On 17 August 2015, the Luxembourg Parliament issued the Bill of Law n°6860 regarding the transposition of Directive 2013/50/EU(1) of the European Parliament and of the Council of 22 October 2013 amending:
- Directive 2004/109/EC of the European Parliament and of the Council on the harmonisation of transparency requirements in relation to issuers whose securities are admitted to trading on a regulated market (the “Transparency Directive”),
- Directive 2003/71/EC of the European Parliament and of the Council on the prospectus to be published when securities are offered to the public or admitted to trading (the “Prospectus Directive”) and
- Commission Directive 2007/14/EC laying down detailed rules for the implementation of certain provisions of Directive 2004/109/EC (the “Revised Transparency Directive”).
The Bill n° 6860 is divided into three chapters:
- the first one dealing with the amendments to the law of 11 January 2008 relating to transparency obligations for issuers of securities, as amended (the “Transparency Law”),
- the second one dealing with the amendment of the law of 10 July 2005 on prospectuses for securities (the “Prospectus Law”) and
- the third one containing implementation provisions.
Main changes brought by the transposition of the Revised Transparency Directive:
The European Commission(2) identified the following two main objectives of the Revised Transparency Directive: (1) close the existing gap in the notification requirements and (2) reduce administrative burden and encourage long term investment, especially for small and medium issuers (“SMIs”)
(1) Close the existing gap in the notification requirements
In the framework of the impact assessment of the Transparency Directive, it has been noted that holdings of certain types of financial instruments that can be used to acquire economic interest in listed companies without acquiring shares were not covered by the current disclosure rules, which could eventually lead to secret stake-building and possible market abuse situations (e.g. cash-settled derivates).
Thus, the Revised Transparency Directive now requires the disclosure of major holdings of all financial instruments (the definition of which is broadened to all instruments of similar economic effect to holdings of shares and entitlements to acquire shares, whether giving right to a physical settlement of not) that could be used to acquire economic interest in listed companies and have the same effect as holdings of equity.
Moreover, holdings of shares and holdings of financial instruments will, for the sole purpose of calculation of the thresholds triggering the notification requirement, be aggregated, it being understood that the amount of holdings of shares and the amount of holdings of financial instruments will be specified separately in the notification in order to avoid any confusion as to the nature of holdings.
The Bill n°6860 will implement these new notification requirements through the amendment of article 12 of the Transparency Law.
(2) Reduce administrative burden and encourage long term investment
As the currently required format and the short-term view of the quarterly financial statements caused a non-proportionate burden on issuers, especially SMIs, in comparison to the benefits in term of transparency, the revised Transparency Directive abolishes the obligation to publish such quarterly financial statements. In this context, it can be noted that the impact assessment carried out at the request of the European Commission has shown that quarterly financial information is not necessary for investor’s protection, that is sufficiently guaranteed through the mandatory disclosure of half-yearly and yearly financial results and the disclosures required by the Market Abuse Directive.
At the same time, the Revised Transparency Directive provides for derogation to the said abolishment and grants the possibility to home Member States to require issuers, under specific conditions only, to publish additional periodic financial information on a more frequent basis(3).
From a Luxembourg point of view, it may be stressed that the Bill n°6860 does not opt for such a requirement by leaving in place the existing provisions according to which an issuer, for which Luxembourg is the home Member State and whose shares are admitted to trading on a regulated market, may make public quarterly financial statements on a voluntary basis.
Additional changes brought by the transposition of the Revised Transparency Directive:
- New definition of home Member State: in order to ensure supervision by the most relevant Member State, the new definition provides for greater flexibility for situations where the securities of an issuer incorporated in a third country are no longer admitted to trading on the regulated market in its home Member State but instead are admitted to trading in one or more other Member States;
- Creation of a centralised storage system: in order to centralise all regulated information in one place, a European electronic access point to regulated information will be developed and operated by ESMA;
- New minimum standards on sanctions: Member States are required to adopt such standards, including types and addressees of sanctions, the level of fines, the criteria for the application of sanctions and their publication.
The Revised Transparency Directive is expected to be in line with the flagship project of the European Commission and its President Jean-Claude Juncker, the capital markets union (CMU)(4), although it has been adopted before.
The content of this article is intended to provide a general overview to the subject matter. Please contact Michel Bulach, Banking & Finance Partner, should you require any further information.
(1) See our article on the adoption of Directive 2013/50/EU: Amendment of Transparency Directive
(2) MEMO 13/544, FAQ on revised transparency directive
(3) Article 5 of the Transparency Law and article 4 of Grand-ducal Regulation of 11 January 2008 on transparency requirements for issuers of securities
(4) See our previous article on the CMU: Creation of a Capital Markets Union: the ambitious project of the European Commission