Table of contents introduction 5

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1. Introduction 5

2. Procedural issues and consultation of interested parties 5

3. Policy context and problem definition 8

4. Baseline scenario, subsidiarity and proportionality 23

5. Objectives 26

6. Policy options, analysis of impacts and comparison 27

7. Transposition and compliance aspects and administrative burden 41

8. Monitoring and evaluation 42

References 44

ANNEX 1 48

1. Policy options with regard to small and medium-sized issuers 48

2. Policy options to improve the regime for notification of major holdings 62

3. Impact on employment and environment of the preferred options 74

ANNEX 2 76

1. Costs of quarterly reporting 76

2. Costs for holders of cash settled derivatives if the requirement to disclose cash settled derivatives is introduced 77

3. Cost savings on trans-national players if maximum harmonisation of rules for notification of major holdings is introduced 78

ANNEX 3 79

1. Rules under the Transparency Directive that require further clarification as identified by the respondents to the public consultation and the Commission' report 79

2. Better transposition and compliance of the Transparency Directive 81

ANNEX 4 82

1. Half yearly reports 84

2. Quarterly information 85

3. Stricter national rules concerning the content of quarterly reports 85

4. Comparison with other jurisdictions: 85

ANNEX 6 87

1. Method of aggregation/calculation of thresholds 87

2. Netting of long and short positions 87

3. Questions to be dealt with through binding technical standards 87

4. Exceptions for disclosure. 88

ANNEX 7 90

ANNEX 8 93

ANNEX 9 95

1. Different thresholds in the Member States 95

2. Different rules in the Member States for aggregation of holdings of voting rights with these of the financial instruments 96

ANNEX 10 97

1. General Remarks on Consultation Procedure and Feedback 99

2. Overview of Responses to the Consultation 99

3. Analysis of Responses 101

Annex 1 – List of respondents 129

Annex 2 – Detailed description of issues that need clarification/amendment according to replies to questions 22, 23 and 24. 132

ANNEX 11 141

1. Introduction 142

1. This report reviews the operation of Directive 2004/109/EC on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market (hereinafter the "Transparency Directive"), in accordance with Article 33 of that Directive. 142

2. Impact of and compliance with the Transparency Directive 142

3. The review of the operation of the Directive: emerging issues 143

4. Conclusions 146

1. Introduction

The Transparency Directive1 requires issuers of securities traded on regulated markets within the EU to ensure appropriate transparency through a regular flow of regulated information to the markets. Regulated information consists of: yearly, half-yearly and quarterly financial information2; on-going information on major holdings of voting rights; and ad hoc information disclosed pursuant to the Market Abuse Directive3.

Article 33 of the Transparency Directive requested the Commission to review the operation of this Directive within four and half years of its adoption. The Commission report on the operation of the Directive of May 20104 shows that, overall, issuers generally comply with financial reporting obligations and that the transparency requirements of the Directive are considered to be useful for the proper and efficient functioning of the market.

Nevertheless, the review of the operation of the Transparency Directive showed that there are areas where the regime created by this Directive could be improved. In particular, evidence that has been gathered demonstrates the need to provide for the simplification of certain issuers' obligations with a view to making regulated markets more attractive to small and medium-sized issuers raising capital in Europe. Furthermore, the effectiveness of the existing transparency regime needs to be improved, notably with respect to the disclosure of corporate ownership.

2. Procedural issues and consultation of interested parties

The impact assessment is the result of an extensive dialogue and consultation with all major stakeholders, including securities regulators, market participants (issuers, intermediaries and investors), and consumers. It is built upon the observations and analysis contained in the Commission report on the operation of the Transparency Directive (see Annex 11) and the more detailed Commission staff working document which accompanied it. This report describes the impact of the Transparency Directive and how it has been applied; and presents the main issues emerging from the application of the Directive. It draws on the findings of a study conducted in 2009 by Mazars5 for the Commission on the application of selected obligations of this Directive, which includes evidence gathered from market participants through a survey. The report also draws on reports published by the Committee of European Securities Regulators (CESR) (now ESMA)6 and by the European Securities Markets Expert Group (ESME)7 in this area. CESR (ESMA) and ESME reports have been particularly valuable to identify areas of the Transparency Directive with unclear provisions and/or which could be improved.

Comments received from stakeholders participating in the public consultation launched from 28 May 2010 to 23 August 2010 were also taken into account. The Commission services issued a public consultation document explaining the problems found and suggesting options for the way forward. The Commission services received 111 replies to the consultation. The non-confidential contributions can be consulted in the Commission website8. The feedback statement is included in Annex 10.

Three main issues were submitted for comments by stakeholders: the attractiveness of regulated capital markets for small and medium-sized issuers; ways to improve the transparency regime for holdings of voting rights and the problems encountered with the application of the Directive because of diverging national measures and/or unclear obligations in the Directive.

About half of the respondents to the public consultation believe that the margin of manoeuvre for reducing the requirements without lowering transparency standards was limited and, consequently, changes to the Transparency Directive could not significantly reduce costs for small and medium-sized issuers. The other half believed that some cost reductions could be achieved without necessarily affecting the level of transparency necessary to protect investors. The following ideas were for example advanced: streamline disclosures; allow for more flexible deadlines for publication of financial reports; abolish the obligation to produce quarterly financial information either definitively or during the first three years of listing.

The majority of respondents to the consultation would be in favour of increasing the level of harmonisation concerning the notification by the investors of the holdings of voting rights and including the disclosure of cash-settled derivatives into the notification requirements. In addition, some technical adjustments and clarifications were welcomed by the respondents in order to create a better implementation framework for the Directive. These possible adjustments are presented in the Annex 3.

As part of the consultation process, the Commission services organised on 11 June 2010 a public conference with the participation of several stakeholders. Discussion focused on the attractiveness of regulated markets to small and medium-sized issuers and the possible enhancement of the transparency obligations regarding corporate ownership disclosures. The outcome of this conference has also been considered in this impact assessment9.

In March 2010, a Steering Group was set up by Directorate General Internal Market and Services to monitor the progress of the impact assessment report. The Steering Group comprised representatives of a number of services of the European Commission, namely the Directorate General Internal Market and Services, the Directorate General Competition, the Directorate General Economic and Financial Affairs, the Directorate General Enterprise, the Directorate General for Health and Consumers, the Directorate General for Information and Society and Media, the Directorate General for Trade, the Legal Service and the Secretariat General. The Steering Group met 3 times (23 March 2010, 17 March 2011 and 7 April 2011). In accordance with the rules for the elaboration of impact assessments, the minutes of the final meeting of the steering group have been submitted to the Impact Assessment Board together with this impact assessment.

The Impact Assessment Board delivered its opinion on 10 June 2011. Following the Board's opinion, several changes were made to this IA, in particular the following:

  • the report better explains the context and the scope of the initiative, in particular the link with the overall Commission polices to simplify legislation, improve capital market access for small and medium companies and make financial market more stable;

  • the analysis of problems arising from quarterly information has been strengthen and now includes experience of third countries, provides greater evidence of excessive administrative burden, short-timer pressure, overlaps with other EU legislative requirements and nuances the stakeholders' views on this issue;

  • the justification of some of the policy options has been improved, namely the shift from minimum to maximum harmonisation and the changes in the sanctioning regime;

  • the report provides a more comprehensive analysis of cost changes implied by all policy options, explains why the standards cost model has not been used and discusses to greater extend the efficiency and effectiveness of the preferred options and their impact on the international attractiveness of EU markets;

  • the presentation of the problem definition and policy options with regard to major holdings of voting rights is improved, the exemptions envisaged to the requirement to notify major holdings of voting rights are discussed in greater depth;

  • an annex including the Commission report on the operation of the Transparency Directive has been added;

  • other technical comments transmitted by the Impact Assessment Board have been incorporated in the report.

Agenda planning or WP reference: initiative listed in the Commission Work Programme for 2011 - Annex III (initiative number 28).

This report does not prejudge the final form of any decision to be taken by the Commission.

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