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World Bank Workshop - 14 March 2006World Bank Workshop - 14 March 2006The disclosure of financial information The disclosure of financial information according to the Transparency Directiveaccording to the Transparency Directive

byby

Mina FilippaMina FilippaLegal Advisor/ Rapporteur for the Transparency Legal Advisor/ Rapporteur for the Transparency

DirectiveDirectiveCommittee of European Securities Regulators (CESR)Committee of European Securities Regulators (CESR)

Committee of European Securities Committee of European Securities RegulatorsRegulators

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OverviewOverview

I. IntroductionI. Introduction II. CESR and its role in the II. CESR and its role in the

Lamfalussy ProcessLamfalussy Process III. The Transparency Directive-III. The Transparency Directive-

General OverviewGeneral Overview IV. The financial information in the IV. The financial information in the

context of the Transparency context of the Transparency DirectiveDirective

V. Concluding remarksV. Concluding remarks

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Committee of European Securities Regulators: 27 members (EU+EEA).

Officially established in June 2001 by European Commission Decision background: Lamfalussy Report presented by a Committee of presented by a Committee of

Wise Men on the Regulation of European Securities MarketsWise Men on the Regulation of European Securities Markets Introduced a 4 level approach to the development of EU Introduced a 4 level approach to the development of EU

securities legislation – now extended to banking and insurancesecurities legislation – now extended to banking and insurance Role for CESR at Level 2 and 3 of Lamfalussy processRole for CESR at Level 2 and 3 of Lamfalussy process

Independent Committee regrouping senior representatives (Chairs and Senior Officers) from national public authorities competent in the field of securities regulation

Operational arrangements of CESR set out in a Charter. Exchange of confidential information among Members under signed MOU.

II. CESR and its role in the context II. CESR and its role in the context of the Lamfallussy processof the Lamfallussy process

A. What is CESRA. What is CESR

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B. Role of CESR and the B. Role of CESR and the Lamfalussy Process Lamfalussy Process

EU Directives and Regulations

LEVEL 1

LEVEL 1

Implementing Measures

LEVEL 2

LEVEL 2

EnforcementLEVEL

4

LEVEL 4

LEVEL 3

LEVEL 3

Increasing Supervisory ConvergenceGuidelines and Standards

THE FOUR LEVEL THE FOUR LEVEL PROCESSPROCESS

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B. Role of CESR and the Lamfalussy B. Role of CESR and the Lamfalussy Process Process

LEVEL 1 = general measures ; high level objectives ( = Directives)

LEVEL 2 = sets out technical requirements necessary to achieve objectives of Level 1 (=Directives or Regulations)

LEVEL 3= non-binding measures intended to foster consistent and uniform implementation (developed by CESR for use by its members )

LEVEL 4 = European Commission (EC) checks Member States compliance with EU legislation and may take action against Member States in case of breach of Community Law. CESR may contribute at level 4 by supplying information to the EC

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B. Role of CESR and the B. Role of CESR and the Lamfalussy Process Lamfalussy Process

LEVEL 2LEVEL 2

Commission Mandate to CESR

CESR‘s Final Advice sent to EU Commission

Proposal for Implementing Measures presented to ESC

Vote by ESC within 3 months

Adoption of Implementing Measures by EU Commission

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Preparation of Level 2 advices to the European Commission represented the largest part of CESR's activities until June 2004

Areas covered by CESR at Level 2: Prospectus and Transparency Directives, MiFid, Investment Management

Examples of CESR’s advices for Level 2 implementing measures in the area of financial information Prospectus implementing measures -> Regulation 809/2004 Prospectus implementing measures -> Regulation 809/2004

(information requirements for various types of prospectuses, (information requirements for various types of prospectuses, publication and advertisements) publication and advertisements)

Implementing measures of Transparency Obligations Directive: Implementing measures of Transparency Obligations Directive: dissemination of corporate information, notification of major dissemination of corporate information, notification of major shareholdings, various issues on interim information and shareholdings, various issues on interim information and equivalence of reporting duties for third country issuersequivalence of reporting duties for third country issuers

MiFID implementing measuresMiFID implementing measures

B. Role of CESR and the B. Role of CESR and the Lamfalussy Process Lamfalussy Process

Level 2Level 2

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Level 1 The Transparency Directive (adopted: 15.12.2004, The Transparency Directive (adopted: 15.12.2004,

transposition deadline: 20.1.2007)transposition deadline: 20.1.2007) Level 2:

European Commission’s Working DocumentEuropean Commission’s Working Document (under (under discussion in the EU institutions) on the issues of discussion in the EU institutions) on the issues of dissemination of information, major shareholdings dissemination of information, major shareholdings notifications, half-yearly financial statements and notifications, half-yearly financial statements and equivalence of third countries information.equivalence of third countries information.

CESR’s consultation paper CESR’s consultation paper (under public consultation until (under public consultation until the 31the 31stst of March) of March) on the storage and filing of regulated on the storage and filing of regulated informationinformation

Level 3 Not yet Level 4 Not yet

III. The Transparency III. The Transparency Directive-Directive-

General overviewGeneral overviewThe state of the TransparencyThe state of the Transparency

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IV. The Financial Information in IV. The Financial Information in the context of the Transparency the context of the Transparency

DirectiveDirective

Who has the obligations?Who has the obligations? All issuers of shares or debt securities All issuers of shares or debt securities

whose shares or bonds are admitted to whose shares or bonds are admitted to trading on a regulated market situated trading on a regulated market situated or operating in the EU.or operating in the EU.(Exemptions for state issuers, eurobond issuers and third (Exemptions for state issuers, eurobond issuers and third country issuers)country issuers)

Third country issuers whose securities Third country issuers whose securities are traded on a regulated market in the are traded on a regulated market in the EUEU(Except if they are subject to equivalent requirements in (Except if they are subject to equivalent requirements in their own country)their own country)

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A. The four obligations of the issuerA. The four obligations of the issuer

1.1. To publish its financial information in To publish its financial information in accordance with the Transparency accordance with the Transparency DirectiveDirective

2.2. To file its financial information with the To file its financial information with the competent authoritycompetent authority

3.3. To disseminate its financial informationTo disseminate its financial information4.4. To store its financial information in a To store its financial information in a

central storage mechanismcentral storage mechanism

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1. The issuer’s obligation to publish its 1. The issuer’s obligation to publish its financial information in accordance with financial information in accordance with

the Transparency Directivethe Transparency Directive

Annual Financial Report

– Audited financial statements– Management Report– Quality statementTime of publication: 4 months after the end of the preceding year

Half-yearly financial report– Condensed set of financial statements (not necessarily

audited)– Interim management report– Quality statementTime of publication: 2 months after the end of the semester

Interim management statements– Explanation of the material events and transactions

Time of publication: 10 weeks after the beginning of the quarter and six weeks before its end

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Who is responsible for the financial Who is responsible for the financial information information

At least:At least: The issuer The issuer oror Its administrative, management Its administrative, management

and supervisory bodiesand supervisory bodies The persons responsible within The persons responsible within

the issuerthe issuer

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2. The issuer’s obligation to file its 2. The issuer’s obligation to file its financial information with the Competent financial information with the Competent

AuthorityAuthority

The issuer must file its financial information with

the competent authority of his home member- state

The competent authority may decide to publish it on its website

The competent authority should comply with minimum standards such as security standards and standards as to the information source (authentication)

CESR encourages but not mandates the electronic filing

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3. The issuer’s obligation to disseminate its 3. The issuer’s obligation to disseminate its financial informationfinancial information

The issuer shall disseminate its financial The issuer shall disseminate its financial

information by using the media. The issuer may information by using the media. The issuer may use a service provider to send the information to use a service provider to send the information to the media.the media.

The information should be pushed to investorsThe information should be pushed to investors The information should be disseminatedThe information should be disseminated

– In a manner ensuring fast accessIn a manner ensuring fast access– On a non-discriminatory basisOn a non-discriminatory basis– With the use of media that may ensure effective With the use of media that may ensure effective

dissemination to the public throughout the EUdissemination to the public throughout the EU– Without charging investors any specific cost Without charging investors any specific cost

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4. The issuer‘ s obligation to make 4. The issuer‘ s obligation to make available its financial information in a available its financial information in a

central storage mechanismcentral storage mechanism

Member states must appoint a national Member states must appoint a national storage mechanism (called the“officially storage mechanism (called the“officially appointed mechanism“- OAM)appointed mechanism“- OAM)

All the national storage mechanisms will be All the national storage mechanisms will be interconnected at the EU levelinterconnected at the EU level

The issuer will make its information available The issuer will make its information available at his national storage mechanismat his national storage mechanism

Through the EU network this information will Through the EU network this information will be accessible to all EU investors irrespective be accessible to all EU investors irrespective of where they are situatedof where they are situated

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B. Other issuesB. Other issues1. The language of the financial 1. The language of the financial

informationinformation

3 3 casescases Where the securities are admitted Where the securities are admitted only in the Home member- stateonly in the Home member- state

– In a language accepted in the Home member stateIn a language accepted in the Home member state(no choice of the issuer)(no choice of the issuer)

Where the securities are admitted Where the securities are admitted in the Home and in a Host member- in the Home and in a Host member- statestate– In a language accepted in Home member-state andIn a language accepted in Home member-state and

at the choice of the issuerat the choice of the issuer– EitherEither in a language accepted in Host member state – Or Or in a language customary in the sphere of international financein a language customary in the sphere of international finance

Where the securities are admitted Where the securities are admitted onlyonly in a Host member- statein a Host member- stateat the choice of the issuerat the choice of the issuer– EitherEither in a language accepted in Host member state in a language accepted in Host member state – Or Or in a language customary in the sphere of international financein a language customary in the sphere of international finance

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2. Supervision and Penalties2. Supervision and Penalties

The home country controlThe home country controlCompetent authority is the authority of the issuer’s Competent authority is the authority of the issuer’s home member state (usually where its registered home member state (usually where its registered office is)office is)

The powers of the competent authoritiesThe powers of the competent authoritiesExtended supervisory and investigatory powers Extended supervisory and investigatory powers including the power to ask for additional information including the power to ask for additional information and documents, to suspend trading and to carry out on and documents, to suspend trading and to carry out on site inspectionssite inspections

PenaltiesPenaltiesTo be provided by the national legislation but at least To be provided by the national legislation but at least civil or administrative penalties. Penal sanctions are civil or administrative penalties. Penal sanctions are also possibe.also possibe.

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Where you can find the relevant Where you can find the relevant documentsdocuments

The Level 2 Working Document of the European The Level 2 Working Document of the European Commission on dissemination, major shareholdings Commission on dissemination, major shareholdings and equivalence of informationand equivalence of informationhttp://www.europa.eu.int/comm/internal_market/securities/transparency/indehttp://www.europa.eu.int/comm/internal_market/securities/transparency/index_en.htmx_en.htm

CESR’s technical advice on dissemination, major CESR’s technical advice on dissemination, major shareholdings and equivalence of information andshareholdings and equivalence of information andCESR’s consultation paper on the storage and filing of CESR’s consultation paper on the storage and filing of the informationthe informationhttp://www.cesr-eu.org/index.php?page=contenu_groups&id=41&docmore=1http://www.cesr-eu.org/index.php?page=contenu_groups&id=41&docmore=1#doc#doc

Further questions?Further questions?mfilippa@cesr-eu.orgmfilippa@cesr-eu.org;;