralisation; (ii) suggests the minimum standards to be respected 
by  each  national  OASM;  (iii)  describes  the  funding  implications  of  setting  an 
operating national OASM; (iv) evaluates the role of the Competent Authority in the 
supervision of the OASM and in adapting the standards; and (v) provides an opinion 
in  relation  to  the  filing  of  regulated  information  by  electronic  means  with  the 
Competent Authorities. In its advice, CESR expressed a preference for the so-called 

454 

455 

456 
457 
458 
459 
460 

Cf. Articles 4(6) and 5(6). In addition to the OASMs required by Article 21(2) of the Directive, Articles 
4(1) and 5(1) require issuers to ensure that the annual financial report and half-yearly financial report 
remain available to the public for at least 5 years. In practice, issuers comply with this requirement by 
making such reports available through their website. It should be noted that other directives also require 
issuers to make some information available through their websites (see §15.2 of this Annex). 
Cf. Article 19(4). According to CESR (September 2008), in most Member States filing with the OASM 
is aligned with filing with the competent authority. See replies to questions 155-156. 
Cf. Article 22. 
Cf. Article 22(2). 
CESR (March 2005). 
CESR (April 2006). 
CESR (June 2006). 

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Model C, a simple network model. Model C would consist of a single interface for 
end users (e.g. a website) containing a central list of all issuers Under Model C, the 
pan-European  network  would  consist  of  a  common  single  interface  for  end  users 
(e.g.  a  website)  containing  a  central  list  of  all  EU  listed  companies  with,  for  each 
issuer, a hyperlink to the relevant storage system on which regulated information can 
be  found.  By  clicking  on  the  name  of  the  relevant  company,  the  user  would  be 
directed  to  the  site  of  the  relevant  storage  mechanism.  The  data  would  remain  at 
national level  and  the only  common  element would  be the list  of  listed companies. 
CESR  pushed  for  defining  the  possible  network  as  early  as  possible.  The  main 
argument  was  that  it  did  not  make  sense  to  create  isolated  national  storage 
mechanisms that would not be in a position to later interlink to each other. 

15.18.  Building on CESR advice, DG Internal Market and Services consulted the public 
on  this  issue  in  March  2007.  The  consultation  document461  contained:  (i)  draft 
minimum quality standards for the central storage and (ii) draft minimum conditions 
for  a  pan-European  network  of  national  central  storage  mechanisms.  Preliminary 
discussions with Member States within the European Securities Committee were also 
held: preference was expressed for continuing the work toward the development of a 
pan-European network of central storage mechanisms without limiting the flexibility 
of  the  national  mechanism  in  this  process  through  the  enactment  of  Commission's 
implementing measures on minimum quality standards. The issues of governance of 
a  pan-European  network  and  the  question  of  Information  and  Communication 
Technology  convergence  appeared  as  priority  issues  compared  to  the  quality 
standards. 

15.19.  As  a  result  the  Commission  adopted  on  11  October  2007  a  non-binding 
Recommendation462  on  the  network  of  national  mechanisms  storing  regulated 
information.  The  main  aim  of  the  Recommendation  was  to  give  support  to  work 
undertaken by CESR regarding the pan-European network and to its suggested way 
forward: the so-called Model C. Hence, this recommendation suggests that Member 
States should take steps to set up the network model proposed by CESR.  

15.20.  A  key  role  for  CESR  in  the  development  of  the  network  is  also  foreseen  in  the 
Commission  Recommendation.  CESR  has  set  up  an  initial  network  by  using 
CESR MiFID database463 on shares admitted to trading on EU regulated markets. In 
essence, by clicking on the shares' name displayed on that database, users are linked 
to  corresponding  OASM.  This  initial  network  only  includes  the  list  of  issuers  of 
shares,  but  not  of  other  securities.  While  this  is  a  practical  solution  in  the  interim 
phase, it does not meeting the expectations that both CESR's original advice and the 
Commission's recommendations created.  

461 
462 

463 

See http://ec.europa.eu/internal_market/securities/transparency/index_en.htm#storage  
Commission Recommendation 2007/657/EC of 11 October 2007 on the electronic network of officially 
appointed  mechanisms  for  the  central  storage  of  regulated  information  referred  to  in  Directive 
2004/109/EC of the European Parliament and of the Council, OJ L267, 12.10.2007, p.16. The text of 
the recommendation is available at: 
www.ec.europa.eu/internal_market/securities/transparency/index_en.htm 
http://mifiddatabase.cesr.eu.  

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15.21.  The  Commission  Recommendation  also  contains  suggestions464  on  minimum 
quality  standards  applicable  to  the  national  storage  mechanisms  that  would  form 
part of the network465.  

C2) The limited results so far and the need for an evolution 

information 

15.22.  Despite  this  Recommendation,  the  impact  of  the  Directive  rules  on  storage  of 
regulated 
to  historical 
information  on  listed  companies  on  a  pan-European  scale  has  not  been  simplified: 
interested  parties  need  to  go  through  27  different  OASMs466  and  the  electronic 
network interconnecting them is only at an initial stage with rather modest results so 
far.  

is  however  not  encouraging.  Access 

According to the External Study stakeholders do not see real changes in the storage 
of regulated information resulting from the application of the Directive467 and would 
use the companies' websites as primary source of information rather than the storage 
mechanism, although they would trust more the latter468. However, there is a certain 
(but  not  conclusive)  support  for  having  access  to  all  available  information  via  a 
single point of entry469. 

15.23.  These  limited  results  raise  the  question  as  to  whether  the  Directive  storage 
mechanisms, as currently designed, are able to fulfil  the  role of "gate" to  historical 
financial information on listed companies at pan-European level. 

464 

465 

466 

467 
468 

469 

Under Article 21 of the Directive, the Commission is legally empowered to adopt formal implementing 
measures  regarding  the  minimum  quality  standards.  However,  it  was  decided  to  link  such  minimum 
standards to the development of the network. As a result, it was preferred not to impose legally binding 
measures on the national storage mechanisms that would constrain the development of the network. 
According to CESR (September 2008), most of those Member States have implemented the European 
Commission’s recommendation either as mandatory or as recommendation. See replies to question 154. 
According  to Mazars  (2009),  stakeholders complaint  about  the  lack of harmonisation on  the practical 
functioning of these databases (see section 1.8.1 of that Study). 
Mazars (2009), section 4.4.2. 
Ibid.,  section  4.4.3.1.  At  the  same  time,  stakeholders  would  not  be  unhappy  with  the  national 
independent storage mechanisms. Ibid., section 4.4.2.2. 
Ibid., section 4.4.3.2. 

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15.24.  It  appears  that  there  is  need  for  an  evolution.  Indeed,  the  Commission 
Recommendation,  and  its  implementation  by  CESR  (Model  C),  was  seen  by  the 
Commission as a first step in achieving at least a single point of access to regulated 
information. The Commission envisaged in the Recommendation that the network of 
national  storage  mechanisms  should  be  further  developed  and  invited  CESR  to 
reflect on this (see below, section E of this Annex).  

15.25.  Positions  are,  however,  diverse.  The  External  Study470  outlines  that,  generally 
speaking,  stakeholders  believe  that  it  would  be  preferable  to  have  a  centrally 
maintained  EU  system  to  store  regulated  information  (63%  of  those  who  have 
expressed an opinion). Only industry associations are against it. The most supportive 
of  this  idea  are  the  users  of  financial  information  (Financial  Analysts,  Supervisors, 
Retail  and  Institutional  Investors).  A  majority  of  issuers  (41%)  of  shares  are  in 
favour of an EU central storage mechanism, in particular recently listed companies 
(48%). 

15.26.  The  support,  however,  is  not  equal  depending  on  the  category  of  stakeholder  or  its 
geographical origin471. During interviews, stakeholders commented on detail on the 
relevance of a central storage mechanism. Some even argue against a central system 
indicating that Retail Investors prefer to access to regulated information through the 
Internet  Home  page  of  listed  companies  and  that  Institutional  Investors  focus  more 
on “added value” data vendors. This being said, Financial Analysts, Supervisors and 
Issuers  favour  an  official  central  place  for  storage  that  would  be  a  central  access 
point for stored information. Whether this central point should be the regulator or a 
commercial entity is much debated472.  

470 
471 

472 

Ibid., section 4.4.3.6. 
An  EU  storage  mechanism  is  particularly  supported  by  stakeholders  in  Slovakia,  Romania,  Spain, 
France,  Luxembourg,  Poland,  Hungary,  Germany,  Austria  and  Italy.  Views  to  the  contrary  are 
expressed in Ireland, Sweden and the UK. 
An often mentioned point is that the business case of an OASM is not obvious (in some Member States 
there  are  no  applicants  to  become  an  OASM)  and  even  Exchanges  hesitate  to  apply.  Exchanges 
operating  on  several  member  States  also  criticise  the  lack  of  harmonisation  in  the  setting  up  of  an 
OASM. 

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Finally, whether the central storage mechanism should be at national or at EU level is 
much  discussed  and  the  views  are  mixed.  Even  for  a  central  EU  access  point,  the 
underlying  architecture  of  the  system  is  a  matter  for  debate  (Interconnection  of 
national OASM? Centralisation? Central access only?). 

15.27.  Confronted with all these complexities and believing that technological development 
with the Internet call for different solutions, some stakeholders propose a simpler and 
more  straightforward  idea:  imposing  minimum  standards  for  issuers  to  store 
Regulated  Information  on  their  website  and  inviting  the  users  of  financial 
information to use Internet search facilities to access the stored information473. This 
decentralisation would eliminate the storage mechanisms as such. 

15.28.  The External Study is favourable towards the enactment of a single action point for 
stored information, which remains close to the existing situation (Model C): a single 
EU  access  point  at  CESR  level  with  a  direct  Internet  link  to  a  compulsory  and 
harmonised section of the issuers’ website where the information would be stored474. 

D) For a comparison: how is information stored and made accessible in third countries?  

D1) United States 

15.29. 

In  the  US,  all  financial  information  filed  with  the  Securities  and  Exchanges 
Commission  (SEC)  remains  available  via  the  SEC’s  dedicated  storage  website 
(EDGAR) for an indefinite period475.  

15.30. 

In May 2008, after successfully implementing the XBRL Voluntary Filing Program 
the  US  SEC  published  a  proposed  ruling  in  which  it  phases-in  mandatory  use  of 
XBRL (interactive data) for all publicly traded companies filing corporate financial 
statements. SEC eventually decided in December 2008 to require public companies 
and  mutual  funds  to  use  interactive  data  for  financial  information.  For  public 
companies,  interactive  data  financial  reporting  will  occur  on  a  phased-in  schedule 
beginning next year. The largest companies who file using U.S. GAAP with a public 
float above $5 billion will be required to provide interactive data reports starting with 
their  first  quarterly  report  for  fiscal  periods  ending  on  or  after  15  June  2009.  This 
will  cover  approximately  500  companies.  The  remaining  companies  who  file  using 
U.S. GAAP will be required to file with interactive data on a phased-in schedule over 
the  next  two  years.  Companies  reporting  in  IFRS  issued  by  the  International 
Accounting Standards Board will be required to provide their interactive data reports 
starting with fiscal years ending on or after 15 June 2011.Companies will be able to 

473 

474 
475 

Storage of Regulated Information on the website of the issuer is already compulsory in several Member 
States. See also §15.2 of this Annex. In any event, stakeholders would already be using the companies’ 
websites as primary source of information. See Mazars (2009), section 4.4.3.1. 
Mazars (2009), Possible Improvement n°14. 
www.sec.gov/edgar.shtml  

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adopt interactive data earlier than their required start date. All U.S. public companies 
will  have  filed  interactive  data  financial  information  by  December  2011  for  use  by 
investors.  

15.31. 

In  June  2008,  US  SEC  announced  the  "21st  Century  Disclosure"  Initiative476  to 
fundamentally rethink the way companies  report and investors acquire information. 
This initiative has 3 phases: (1) the staff of SEC, led by Prof. Lutz, will prepare by 
end  2008  a  high-level  plan  to  help  SEC  to  make  the  transition  to  an  interactive 
company  file  system  based  on  XBRL;  (2)  a  Federal  Advisory  Committee  will  be 
established  in  early  2009.  This  Committee  should  review  the  high-level  plan  and 
make recommendations to SEC for implementing it; and (3) SEC would consider and 
begin acting on the Committee's recommendations. 

In  August  2008  the  Securities  and  Exchange  Commission  Chairman  unveiled  the 
successor  to  the  agency’s  1980s-era  EDGAR  database.  IDEA477–  the  new  system 
will give investors far faster and easier interactive access to key financial information 
about public companies and mutual funds. 

15.32.  According  to  the  External  Study478,  the  US  storage  mechanism  (EDGAR)  does  not 
seem  to  be  well  known  in  Europe.  Users  of  financial  information  (Financial 
Analysts,  Retail  and  Institutional  Investors)  are  most  familiar  withEDGAR  and, 
when they expressed an opinion, they favour the creation of a similar system in the 
EU. A majority of Supervisors having expressed an opinion believe that the national 
storage  mechanism  is  sufficient.  Within  Issuers  of  shares,  Top  and  Recently  listed 
companies are the most supportive of the creation of a system similar to EDGAR in 
the EU. 

D2) Other third countries 

15.33.  The  issue  as  to  whether  a  compulsory  system  of  central  storage  of  regulated 
information is required is addressed differently in the other third countries. Durations 

476 
477 
478 

www.sec.gov/disclosureinitiative  
http://idea.sec.gov/ 
Mazars (2009), section 4.4.3.5. 

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of storage may differ according to the type of required storage (for instance, with the 
issuer, the regulator or a regulator designated entity) and the type of document479. 

In  China,  all  the  disclosed  regulated  information  should  be  registered  at  the  stock  exchange  and 
reported  to  the  local  counterparts  of  CSRC.  The  investors  may  search  for  the  information  on  the 
website of the stock exchange, designated newspapers. Issuers must provide access to the documents 
on the premises of the companies and on websites designated by CSRC for public review indefinitely. 

In  Hong  Kong,  any  document  published  on  the  issuer’s  website  pursuant  to  the  listing  rulesof  the 
exchange remains available on the issuer’s website on a continuous basis for at least 5 years from the 
date of first publication. 

In  India,  all  companies  having  securities  listed  on  a  recognised  stock  exchange,  must  file  regulated 
information  with  EDIFAR  in  addition  to  the  physical  filing  with  the  said  exchanges  or  any  other 
platform as may be mandated by the securities and exchange board of India (SEBI) from time to time 
(EDIFAR  has  been  launched  by  SEBI  in  collaboration  with  the  National  Informatics  Centre).  In 
addition, on January 1, 2007, National Stock Exchange, Mumbai (NSE) and Bombay Stock Exchange, 
Mumbai (BSE) jointly launched a common portal for filing and dissemination of information, which 
is  jointly  owned,  managed  and  maintained  by  these  two  exchanges.  Since  its  launch,  the  portal  has 
become a single source to view information filed by companies listed with NSE and / or BSE. A listed 
company  would  be  required  to  file  its  submissions  through  this  portal  irrespective  of  the  stock 
exchange(s) on which it is listed and the information so filed can be viewed at this portal. 

In  Japan, disclosed  information  is physically  made  accessible  at  the  head  office of  the  issuer  and  is 
available  via  the  EDINET  system  (accessible  through  the  internet).  The  duration  of  availability 
depends on the type of documents. 

In  Switzerland,  the  SIX  Swiss  Exchange  provides  a  central  storage  system.  The  information  is 
available to the public for one or two years. 

15.34.  Concerning  XBRL,  there  have  been  also  interesting  developments  in  other 
jurisdictions than the USA. Financial  institutions have been reporting monthly  data 
in  XBRL  format  to  the  Bank  of  Japan  since  February  2006.  The  Japanese  FSA 
successfully  completed  migration  of  its  regulated  information  to  an  XBRL-based 
system (EDINET) in March 2008 and is already requiring XBRL-based reports. 

A  number  of  Asian  stock  exchanges  (Tokyo,  Korea,  Shanghai)  are  introducing 
XBRL-based  reporting  by  their  listed  companies  during  the  course  of  2008. 
Singapore has a comprehensive XBRL project to allow all companies to file only one 
set  of  financial  statements  that  can  be  used  by  several  government  agencies, 
including the tax authorities. Also the government of Australia have taken a broader 
approach  by  creating  national  XBRL  infrastructure  to  use  common  information 
formats for a number of administrations and organisations in this country. 

E)  Issues  for  further  reflection:  future  scenarios  for  the  interconnection  of  storage 
mechanisms 

15.35.  Considering  the  limitations  of  Model  C  described  above,  the  Commission  invited 
CESR  to  draw  up,  by  30  September  2010  appropriate  guidelines  for  the  future 
development  of  the  electronic  network  beyond  Model  C.  According  to  the 

479 

See Mazars (2009), section 6.4.1. 

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Commission Recommendation 2007/656/EC480, those guidelines should in particular 
examine the feasibility, including a cost/benefit analysis to require: 

–  "(a)  the  use,  in  all  the  access  points  to  the  electronic  network,  of  harmonised 
searching  facilities  based  on  a  set  of  common  search  keys  and  reference  data 
items, thus harmonising the methods of classifying and identifying the information 
to store; 

–  (b)  the  use  of  common  input  formats  and  standards  for  the  submission  of 

regulated information to the storage mechanisms; 

–  (c)  the  use  by  the  storage  mechanism  of  a  common  list  of  types  of  regulated 

information; 

–  (d)  the  technical  interconnection  with  the  electronic  network  developed  by  the 

national company registries covered by the Directive 68/151/EEC; and 

–  (e)  entrusting  the  supervision  of  the  services  provided  by  any  legal  entity 
operating  the  common  elements  of  the  electronic  network  to  a  single  body 
composed of representatives of the competent authorities referred to in Article 24 
of Directive 2004/109/EC." 

15.36. 

Indeed,  the  main  limitations  of  the  Model  C  network  is  that  it  does  not  allow 
interested parties to search in the different OASMs with a single research engine (see 
below,  sub-section  E1)  and  does  not  harmonise  the  methodology  to  store 
information, e.g. by using common input formats (see below, sub-section E2). Also, 
the  problem  of  governance  remains:  who  will  take  care  of  the  developing  the 
network (see bellow, sub-section E3). Finally the question of the link to the business 
registries is still unsolved (see below, sub-section F).  

15.37. 

In this context, there seems to be demand for better access to reference data481 on 
securities.  For  instance,  the  European  Central  Bank  runs  a  "centralised  securities 
database"  which  could  have  the  potential  to  integrate  regulated  information  on 
issues482. Interlinking existing (or future) databases on securities reference data to the 
OASMs483 would increase transparency in the market.  

E1) The harmonised searching facilities 

15.38.  The  Commission  Recommendation  expects  CESR  to  examine  the  feasibility  of 
establishing, in all the access points to the electronic network, harmonised searching 
facilities  based  on  a  set  of  common  search  keys  and  reference  data  items.  These 
harmonised searching facilities should at least provide for the possibility of making: 

–  searches  using  common  category  labels  attached  to  the  regulated  financial 
information when filed with the storage mechanisms, such as: issuer name; date of 

480 
481 
482 
483 

Cf. §22 of the Commission Recommendation 2007/657/EC.  
Reference data should be understood as data describing the properties and behaviour of a security. 
See European Central Bank (February 2010).  
For instance, in a similar manner to the link between national OASMs and CESR Mifid database.  

EN 

121 

   EN 

 
                                                 
filing;  country  of  issuer;  title  of  document;  industry/branch  of  trade  and  type  of 
regulated information; 

–  dynamic or chain searches; 

–  multiple-country searches with a single request. 

15.39.  The  harmonised  searching  facilities  would  require  harmonising  the  methods  of 
classifying  and  identifying  the  information  to  storage.  In  particular,  common  lists 
with regard to industry/branch of trade and type of regulated information would be 
needed.  Interlinking  databases  on  securities  reference  data  with  OASMs  searching 
facilities would increase transparency in the market (see §15.37 above). 

The  common  list  of  types  of  regulated  information  would  facilitate  uniform 
classification of filed information and EU-wide searches of information on the basis 
of type of information. While the list would need to be common, this, in itself, would 
not  require  full  harmonisation  of  the  definition  of  regulated  information  in  the 
different Member States. The list would rather be a collection of anything which is 
considered to be regulated information under national law.  

E2) Common input format: XBRL and standard forms 

15.40.  The  operation  of  the  network  and  the  future  use  of  the  information  stored  would 
largely be facilitated if common input formats and standards are requested at the time 
of  filing484  information.  This  would  also  facilitate  "straight-through"  processing  by 
the OASMs. 

The following formats and standards deserve particular attention: (i) the possible use 
of  the  XBRL  (eXtensible  Business  Reporting  Language485)  language;  and  (ii)  the 
possible  use  of  electronic  standard  forms  for  the  notification  of  major  holdings  of 
voting rights.  

15.41.  Concerning XBRL, there have been recent calls by EU institutions for a wider use 
of  this  reporting  language.  The  Competitiveness  Council  conclusions  of  22-23 
November 2007 agreed to the Commission Communication of 10 July 2007 on the 
simplification of company law, accounting and auditing, but at the same time called 

484 
485 

See also point 20.4 of the Commission Recommendation on storage. 
See  www.xbrl.org/eu.  XBRL  (or  Interactive  data  as  it  is  called  in  the  US)  is  a  language  for  the 
electronic  communication  of  business  and  financial  data  similar  in  function  to  bar  codes.  The  idea 
behind XBRL is simple. Instead of treating financial information as a block of text - as in a standard 
internet  page  or  a  printed  document  -  it  provides  an  identifying  tag  for  each  individual  item  of  data. 
With  every  number  on  an  income  statement  or  balance  sheet  individually  labelled,  information  about 
thousands  of  companies  contained  on  thousands  of  forms  could  be  easily  searched  on  the  Internet, 
downloaded  into  spreadsheets,  reorganized in  databases,  and put  to  any number  of other  comparative 
and analytical uses by investors, analysts, journalists, and financial intermediaries. The introduction of 
XBRL  tags  enables  automated  processing  of  business  information  by  computer  software,  cutting  out 
laborious and costly processes of manual re-entry and comparison. XBRL is one of a family of "XML" 
languages which is becoming a standard means of communicating information between businesses and 
on the internet. XBRL is being developed by an international non-profit consortium of more than 550 
major companies, organisations and government agencies. It is an open standard, free of licence fees. It 
is  already  being  put  to  practical  use  in  a  number  of  countries  and  implementations  of  XBRL  are 
growing rapidly around the world. 

EN 

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   EN 

 
                                                 
for  the  optimisation  of  the  use  of  electronic  means  taking  into  account  the 
possibilities offered by "available technological instruments and business reporting 
computer languages". 

The  European  Parliament's  Resolution  of  21  May  2008  on  a  simplified  business 
environment for companies in the areas of company law, accounting and auditing486, 
notes the advantages of XBRL and urges the Commission to actively promote the use 
of  electronic  means  in  relations  between  undertakings  and  public  administrations. 
Also the European Parliament Resolution of 9 October 2008 on Lamfalussy follow-
up: future structure of supervision487, calls on the L3 Committees to design common 
reporting  standards,  preferably  in  a  multi  purpose  format  such  as  XBRL  and  calls 
upon the Commission to submit adequate legislative proposals. 

15.42.  The  possible  use  of  XBRL  for  financial  reporting  purposes  has  appeared  as  a  new 
issue.  This  use  is  strongly  supported  by  the  European  Parliament  and  its  used  is 
already  required  by  some  European  banking  supervisors.  CEBS  has  developed 
XBRL  taxonomies  for  the  prudential  reporting  framework  COREP  (COmmon 
REPorting) for the new solvency ratio of credit institutions and investment firms, and 
for  the  standardised  financial  reporting  framework  (FINREP)  for  credit  institutions 
operating  in  the  EU.  Central  banks488  have  active  XBRL  projects,  some  of  them 
either allow or require XBRL-compliant reporting489, following the recommendation 
of the CEBS. At the same time, there may be alternative ways other than XBRL to 
structure  data.  Banking  supervisors  in  six  Member  States490  have  however  decided 
not to use XBRL. Outside the EU, the US SEC and certain other securities regulators 
are promoting the use of XBRL. 

15.43.  The  External  Study  is,  however,  more  cautious  on  the  possible  use  of  XBRL.  It 
believes  that  “more  experience  from  countries  where  XBRL  is  used  would  appear 
necessary  before  an  EU  decision  or  recommendation  on  the  use  of  XBRL  be 
made”.491 

15.44.  Concerning the electronic standard form for the notification of major holdings of 
voting  rights  (and  of  financial  instruments),  cross-border  compliance  by  investors 
would  be  facilitated,  especially  when  they  need  to  make  notifications  to  several 
issuers  located  in  different  Member  States,  if  such  a  form  was  available  and  used 
across the EU492. Equally, a form of this kind would simplify the notification process 
for  those  issuers  who  may  receive  notifications  from  several  voting  rights  or 
financial instrument holders located in different Member States493. Finally, filing of 
notifications  in  a  structured  format  would  also  facilitate  further  processing  of  the 
information:  e.g.  allowing  to  extract  consolidated  data  of  holdings  by  issuer  or  by 
investor.  

486 
487 
488 
489 
490 
491 
492 
493 

European Parliament (May 2008), §12. 
European Parliament (October 2008), Recommendation 3.2(e).  
In Belgium, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherland, Poland and Spain. 
In particular this is the case of Belgium, Germany and Spain.  
Czech Republic, Estonia, Slovakia, Slovenia, Sweden and the UK. 
Mazars (2009), Possible improvement n°6. 
See European Commission (December 2008), §§25-27.  
It  should  be  noted  that  an  electronic  form  of  this  kind  would  be  able  to  take  into  account  national 
legislative differences and offer different options to the users when filling the form.  

EN 

123 

   EN 

 
                                                 
The External Study is also favourable to the creation of such a standard form494.  

For more information on the development of an EU standard form for the notification 
of major holdings of voting rights, see Annex 4 (§§4.8 and seq.). 

E3) The problem of governance: who will take care of the developing the network. 

15.45.  Enhancing the network of national storage mechanisms (or the ex novo creation of a 
centralised  storage  system)  is  desirable.  This  step,  however,  would  require  solving 
governance  issues,  in  particular  who  should  take  responsibility  for  enhancing  such 
network:  actors such  as  the  European  Securities  Market Authorities495,  the network 
of European business registries496, the European Central Bank497 or the Office for the 
Harmonisation of the Internal Market498 could a priori be concerned.  

15.46.  Decisions on costs, notably regarding the initial499 investment, would also need to be 
taken.  In  this  context,  a  recent  EU  financing  programme  allows  for  EU  (partial) 
financing  of,  inter  alia,  certain  CESR  activities,  including  information  technology 
projects  of  EU  dimension.500.  Another  recent  EU  programme  also  allows  for  EU 
funding and support of interoperability solutions for European public administrations 
(the ISA programme)501. 

15.47.  The Commission will be launching in 2010 a feasibility study on the development of 
a  pan-European  storage  system  for  regulated  information,  which  should  be 
addressing those issues. 

F) The parallel process on the interconnection of business registries 

494 
495 

496 
497 

498 

499 
500 

501 

Mazars (2009), Possible Improvement n°13. 
ESMA  will  be  CESR  successor.  CESR  should  prepare  guidelines  in  2010  regarding  the  future 
development  of  the  electronic  network  of  storage  mechanisms  (cf.  Recommendation  2007/657  of  the 
European  Commission,  §§21  and  22).  CESR  is  also  running  the  so-called  Mifid  database  and  is 
currently providing a temporary initial network of storage mechanism.  
See www.ebr.org  
The European Central Bank runs a "centralised securities database" which could have the potential to 
integrate regulated information on issues. See European Central Bank (February 2010).  
OHIM is an EU agency that manages the EU trademark registry. As such, it has the know-how to keep 
registries  and  could  potentially  be  an  alternative  to  develop  a  pan-European  storage  system.  See: 
http://oami.europa.eu 
Understood as one-off costs as opposed to regular on-going costs. 
See  in  this  regard  Decision  No  716/2009/EC  of  the  European  Parliament  and  of  the  Council  of  16 
September  2009  establishing  a  Community  programme  to  support  specific  activities  in  the  field  of 
financial services, financial reporting and auditing, OJ L253, 25.9.2009, p.8.  
See  also  Decision  No  922/2009/EC  of  the  European  Parliament  and  of  the  Council  of  16  September 
2009  on  interoperability  solutions  for  European  public  administrations  (ISA),  OJ  L  206,  3.10.2009, 
p.20. 

EN 

124 

   EN 

 
 
                                                 
15.48.  The  question  of  the  interconnection  between  the  OASMs  and  the  national  business 
registries  also  needs  further  reflection.  In  this  context,  the  interconnection  of  the 
national business registries among themselves almost appears as a pre-requisite.  

15.49.  Company/business  registries  store  company  related  information  under  some 
European  company  law  directives  and  national  law,  such  as:  statutes/articles  of 
association,  annual  accounts,  persons  authorised  to  represent  the  company  etc.  A 
company file is kept on each company created, irrespective of whether it is listed or 
not. The first company law directive requires the business registries to accept on-line 
filings and to provide business information on-line. 

15.50.  European  business  registries  of  24  European  jurisdictions  (18  of  which  a  Member 
State of the EU) set up a network to link them: so-called EBR (European Business 
Registries)502. Through the EBR network it is already possible to obtain comparable, 
official company information from the countries connected to the network.  

15.51.  EBR, together with other partners, also launched a research project called BRITE503 . 
The  main  objective  of  the  project  as  to  carry  out  the  research  necessary  to  enable 
complete  cross-border  interoperability  (technical,  semantic  and  organisational) 
between  the  Business  Registers  at  European  level.  BRITE  partners  are  currently 
working on the implementation of the results of the BRITE project after March 2009. 

For  instance,  BRITE  partners  explored  the  possibility  to  develop  this  platform  to 
interlink the OASMs between them and to the business registries. BRITE imagined 
reaching a level of integration so as to enable for use and aggregation of individual 
data: end-users would be able to match data and easily make further searches at the 
level of the stored data fields504. Such a level of integration would have require that 
data are stored in a predetermined format (and possibly filed in that format too)505. 
Eventually, the BRITE project did not pursue this avenue. 

15.52. 

It should be noted that the European Parliament, in its resolution of 21 May 2008 on 
a  simplified  business  environment  for  companies  in  the  areas  of  company  law, 

502 
503 

504 

505 

www.ebr.org  
BRITE  was  a  36-month  project  co-financed  by  the  European  Commission  (DG  Information  Society, 
under the IST programme, eGovernment Actions) between March 2006 and February 2009. It was led 
by EBR (the European grouping of Business Registries). The Commission partially funded this project.  
For example, a search for the major shareholders of a specific issuer would not merely return a list of 
files  with  the  text  of  uploaded  notifications,  but  would  produce  one  single  overview  of  all  (current) 
major  shareholders  together  with  their  respective  percentages  of  voting  rights/shares  in  the  issuer. 
Clicking on a major shareholder’s name could then initiate a new search with that shareholder as search 
entry  into  an  appropriate  OASM,  returning new data  stored  in  OASMs  (e.g.  a  overview  of  the  major 
shareholders  of  that  shareholder,  when  listed;  a  overview  of  the  other  listed  companies  in  which  that 
shareholder holds a significant holding etc.). 
A further dimension of integration could be achieved within BRITE, if the OASM network is connected 
to the network of business registers. This interconnection and integration of relevant data could enable 
users  of  the  OASM  system  to  obtain  even  more  company  data,  as  stored  in  the  relevant  company 
registers,  and  to  gather  data  at  the  level  of  non-listed  companies  (for  instance,  an  unlisted  company 
which is a shareholder of a listed company). 
For instance, BRITE has been working on a unique company identifier at world level (REID) in order 
to  be  able  to  automate  processes  within  registries.  The  company  identifier  could  possibly  follow  the 
IBAN  structure.  REID  is  being developed with  a  view  to  conform  to  ISO  standard 6523.  BRITE has 
also identified XBRL as a suitable standard for the statutory reporting. 

EN 

125 

   EN 

 
                                                 
 
accounting  and  auditing,  called  on  the  Commission  to  encourage  the  MS  to 
harmonize the classification of  financial  information reporting  requirements, and to 
leverage  new  technologies  with  a  view  to  reducing  the  cost  of  information 
obligations  while  preserving  the  benefits  to  market  participants,  policy-makers  and 
public administrations506. 

15.53. 

In November 2009, the Commission issued a Green Paper on the Interconnection of 
business  registries507  launching  a  public  consultation  on  possible  ways  forward  to 
improve  access  to  information  on  businesses  across  the  EU  and  more  effective 
application  of  the  company  law  directives508.  At  the  same  time,  the  Commission 
published  a  Progress  Report  on  the  interconnection  of  European  business  registers 
describing the current legal and factual situation of the access to information and co-
operation between business registers509.  

506 

507 
508 

509 

EN 

European  Parliament  (May  2008),  §20.  See  also  §§12  and  13  on  XBRL  and  inter-operable  business 
registries. 
European Commission (November 2009a). 
The 
http://ec.europa.eu/internal_market/consultations/2009/interconnection_of_business_registers_en.htm  
European Commission (November 2009b). 

consultation 

January 

public 

ended 

2010. 

See: 

31 

on 

126 

   EN 

 
                                                 
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Directives 

First Company Law Directive510: First Council Directive 68/151/EEC of 9 March 1968 on co-
ordination of safeguards which, for the protection of the interests of members and others, are 
required  by  Member  States  of  companies,  within  the  meaning  of  the  second  paragraph  of 
Article  58  of  the  Treaty,  with  a  view  to  making  such  safeguards  equivalent  throughout  the 
Community, OJ L 65, 14.3.1968, p.8.  

Fourth Company Law Directive: Fourth Council Directive 78/660/EEC of 25 July 1978 on the 
annual accounts of certain types of companies, OJ L 222, 14.8.1978, p. 11.  

Market Abuse Directive511: Directive 2003/06/EC of 28 January 2003 on insider dealing and 
market manipulation (market abuse); OJ L 96, 12.4.2003, p. 16. 

MiFID512: Directive 2004/39/EC of the European Parliament and of the Council of 21 April 
2004  on  markets  in  financial  instruments  amending  Council  Directives  85/611/EEC  and 
93/6/EEC  and  Directive  2000/12/EC  of  the  European  Parliament  and  of  the  Council  and 
repealing Council Directive 93/22/EEC, OJ L 145, 30.4.2004, p. 1. 

Prospectus Directive513: Directive 2003/71/EC of the European Parliament and of the Council 
of  4  November  2003  on  the  prospectus  to  be  published  when  securities  are  offered  to  the 
public or admitted to trading and amending Directive 2001/34/EC, OJ L 345, 31.12.2003, p. 
64.  

510 
511 
512 
513 

www.ec.europa.eu/internal_market/company/official/index_en.htm 
www.ec.europa.eu/internal_market/securities/abuse/index_en.htm 
http://ec.europa.eu/internal_market/securities/isd/index_en.htm  
www.ec.europa.eu/internal_market/securities/prospectus/index_en.htm 

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Seventh Company Law Directive: Seventh Council Directive 83/349/EEC of 13 June 1983 on 
consolidated accounts, OJ L 193, 18.7.1983, p. 1  

Shareholders  Rights  Directive514:  Directive  2007/36/EC  of  the  European  Parliament  and  of 
the  Council  of  11  July  2007  on  the  exercise  of  certain  rights  of  shareholders  in  listed 
companies, OJ L 184, 14.7.2007, p.17.  

Takeover  Bids  Directive515:  Directive  2004/25/EC  of  the  European  Parliament  and  of  the 
Council of 21 April 2004 on Takeover bids. OJ L142, 30.4.2004, p.12.  

* 

* 

* 

514 
515 

www.ec.europa.eu/internal_market/company/shareholders/indexa_en.htm 
www.ec.europa.eu/internal_market/company/takeoverbids/index_en.htm 

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