Latest Consultation Paper asks the wrong question?

After 5 years+ of the Financial Services Action Plan, with 39 new Directives, and who knows how many consultations across the European Union, the latest CESR consultation on how to implement the required Central Storage Mechanism closes on March 31st.

The concept is that listed companies would be obliged to post electronic copies of their regulated information – including annual reports, half yearly financial statements, management reports, certain corporate actions, and major shareholdings – into a database, freely accessible by investors.

Despite the fact that these same documents will already have been disseminated across the EU to online locations accessible by both institutional and retail investors, the Transparency Obligations Directive requires each member country to establish an Online Access Mechanism, networked to allow investors across the EU to access company information.

The CESR consultation paper foresees at least 5 ‘network models’ described in detail, together with discussion of formatting, security, etc. It discusses how the national databases could link together, in a way that allows an investor to search across all EU listed companies.

However the question it does not ask is whether this Central Storage Mechanism is whether one is needed in the first place. Having worked in the financial information business for 25 years, I have seen data enterprises succeed – and lots fail. However, those that – eventually, in some form – succeed, do so because users need it.
Given the regulatory burden already on IRO’s, I would have liked to see the question posed – “is this necessary?”.

New rules on dissemination of inside information under discussion

Across the EU, the Transparency Obligations Directive is in the limelight. With an implementation deadline of January 20th next year, regulators are creating working groups and holding public hearings with the aim of launching consultation papers.

The timing is being worked out in reverse. Most regulators need to give three months notice of changes to their Listing Rules. They also need to consult in advance, allowing two months for comment. And of course with two months lost to the grand (European) summer vacation, the consultation papers need to be in the public domain in mid April at the latest.

The FSA for example recently held a public hearing, and laid out their timetable of a consultation paper in later March.

Under the dissemination proposals, the FSA is likely to propose continuing the existing PIP regime. One of the debates on this is whether the existing dissemination – focussed largely on the UK and on financial news providers used by professionals – satisfies the need laid out in TOD for news to be disseminated “across the EU” and “in a manner capable of being disseminated to the general public”.

And of course a major challenge for regulators is whether the current proposals for implementation from the European Commission – the so-called level 2 implementation - will be changed. Most of the regulators are proceeding on the basis that the current version is final. If however it were to be changed substantially, more consultations – and consequent delay - could follow.

Meanwhile, I wonder whether there are second thoughts about the need for an Online Access Mechanism as foreseen in TOD? The costs of creating and maintaining these in every country across the EU are substantial and no obvious means of funding it - aside from the inevitable load on listed companies - has emerged.