Securities: results of consultation on transparency obligations of publicly traded companies

IP/01/1861

Brussels, 19^th December 2001

Securities: results of consultation on transparency obligations of publicly traded companies

The European Commission has published on the Internet the results of a consultation, launched in July 2001, on its forthcoming proposal for a Directive to update existing Community rules on the information which has to be regularly provided by companies whose securities are traded on regulated markets. This is one of the first examples of the consultation process instigated as a result of the Stockholm European Council Resolution on European securities market regulation, based on the final report of the Committee of Wise Men chaired by Baron Alexandre Lamfalussy. The Resolution invited the Commission to consult market participants, securities issuers and consumers in an open, transparent and systematic way when preparing new legislation on securities. It recommended that the results of such consultation should be published. A summary of the replies to the consultation is available on the Europa website at: http://ec.europa.eu/internal_market/en/finances/mobil

Internal Market Commissioner Frits Bolkestein said "This consultation round on information requirements for securities issuers has been a success. It demonstrates that the recommendations of the Lamfalussy report are being implemented and that interested parties wish to participate actively in the preparation of legislative proposals by the Commission. The Commission will now take the views expressed into account when planning its next steps".

This consultation will help the Commission to prepare a new proposal for a Directive dealing with ongoing and periodic transparency requirements of securities issuers. The proposal for a Directive is likely to be submitted to the European Parliament and Council by the summer of 2002. Existing legislation in this field dates back to the 1980s (Directives 79/279/EEC, 82/121/EEC and 88/627/EEC). Whilst this legislation was recently codified in Directive 2001/34/EEC, no substantive changes were made to it to adapt it to the challenge of creating a fully integrated pan-European securities market.

The consultation took place over the Internet and was launched in July 2001 (see IP/01/999). Those responding included securities issuers, industry, stock exchanges, underwriters, investment firms, audit and accounting firms, consumers, lawyers and academics. Many national securities regulators, along with the new Committee of European Securities Regulators (CESR), also sent valuable contributions, as did a number of European and international associations.

In total, the Commission received 90 responses, covering all Member States. It will now evaluate the responses with a view to preparing a proposal for legislation updating the requirements for regular reporting and ongoing transparency which must be met by issuers. This is a priority under the Financial Services Action Plan (see IP/00/1269), endorsed by the Lisbon and Stockholm European Councils as a key element in the creation of the most competitive economy in the world.

The main points to emerge from the consultation were as follows:

Consolidation: The Commission document suggested the consolidation into a single legal text of all existing periodic and ongoing disclosure obligations for issuers whose securities are admitted for trading on a regulated market. In general, respondents broadly endorsed this approach. Some suggested that the initiative should also seek to strengthen the current disclosure requirements on voting rights in major holdings, e.g. the reduction of the thresholds (currently 10%) exempting owners from disclosure of acquisition or disposal of shares to the issuer.

Upgrading of periodic disclosure obligations: The Commission sought views on whether to upgrade existing regular reporting requirements to meet international best practice, for example by introducing international accounting standards (IAS) and quarterly financial reports. While respondents welcomed the proposal to align disclosure standards with IAS, views on quarterly reporting were mixed. A large majority of securities regulators, stock exchanges and investors fully backed the idea of quarterly reporting. On the other hand, many issuers were hesitant, suggesting a graduated approach based on the size of the issuer and the risk linked to the type of security concerned. Other issuers were opposed to quarterly reporting.

Publication in electronic form: The consultation document suggested allowing publication of information not only via newspapers, but also via the Internet. A large majority of responses supported this idea. However, newspaper editors and news agencies were opposed, on the grounds that, among other things, access to the Internet is not available everywhere in the European Union.

Control by Member State authorities: The consultation document asked whether it was appropriate for each Member State to have a single authority responsible for these issues. There was wide support for the idea of such single authorities. Stock exchanges underlined the need for an approach based on the successful co-operation between administrative authorities and stock exchanges.

Possibility of future implementing measures following the recommendations of the Lamfalussy report: To ensure the necessary flexibility of the system, in accordance with the views of the Committee of Wise Men, endorsed by the Stockholm European Council, the Commission suggested it would be necessary to make technical adaptations and clarifications via comitology decisions (Level 2 of the Lamfalussy recommendations). A clear majority of respondents favoured a more flexible regulatory structure in which the Commission, assisted by the European Securities Committee, could adopt implementing measures. Others asked for further clarification of this approach and put the emphasis on legal security, democratic control and effective consultation of the business community.

Geographical Origin of the 90 replies