Transparency Directive: ESMA Publishes Updated Guide to Notifications of Major Holdings

On 16 January 2018, the European Securities and Markets Authority (ESMA) published an updated version of its practical guide to the national rules across the EEA on the notification of major holdings under the Transparency Directive. The original version of the practical guide was covered in our April 2017 edition.

Part I of the practical guide provides a country-by-country summary of the main rules and practices regarding notifications of major holdings under the Transparency Directive. Part II presents key data across different jurisdictions in a table setting out notification thresholds, the triggering event, the deadline for learning of the triggering event and the deadline for making a notification. The full text of the updated practical guide is available here:

European Commission Publishes Final Report on Sustainable Finance

On 31 January 2018, the European Commission ("Commission") published the final report by its High-Level Expert Group on Sustainable Finance (HLEG) ("Final Report"). On the same day, the Commission published a press release stating that it welcomes the Final Report.

The Commission established the HLEG to help develop an overarching and comprehensive EU strategy on sustainable finance. It requested advice regarding how to "steer the flow of capital towards sustainable investments; identify steps that financial institutions and supervisors should take to protect the financial system from sustainability risks; and deploy these policies on a pan-European scale."

The HLEG's Final Report presents various corporate governance recommendations in order to develop a sustainable financial system. The HLEG recommendations include:

  • The extension of stewardship principles for institutional investors, for example by amending the Shareholder Rights Directive. Investors should have governance practices consistent with national requirements and the International Corporate Governance Network Global Stewardship Principles, ensuring in particular the alignment of their own incentives with long-term objectives and having sufficient expertise to address long- term sustainability risks.
  • Investors should continuously engage with investee companies with the aim of preserving or enhancing long- term value on behalf of clients or beneficiaries. The extraction of short-term profits at the expense of long- term value creation should be avoided, and investors should integrate environmental, social and governance factors into stewardship activities.
  • Investors with voting rights should seek in their voting process to make decisions addressing concerns over investee companies' sustainability performance.
  • Requiring company management to develop a climate strategy and describe the company's approach to sustainable development goals.
  • Ensuring that remuneration policies and individual executive employment contracts are consistent with the long term, including sustainability goals.

The full text of the Commission's report is available here:

The Commission's press release is available here:

Commission Publishes Action Plan on Financing Sustainable Growth

On 8 March 2018, the Commission published an action plan on financing sustainable growth ("Action Plan"). The Action Plan builds on the recommendations set out in the Final Report published by the HLEG on 31 January 2018.

Regarding corporate governance, the Action Plan proposes to:

  • Publish by Q2 2019 the conclusions of the fitness check on public reporting by companies launched by the Commission on 8 February 2018.
  • Revise by Q2 2019 the guidelines on climate-related non-financial information (in line with the Financial Stability Board's Task Force on Climate-related Financial Disclosure), as well as utilise a new classification system for climate-related metrics.
  • Request that the European Financial Reporting Advisory Group (EFRAG), where appropriate, assess the potential impact of new or revised IFRS standards on sustainable investments.
  • By Q3 2018, establish a European Corporate Reporting Lab as part of EFRAG to promote innovation and develop the best practices in corporate reporting, including environmental accounting.
  • Promote corporate governance that is more conducive to sustainable investments, by Q2 2019, by carrying out analytical and consultative work with relevant stakeholders. This will assess: (i) the possible need to require corporate boards to develop and disclose a sustainability strategy, including appropriate due diligence throughout the supply chain, and measurable sustainability targets; and (ii) the possible need to clarify the rules according to which directors are expected to act in the company's long-term interest.
  • Collect evidence of undue short-term pressure from the capital markets on corporations and consider, if necessary, further steps based on this by Q1 2019.

The Action Plan states that the Commission will report on its implementation in 2019. The full text of the Commission's Action Plan is available here:

The Commission's press release is available here:

Commission Publishes Evaluation and Fitness Check Roadmap on Public Reporting by Companies

On 8 February 2018, the Commission published for comment a roadmap detailing the proposed scope of its fitness check exercise, which will assess whether the public reporting obligations (both financial and non- financial) of EU companies with limited liability are meeting their objectives.

This fitness check will cover the Accounting Directive (including non-financial reporting), the Transparency Directive, and the Regulation on International Accounting Standards (IAS), among others. It will cover the various reporting requirements currently in force, taking into account the latest amendments of the Accounting Directive and the Transparency Directive in 2013, and the IAS evaluation in 2015.

In particular, the main issues on which the Commission seeks feedback are:

  • Whether the current financial reporting framework meets its objective and will continue to do so.
  • Whether the level of harmonisation and simplification meets the needs of all the various types of companies across the EU.
  • Whether the disclosures in the area of environmental, social and governance reporting are fit for purpose.
  • Whether the integration of different sets of public reporting will make the EU reporting framework more effective.
  • Whether public corporate reporting takes enough consideration of digitalisation and technical progress.

Comments were invited by 8 March 2018 and the Commission intends to publish a staff working document ("Staff Working Document") in Q2 2019.

The full text of the evaluation and fitness check roadmap is available here:

Commission Launches Public Consultation on EU Framework on Public Reporting by Companies

On 21 March 2018, the Commission launched a public consultation aiming to take feedback from providers and users of financial and non-financial information regarding whether the EU framework on public reporting is still fit for purpose. This comes after the publication in February 2018 of the Commission's evaluation and fitness check roadmap on public reporting by companies, and is one of the actions announced as part of the Action Plan on financing sustainable growth published on 8 March 2018 that builds on the Commission's Final Report by its HLEG dated 31 January 2018.

The objectives of this consultation are:

  • To assess whether the EU public reporting framework is, overall, still relevant for meeting its intended objectives, whether it adds value at the European level, is effective, internally consistent, coherent with other EU policies, efficient and not unnecessarily burdensome.
  • To review specific aspects of the existing legislation as required by EU law.
  • To assess whether the EU public reporting framework is fit for new challenges (such as sustainability and digitalisation).

The replies to this consultation will feed into the Staff Working Document that the Commission intends to publish on this subject in Q2 2019.

The consultation closing date is 21 July 2018.

Information regarding the Commission's consultation is available here:

Commission Publishes Guidance on the 2018 Reform of Data Protection Rules

On 24 January 2018, the Commission published guidance on the reform of the EU data protection rules under the General Data Protection Regulation (GDPR), which will enter into application in May 2018. The guidance is contained in a communication to the European Parliament and Council titled "Stronger protection, new opportunities - Commission guidance on the direct application of the General Data Protection Regulation as of 25 May 2018."

The new regulation provides for a single set of rules directly applicable in all member states, but it still

requires significant adjustments in certain aspects, such as amending existing laws by EU governments and setting up the European Data Protection Board by data protection authorities. The guidance states the main innovations; the opportunities opened up by the new rules; takes stock of the preparatory work already undertaken; and outlines the work still ahead of the Commission, national data protection authorities and national administrations.

The guidance outlines the main elements of the new data protection rules:

  • One set of rules across the continent.
  • Same rules apply to all companies offering services in the EU.
  • New and stronger rights for citizens.
  • Stronger protection against data breaches.
  • Stronger rules and deterrent fines.

The Commission requested in its press release regarding the guidance that member states speed up the adoption of national legislation in line with the GDPR, noting that only two member states so far had already adopted the relevant legislation.

The Commission has also identified a need to step up awareness of the benefits of the GDPR and compliance efforts with SMEs. Therefore, on the same day, the Commission launched a practical online tool to help SMEs and other organisations to comply and benefit from the new data protection rules.

The full text of the Commission communication regarding the guidance is available here:

The background to the Commission guidance and related links are available here:

The Commission press release regarding the guidance is available here:

The Commission's online tool for SMEs is available here:

ESMA Publishes 2018 Regulatory Work Programme

On 1 February 2018, ESMA published its 2018 Regulatory Work Programme. The Regulatory Work Programme includes a list detailing the work to be done and consultations to be launched regarding various provisions of the Prospectus Regulation and the Market Abuse Regulation (MAR) in 2018.

The 2018 Regulatory Work Programme is available here:

ESMA Launches Stakeholder Survey

On 16 February 2018, ESMA launched a short stakeholder survey, seeking input from all market participants and other stakeholders on how they interact with ESMA. The survey asked questions such as what medium stakeholders used to interact with ESMA, and how they rated the quality of ESMA's responses to their


The survey was open for comments until 30 March 2018.

The survey and the explanation of the survey are available here:

A full overview of the ways ESMA currently interacts with its stakeholders can be found on the ESMA Website


ESMA Updates its Market Abuse Q&As

On 23 March 2018, ESMA updated its Questions and Answers (Q&As) on the MAR. The goal of the Q&A document is to promote common supervisory approaches in the application of the MAR and its implementing measures.

ESMA approved an update to the Q&As regarding Pillar 2 requirements and the obligation to disclose inside information. This is in order to fulfil the Minimum Requirement for own funds and Eligible Liabilities (MREL) exercise. MRELs should ensure that banks have enough capital and eligible liabilities to be bailed-in, where necessary, at all times. In the context of the MREL exercise (to be conducted by the Single Resolution Board in accordance with the Bank Recovery and Resolution Directive), whenever a credit institution subject to the MAR is made aware of information, it is expected to evaluate whether that information meets the criteria of inside information.

A main objective of the MAR is to enhance market integrity, and this is achieved through the prompt and fair disclosure of information to the public. Market abuse typically consists of insider dealing, unlawful disclosure of inside information and market manipulation. The ESMA press release is available here:

The full text of the updated ESMA Market Abuse Q&A is available here:

ESMA Updates its Prospectuses Q&A in Relation to the Identification of Profit Forecasts

On 28 March 2018, ESMA published the 28th updated version of its prospectuses Q&A. There is a new Question 102 assisting in the understanding of the meaning of profit forecasts. This is the result of an analysis of the definition of "profit forecast" in the Prospectus Regulation. The main points that ESMA notes include:

  • A profit forecast can refer to a range of figures, and need not refer to a precise figure.
  • Profit forecasts are a different item to the trend information requirement in item 12 of Annex 1 of the Prospectus Regulation (809/2004). Forecasts should therefore be clearly identified. In the same manner, a stated aim does not necessarily amount to a profit forecast, particularly if a specific figure is mentioned. Equally, saying that a form of words is not a profit forecast does not stop a profit forecast from counting as one, if that is indeed what it amounts to.
  • A profit forecast does not need to relate to the entirety of an issuer's results (for instance, it may refer to a segment of the issuer's business).
  • "Likely level of profits or losses" does not necessarily refer just to the profit or loss for the year, but may refer to other measures of profitability. ESMA has adopted a "substance over form" approach.

The full text of the updated ESMA Prospectus Regulation Q&A is available here:

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