EUROPE: EU Council and Parliament reach agreement on amendments to EU Transparency Directive

Wednesday May 29 2013

The Permanent Representatives Committee of the EU Council has approved a compromise reached with the European Parliament on updated EU transparency requirements for issuers of securities on regulated markets contained in the Transparency Directive.

The presidency will now confirm to the Parliament that the Council can agree to the compromise, enabling the amendment directive to be adopted at first reading. Agreement was reached at a “trilogue” meeting with the Parliament and the Commission on 14 May.

The agreed improvements are aimed at:

Simplifying certain obligations so as to make regulated markets more attractive for raising capital for small and medium-sized issuers.

The new directive sets out to make obligations applicable to listed small and medium-sized issuers more proportionate, whilst guaranteeing the same level of investor protection, and to facilitate cross-border access to information.

Improving legal clarity and effectiveness, notably with respect to the disclosure of corporate ownership.

The draft directive clarifies provisions in relation to third country issuers, and eliminates administrative burdens that are now considered unnecessary. It reviews the definition of which types of financial instruments are covered, as well as the calculation of thresholds for the notification of major holdings. In this regard, in order to ensure that issuers and investors have full knowledge of the structure of corporate ownership, the definition of financial instruments in the amendment Directive extends to all instruments with similar economic effect to holding shares and entitlements to acquire shares. Financial instruments with similar economic effect to holding shares and entitlements to acquire shares which provide for cash settlement shall be calculated on a ‘delta-adjusted’ basis, by multiplying the notional amount of underlying shares by the delta of the instrument. Where a holder of financial instruments exercises its entitlement to acquire shares and the total holdings of voting rights attaching to physical shares exceed the notification threshold without affecting the overall percentage of the previously notified holdings, a new notification will be required to disclose the change in the nature of the holdings.

Providing for sanctions that are sufficiently dissuasive in the event of transparency requirements being breached.

To ensure this, the text sets out to harmonise member states` legal frameworks for administrative sanctions, setting minimum common standards on certain key aspects of sanction regimes. (Criminal sanctions are not covered).

Click on the above link for the press release. Click here for the compromise text.