So the great day of TOD came and went.

January 20th – earlier this week – was the planned day of implementation of the Transparency Directive. And it duly arrived – more with a whimper than a bang. Many EU countries have yet to begin their implementation of the Directive by establishing their national rules.

So, much of the change is yet to come.

In periodic reporting, which creates major decisions for listed companies in terms of how many reporting events they should have in the year, the majority of issuers – those with calendar year ends – will not be affected until 2008. Which is just as well since there is a marked lack of agreement on what the new calendar should look like.

Transparency Matters is hearing of disagreements in the advice/ requirements of auditors to public companies. Even between partners in the same firms, there is no consistency. Thus those with January 31st year ends will bear the brunt of the decision making, and lead the way.

The jury is also still out on electronic shareholder communications. Reports from the front line show a marked disinclination to rush in to major changes – although in every conversation the word “trees” is mentioned!

One potential area of controversy to come, is in the definition of “pan-European dissemination” and “reaching all investors” and “as close to simultaneously as possible”. Even though these are obligations under the Transparency Directive, no regulator that this blog has seen, has defined this clearly.

In the absence of this clarity, the key service providers have defaulted into 2 groups. The first – which includes PR Newswire my employer – is opting for a wide definition, with distribution to the major financial news services such as Reuters, Bloomberg and others serving the institutional community. In addition, distribution goes to key websites, and financial newspapers accessed by the retail investors in all 27 states of the EU.

The other group is opting for the minimalist approach. Largely this involves just sending news to the key institutional platforms. Now how this can be said to reach all investors (retail and institutional) at the same time beats me. I am not aware of many private investors accessing their news through news services designed for professional investors.

As with all of the Transparency Directive, the decision is left entirely in the hands of the companies and their advisors. They should decide on the route they choose to take.

In the midst of the battle, a new exchange player emerges

In a week dominated by the contest to own the London Stock Exchange, a new exchange is set to launch. Some of us remember the days of multiple UK stock exchanges – Birmingham, Leeds, Manchester all had their own floors. Now in the West Midlands, a new exchange will target regional businesses who feel that AIM and the Plus Markets are not able to support them.

At the beginning of 2004 the Investbx project was completed, intending to launch the first regional stock exchange in Britain for many decades. Investbx is aimed at being a stock exchange for smaller, local companies to have access to capital using local advisers; the protection of investors was paramount and the market has been designed to meet all the FSA’s regulatory requirements.

However, it was the Regional Development Authority in the West Midlands that had sponsored the stock exchange, within the remit of this and similar RDAs to develop and build the economies of their particular regions. Despite its unique focus on SMEs in the West Midlands, Investbx presented a challenge to existing players, and as a result it was referred to the European Competition Commission for abuse of state aid.

Now the project has been cleared by Brussels. In announcing the decision, Competition Commissioner Neelie Kroes said: "This aid will help growing SMEs get access to capital. Improving information transparency on the risk capital market will attack the very source of the market failure. I appreciate in particular that all equity investment at Investbx will be provided by private investors. Investbx is a very innovative project, which may be a valuable precedent for other Member States."

Are the established UK stock markets are failing small companies? And will that failure continue under potentially new ownership? Only time will tell.

However access by large numbers of British and European SMEs to equity capital has not improved. This was the original concern that gave rise to the project in the first place.

As TOD approaches, are all regulators ready?

Well no surprise, but no.

The UK and Germany stand out as 2 regulators that HAVE completed the preparations for companies to follow the EU Transparency Obligations Directive, but many other countries are not as ready. Given that the required implementation date is January 20th , (yes 2007) this is perhaps surprising.

Documents seen by Transparency Matters based on an update from Competent Authorities at end of November, suggest that all but 8 EU countries have yet to introduce the basic levels of regulation on the Transparency Directive, and only 2 have completed the more detailed obligations.

Mind you, the European Commission itself has yet to finalise the details of the obligations on Competent Authorities, so it is hard to criticise.

As we remember, the basic concept of the Transparency Directive was to ensure equal transparency of companies’ news among the 27 member states of the EU. However, many of the obligations are still very different between countries. For example, the application of accounting standards for annual and half yearly accounts, is patchy. In less than half is IFRS mandatory, with most of the others mandating national standards (and a couple allowing issuers to choose).

The major shareholding reporting is also a patchwork quilt of differences, with thresholds ranging between 3% in the UK and Germany, to up to 90% in several countries.

And finally the dissemination model – the rules on how information must reach investors – are still far from resolved in every country. The obligations from TOD are for “fast, simultaneous distribution to all investors within the European Union” and for competition among providers. However some countries are still relying on mandatory, monopoly systems, while others leave the choice of media to the issuers, or allow issuers to post their news to their own – and the regulators’ - websites.

So with less than 10 days to go (as I write) there are many steps for regulators across Europe to take before the vision of true transparency by all issuers in the EU can be achieved.

So what to make of easier de-registration rules for ADR’s?

Against a backdrop of falling US competitiveness in winning new foreign listings, the SEC has unveiled 2 proposals.

First, it has proposed a change to the means by which foreign private issuers can terminate their registration from related SEC reporting obligations. The main difference will be that companies’ ability to deregister would be
determined primarily on the basis of the trading volume of its securities in the United States. This would replace the current obligation which generally only permits a foreign private issuer to deregister if it can determine that it has less than 300 worldwide record holders of its securities or less than 300 beneficial holders resident in the United States.

On the surface, this would make it easier for foreign companies to close down their ADR programmes. After all, an estimated 60-70% of all European exchange traded ADR issuers have less than 5% of their trading volumes through their ADR, meaning that, in theory at least, companies can exit soon.

So will they do so? As ever, these things are not as simple as they appear. For a start, issuers many reasons for having their DR in the first place, such as supporting a local US presence, which have nothing to do with the liquidity of the ADR.

However, some may choose to change their ADR to trading over the counter, not through an exchange, which allows them exemption from Exchange Act reporting. This exemption has also been changed, allowing issuers to satisfy the obligation to supply the disclosures made in their home market, by posting them on their internet sites. Since the vast majority of issuers already do this, it should be no burden.

Second, the SEC has implemented its proposed delay to the obligation for foreign and smaller domestic US issuers to meet the obligations of the notorious Section 404, requiring management's assessment and an auditor's attestation to management's assessment on the effectiveness of the filers' internal control over financial reporting in their annual reports.

Neither on its own is a significant roll back of rules sufficient to encourage more listing, however they are perhaps straws in the wind of change.

When a senior fund manager speaks on hedge funds, one tends to listen.

Blake Grossman, CEO of Barclay's Global Investors, says that hedge funds would soon be classified as mainstream with consequent new trillion-dollar markets for average investors. Since this summer, U.S. investors in mutual funds have been putting twice as much money into foreign stocks as in domestic shares, with Americans looking for currency hedging diversification.

The traditional view is that hedge funds have no interest in winning smaller investors. Not anymore. Fund companies have rushed to capitalise on the popularity of hedge funds by offering mutual funds that use similar techniques. The so called long-short funds have attracted investor support, but the performance of these funds has been all over the place, some losing money.

Many believe therefore that hedge funds will recede in popularity with institutions, but become more accessible to the public.

For hedge funds, the attraction of retail investment is money that can't – or typically won’t - be withdrawn on a quarterly or annual basis. As hedge funds make more long-term investments, they want to make sure that investors don't withdraw money before the bets reach fruition. (It is also interesting to note that the first Sharia-compliant hedge funds are launched by the London prime broking arm of Societe Generale).

Among the drivers of all this retail investor interest is the activist approach of hedge funds and the idea of consequent improved returns. Until this month, there had been no serious academic studies to measure the link in this country between activism and improved returns. But now a paper published by a London Business School team, including Professors Julian Franks and Colin Mayer, has tracked the investments of the Hermes Focus Fund in the half-dozen years to 2004. It finds the results are startlingly good - an annual excess return after fees of 4.9% a year above the FT All-Share over the six-year period.

Nonetheless, Investor Relations professionals have long been worried about the transparency of hedge funds. With hedge fund favourites CFDs not regarded as “material”, tracking who is on one’s share register is tricky. And if hedge funds – and their mutual fund cousins – expand on the back of retail investor cash, those concerns will remain. Their concerns now appear to be shared by the regulators.

The United States has said it supports Berlin’s bid to increase hedge fund transparency during the German presidency of the Group of Eight nations in 2007, according to Reuters. German government officials said. “Through more transparency, risks to the stability of the financial system should be prevented and investors better protected”. And it is not only the Germans. In France the regulator AMF has warned on over-zealous hedge fund activism. “Hedge funds sometimes take shareholder activism too far”, the chairman of France’s Autorite des Marches Financiers told the European Parliament’s economic affairs committee.

Against this background, improved transparency looks not only likely but thoroughly needed.