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Transparency of information about issuers of securities
This Directive boosts transparency by imposing precise and regular disclosure requirements on issuers of securities in order to guarantee a high level of investor protection and efficient markets for securities * admitted to trading on a regulated market.
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 [See amending acts].
Three conditions must be met, namely efficiency, transparency and integration of securities markets, if the objective of harmonising those markets is to be achieved.
This would promote competition on securities markets. It would also guarantee investors a high level of protection and would thus strengthen confidence in the market.
In addition, again with a view to protecting investors, the Directive lays down detailed disclosure requirements:
- for issuers whose securities are already admitted to trading on a regulated market;
- to shareholders with voting rights;
- to natural or legal persons holding voting rights or financial instruments that influence voting rights.
By contrast, these requirements do not apply to units issued by collective investment undertakings other than the closed-end type * or to units * acquired or disposed of in such undertakings. In addition, States, regional or local authorities of States, international public institutions, the European Central Bank and Member States’ national central banks are exempt.
Established on 1 January 2011, the European Securities and Markets Authority (ESMA) plays an important role by, for example, developing draft technical standards.
Periodic information relates to the financial situation of the issuer of securities and that of the enterprises it controls. It also concerns forecasts based on three documents, namely:
- the annual financial report: this encourages year-on-year comparisons and the issuer makes it public at the latest four months after the end of each financial year;
- the half-yearly report by the issuer of shares or debt securities: this covers the first six months of the financial year and is made public as soon as possible after the end of the relevant period, but at the latest two months thereafter;
- interim management statements: the management of each issuer makes public a statement for each period running from the beginning of the six-month period until its publication. The statement is normally made public some time between ten weeks after the beginning of the relevant six-month period and six weeks before the end of that period. However, it does not apply to issuers that already publish quarterly financial reports.
The periodic information must be made public by the issuer. If not, its liability or that of its administrative, management and supervisory bodies will be involved. In addition, the annual and half-yearly financial reports must be made available to the public for at least five years.
Certain bodies are exempt from the requirement to provide annual or half-yearly financial reports, such as:
- States and their regional or local authorities, international public bodies of which at least one Member State is a member, the ECB and Member States’ national central banks, whether or not they issue shares or other securities;
- an issuer exclusively of debt securities admitted to trading on a regulated market, the denomination per unit of which is at least EUR 100 000.
The Directive imposes an ongoing information requirement whenever events change the breakdown of major holdings that affect the allocation of voting rights whether they stem from:
- the acquisition or disposal of holdings of an issuer to which voting rights are attached, either by the shareholder or the issuer itself;
- the acquisition or disposal of major proportions of voting rights by a natural person or legal entity that is entitled to acquire, to dispose of or to exercise voting rights;
- the holding of financial instruments by a natural person or legal entity which confer the right to acquire, on such holder’s own initiative alone, under a formal agreement, shares, already issued, of an issuer whose shares are admitted to trading on a regulated market.
The procedure for notifying and making public major shareholdings involves the new allocation of voting rights, the identification of the shareholder, the date of the change and the voting threshold achieved.
Assessed in the light of thresholds, the proportion of voting rights is calculated on the basis of the total number of shares, effectively held, to which voting rights are attached.
The notification to the issuer is effected not later than four trading days after the event. However, an undertaking is exempted from the notification requirement if it does not exercise its voting rights independently from the parent undertaking, such as an investment or management company, and where it is notified by the parent undertaking.
The issuer shall make public the information no later than three trading days after receipt of the notification if the information has not already been made public by the competent authority. The issuer will also make public the total number of voting rights and capital at the end of each calendar month during which a change has occurred.
In addition, the public issuer must make public without delay any change in the rights attaching to the various classes of shares and new loan issues, and in particular any related guarantee or security. Where shares are not admitted to trading on a regulated market, the issuer must make public without delay any changes in the rights of holders of securities other than shares.
In all cases, the issuer of securities must ensure equal treatment for all holders of shares who are in the same position. The use of electronic means in this connection may be a preferred way of making the information public.
Shareholders must also be in a position to exercise their rights by proxy. Accordingly, the issuer must designate as its agent a financial institution through which shareholders may exercise their financial rights. As regards holders of debt securities whose denomination per unit is equivalent to at least €50 000, the issuer may choose the financial institution that is to act as its agent provided that the shareholders have all the facilities and information necessary to exercise their rights.
Principle of home Member State
In the interests of consistency, efficiency and rationalisation, the home Member State, that is to say the Member State in which the issuer has its registered office, is the main forum for applying the Directive. An issuer with its registered office in a third country may qualify for certain exemptions regarding the disclosure requirements provided that the regulated information in that third country is equivalent to that required in the Member State of the competent authority concerned ("home Member State"). This issuer is required to communicate any information disclosed in a third country that is deemed to be of importance to the public in the Community even if that information is not regulated within the meaning of the Directive. The competent authority in the home Member State must therefore make this information public and inform ESMA of the exemption granted.
In addition, the Commission adopts delegated acts to ensure that general criteria for equivalence are drawn up regarding accounting standards for issuers from more than one country.
The home Member State will ensure that the Directive is implemented and may impose stricter requirements than those laid down by the Directive. At the same time, it must provide for arrangements for imposing liability and penalties where its requirements are not met.
The Member State will also centralise information. In this connection, it would have to guarantee fast and non-discriminatory access to information by way of appropriate media and of an officially appointed mechanism for the central storage of regulated information.
Each Member State will designate a competent authority responsible in particular for implementing the Directive.
This authority will, as a rule, be the central authority referred to in Directive 2003/71/EC. Member States must inform the Commission and ESMA.
Each competent authority shall have all the powers necessary for the performance of its functions, specifically:
- monitoring of disclosure of timely information by the issuer and publication on its own initiative of information not disclosed within the time limits set;
- request for further information and documents;
- verification of compliance with the disclosure requirements, by way of on-site inspections;
- suspension for a maximum of ten days of trading in securities or prohibition of trading on a regulated market if it finds that the disclosure requirements laid down in the Directive have not been met or if it has reasonable grounds for suspecting that those requirements have been infringed.
Tasks may also be delegated, but only for a temporary period. Any such delegation must be notified to the Commission and to ESMA and the competent authorities in the Member States. They will review the situation five years after the entry into force of the Directive. The review will end eight years after the entry into force of the Directive.
In addition, the obligation of professional secrecy applies to the competent authorities, including for the exchange of information intended for the performance of supervisory tasks, with any disclosure of information requiring the agreement of the competent authorities which disclose it. The competent authorities also cooperate with ESMA in that they refer to it situations or requests for cooperation which have been rejected or which have not been followed up within a reasonable time period. The competent authorities also provide ESMA with all the information required to complete its task. The competent authorities may also send information to the European Systemic Risk Board (ESRB).
Where the competent authority of a host Member State finds that the issuer or the holder of shares has committed irregularities, it shall refer its findings to the competent authority of the home Member State and ESMA.
Delegated acts and implementing measures
The Commission is assisted by the European Securities Committee regarding the implementing measures.
In addition, the Directive is also designed to take account of developments on financial markets in order to ensure its uniform application. The Commission is empowered, therefore, to adopt implementing measures that take account of technical developments on financial markets.
This Directive also envisages guidelines for setting up electronic networks at national and at European level for all the actors and all the information required by the Directive, by Directive 2003/6/EC on market abuse and by Directive 2003/71/EC on prospectuses.
|Act||Entry into force||Deadline for transposition in the Member States||Official Journal|
OJ L 390, 31.12.2004
|Amending Act(s)||Entry into force||Deadline for transposition in the Member States||Official Journal|
OJ L 76, 19.3.2008
OJ L 327, 11.12.2010
OJ L 331, 15.12.2010
Successive amendments and corrections to Directive 2004/109/CE have been incorporated in the basic text. This consolidated version is for reference purpose only.
- Directorate-General Internal Market and Services: Transparency requirements for listed companies