European Union: Governance & Securities Law Focus: Europe Edition Q3 2015

In this newsletter, we provide a snapshot of the principal European, US and selected international governance and securities law developments of interest to European corporates.


Transparency Directive: The European Securities and Markets Authority ("ESMA") Consultation on European Single Electronic Format

On 25 September 2015, ESMA published a consultation paper on draft Regulatory Technical Standards ("RTS") on the European Single Electronic Format, as required by the Transparency Directive.

ESMA considered that some sections of the Annual Financial Reports ("AFR") are not suitable because, in order to have effect and admissibility in court, the document should be in human-readable form. ESMA proposes that the AFR should consist of a dual data format including structured (machine-readable data with embedded coding) and non-structured (human-readable) electronic formats.

ESMA highlights that the adoption of a standardised taxonomy to classify financial information would be very hard to achieve due to the differences in accounting standards across the EU and the problems it creates for narrative reporting.

The consultation will be open until 24 December 2015 and ESMA must submit the draft RTS to the European Commission by 31 December 2016.

The full text paper is available here:

Transparency Directive: ESMA Final Report on European Electronic Access Point

On 28 September 2015, ESMA published its final report on draft RTS on a European Electronic Access Point ("EEAP") as required by the Transparency Directive.

ESMA will be in charge of administering EEAP, which will be a single point of access for regulated information in the EU. The EEAP will act in conjunction with other Officially Appointed Mechanisms ("OAM") in each Member State without replacing them. The proposed mechanism would be for the EEAP to work as a search engine that fetches OAM regulated information.

ESMA broadly adopted the feedback on the draft RTS received in a consultation from 19 December 2014 and incorporated its own improvements to the technical infrastructure. Given that issuers and OAMs will have to adapt to the requirements of the draft RTS, ESMA suggests that these should only apply to regulated information released after 1 January 2017 to OAMs and issuers.

The European Commission has received ESMA's final report and has three months to decide whether to endorse the draft RTS.

A copy of the report is available here:

OECD Updates G20/OECD Principles of Corporate Governance

On 5 September 2015, the Organization for Economic Co-operation and Development ("OECD") published an updated version of the G20/OECD Principles of Corporate Governance ("Principles"). The Principles' objective is to improve the legal, regulatory and institutional framework for corporate governance. The update to the Principles includes the following additions:

  • a new principle on the role of the stock market in supporting good corporate governance;
  • new guidance on the board of directors' role in risk management, tax planning and internal audit, as well as a recommendation for establishing specialised board committees to oversee these areas; and
  • new guidance on stakeholders' rights to access information and consequences for the violation of such rights.

This is the first update to the Principles since 2004 and will be presented to the G20 leaders before the November 2015 summit.

The full text of the Principles is available here:

TheCityUK Report on European Capital Markets Union

On 16 July 2015, TheCityUK, a lobbying group representing UK-based financial and related professional services industry at a national and international level, published a report setting out its views on the European Commissions' proposal to create a Capital Markets Union ("CMU"). This proposal was covered in our April 2015 newsletter.

The report concludes that capital markets could play a much more significant role in financing growth, given that European businesses, particularly small and medium enterprises ("SMEs"), remain too reliant on banks. The objective of the report is to recommend ways to make capital markets more accessible and fundraising for SMEs quicker and cheaper in order to secure diversified sources of capital to support long-term growth.

The report's key recommendations include:

  • creating national and central European registers of capital markets to raise awareness of capital markets options available to SMEs;
  • minimising the regulatory complexity involved in raising capital and listing on a regulated market in order to help manage costs. In particular, the Prospectus Directive's definition of "offer to the public" should be amended so that its financial and other thresholds could provide greater flexibility;
  • publishing the prospectus and other information sooner to investors in the context of an IPO;
  • improving the quality of information available to investors by making the prospectus more focused and relevant;
  • harmonising the approach of National Competent Authorities to prospectus review and approval in an effort to boost investor confidence in pan-European offerings; and
  • reducing the prospectus disclosure requirements for secondary offerings.

Other recommendations focus on how the current regime could be improved to further the goals of the CMU.

The full text of the report is available here:

European Parliament Adopts Amendments to Proposed Shareholder Rights Directive

On 8 July 2015, the European Parliament resolved to adopt amendments to the European Commission's proposal to amend the Shareholder Rights Directive. The amendments introduce:

  • an obligation for multinational companies to declare the taxes paid in each country in which they operate as a measure to tackle tax evasion and avoidance;
  • a requirement for shareholders of listed companies to vote at least every three years on a company's remuneration policy for directors, and for companies to explain how the directors' remuneration policy advances the long-term interest of the company;
  • an expansion and clarification regarding transparency for proxy advisors, including disclosure of their codes of conduct, policies and amount of research undertaken; and
  • provisions in the Accounting Directive for large undertakings and public-interest entities and the Transparency Directive, requiring issuers to publicly disclose a range of information on a country by country basis.

The full text of the adopted amendments is available here:

Prospectus Directive: ESMA´s Final Report on Regulatory Technical Standards under Omnibus II Directive

On 1 July 2015, ESMA submitted to the European Commission its final report on draft RTS on prospectus related issues under the Omnibus II Directive. The report is based on the submissions it received from the consultation paper and suggests changes to the draft RTS in the areas of prospectus approval, incorporation by reference, publication of the prospectus and advertisements.

The European Commission now has three months to decide whether to adopt ESMA's draft RTS.

The full text of the report is available here:

Prospectus Directive: ESMA Update Opinion on Israeli Equivalence

On 1 July 2015, ESMA published an updated opinion on Israel's prospectus regime. This updated opinion uses Article 20 of the Prospectus Directive as a framework for assessing Israel's laws and regulations regarding prospectuses taking into account changes brought into effect in September 2012.

The opinion outlines the "wrapper" information that would be required to make Israeli prospectuses compliant with the Prospectus Directive, which would allow them to receive approval from the relevant Member State authority.

The full text of the report is available here:

Market Abuse: ESMA Technical Standards on the Market Abuse Regulation

On September 2015, ESMA published its final technical standards report regarding the Market Abuse Regulation ("MAR") and feedback in response to its consultation published in July 2014.

The report makes important changes to the previous consultation draft published on 15 July 2014, notably in the area of disclosure of inside information and delays. The following changes have been made:

  • to improve clarity, some direct references to the Transparency Directive have been replaced by a list of specific ways in which disclosure of inside information can be made;
  • SME growth market issuers will no longer be required to publicly disclose inside information on the website of the relevant SME growth market operator's venue and maintain such information for at least five years;
  • issuers will no longer be required to post on their websites insider information on a section exclusively reserved for such information and will now be able to disclose it anywhere on the website provided that the information is clearly and easily identifiable,; and
  • a specific template for insider lists has been introduced for SME issuers and there is a slightly reduced content requirement for the insider lists of all other issuers.

Other changes include:

  • changes to the notification requirements when an issuer delays the disclosure of inside information. In particular, ESMA has clarified that the relevant trigger point is when inside information first exists within the issuer; and
  • clarification that both the financial adviser and the issuer must comply with the MAR and ESMA requirements when they conduct a market sounding.

The full text of the report is available here:

MiFID II: ESMA Final Draft RTS on Admission to Trading

On 28 September 2015, ESMA published its final report and draft RTS on the admission of financial instruments to trading on regulated markets under MiFID II.

The final draft RTS covers the following issues:

  • the characteristics of financial instruments for admission to trading on a regulated market, in particular the criteria regulated markets should follow to decide whether a transferable security is freely negotiable and capable of being traded fairly and in an orderly and efficient manner;
  • arrangements to help regulated markets ensure that issuers comply with initial, on-going and ad-hoc disclosure obligations; and
  • provisions that regulated markets must establish to facilitate access to information made public under EU law.

The Commission has three months to approve the RTS after which, if endorsed, the European Parliament and the Council will have a period to object. The regulation is intended to apply from 3 January 2015.

The full text of the draft RTS is available here:

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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