Making the Transparency Directive work – across the EU

In past posts, this blog has pointed out the uneven application of the Transparency Directive. This has included the variable guidance on Interim Management Statements, on differing standards of major shareholding notification, and in the reach of inside information across the EU.

Now we all have our opportunity to have our say. The Committee of European Securities Regulators has called for evidence on all of the above – and asked whether it should get involved in ensuring a similar standard of implementation of the rules at national level.

So what are the challenges? For IMS (you will recall that this was the compromise agreement between full blown quarterly reporting and a trading statement), companies across Europe are still working out their best approach. Since January when the new rules were introduced, we have seen around one fifth of companies produce a report.

The content is highly variable, and one wonders what the consumer of the news makes of it. IRO’s have had – in the absence of guidance – to work out what the rules mean, and of course to watch what best practice is evolving. The result ranges from a substantial financial update, to a report on sales performance in the last quarter. Would IRO’s welcome some more substantial guidance from their regulators? Probably.

Another area that CESR plans to look at is in whether to make ‘derivatives’ material for disclosure of major shareholdings. If there is one subject on which our side of the capital raising fence guarantees to raise interest, it is surely this. Now is the time to speak out, as regulators are still casting about for a good solution for all sides. There seems to be some agreement that the process of ensuring that votes are not influenced by holders of a CFD is not working, however many will still argue that this does nothing to clarify who is behind block trades.

CESR also asks for comment on whether the dissemination of news is working. I suspect that most UK listed companies will say it is; those with multiple listings may differ, as the requirements in different countries vary hugely, and complying is not the easy process envisaged. Investors are therefore receiving a patchy update of news.

And finally CESR asks whether there is a role that it should play in creating a European storage system. This is the idea of a “European EDGAR” where companies would be obliged to file their news and other disclosure materials into a central database. For the moment, most regulators have set up web- based retrieval of documents, and filing is a simple matter of providing it to your PIP, who will do it for you.

The CESR idea seems to go beyond that, and foresees a Europe-wide mandated system, with the advantage that investors can easily retrieve standard materials. The obvious concern is who should pay for it; inevitably the costs would fall on the issuer in some form or another.

The CESR call for evidence is open for comment on their website www.cesr-eu.org. Now is the time to comment.