15 Transparency in trading of securities
| (24415)
8062/03
COM(03) 138
| Draft Directive on harmonisation of transparency requirements with regard to information about issuers whose securities are admitted to trading on a regulated market and amending Directive 2001/34/EC.
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| Legal base | Articles 44 and 95 EC; co-decision; QMV
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| Department | HM Treasury |
| Basis of consideration | Minister's letter of 3 December 2003
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| Previous Committee Report | HC 63-xxxviii (2002-03), paragraph 5 (19 November 2003)
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| To be discussed in Council | Not known
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| Committee's assessment | Politically important
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| Committee's decision | Cleared
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Background
15.1 The EU's Financial Services Action Plan (FSAP), published
in May 1997, focuses on legislative action necessary to establish
an integrated European financial services market. The FSAP is
a key priority of the Lisbon Agenda of economic reform.
15.2 In November 2003 we left uncleared a draft Transparency Directive
proposed by the Commission as part of the FSAP. It would establish
rules on periodic financial reports and disclosures of major shareholdings
for companies whose securities are traded on a regulated market
in the Community. The Commission says the draft Directive seeks
"to impose a level of transparency and information commensurate
with the aims of sound investor protection and market efficiency."
As we reported then the Minister had usefully updated us on progress
on the proposal and on the views of interested parties. But we
decided to hold the document under continued scrutiny whilst asking
the Minister for a more explicit statement of the Government's
view of the overall intention of the draft Directive and of its
more important provisions, such as the matter of mandatory quarterly
reports.
The Minister's letter
15.3 The Financial Secretary to the Treasury (Ruth Kelly) writes
now to say that during continued intensive negotiations a Presidency
text moved considerably to the UK's advantage and that this text
was the basis of a general approach adopted by the Council on
25 November 2003. She tells us:
"The Government welcomes the improvements contained in the
general approach, in particular with regard to the issues of quarterly
reporting and liability. We believe that the Presidency text represents
a very good outcome for the UK and manages to address the key
concerns of all Member States."
15.4 On important issues in the draft Directive the Minister says:
"On quarterly reporting, the Presidency text has moved
away from the Commission's original proposal of mandatory quantitative
reporting on a fixed quarterly cycle. It now requires companies
that have shares on EU markets and that do not disclose quarterly
financial reports to disclose qualitative information about the
company's performance on an ad hoc basis in the six-month periods
following the date of their annual and half-yearly reports, respectively.
"Importantly, the Presidency text allows the
UK largely to continue to rely on its tried-and-tested forms of
ad hoc disclosure, commonly referred to as trading statements,
while ensuring sufficient transparency of information about companies'
performance across the EU. We now estimate that the additional
burden and costs placed on UK companies as a result of the requirement
for ad hoc qualitative reporting will be marginal, mostly resulting
from the need to check compliance with the harmonised content
requirements stipulated by this Directive.
"We have also secured a number of drafting changes
that help to address our concerns on the Directive's impact on
existing laws on civil liability. As regards Directors'
liability, we have now secured sufficiently flexible drafting
that would allow us to implement the Directive in a way that would
make it clear that annual reports etc. are prepared for the purposes
of the issuer and its shareholders and are then made available
to the wider public.
"On auditors liability, we believe that the
drafting now contains more flexibility for responsibility for
the disclosure of auditor reports to fall on issuers only, rather
than on issuers and auditors. The scope for a court in the future
to find that an auditor owes a statutory duty to somebody other
than the issuer, which would have represented a significant widening
of auditor liability, is reduced, but not excluded."
15.5 The Minister says that it is hoped to have a
"single joint reading" on the proposal with the European
Parliament, following negotiation between it and the Council,
in April 2004. This would be on the basis of amendments consistent
with the Presidency text. Failing this, the European Parliament
would conclude its first reading in February or March 2004 and
the Council would then reach formal political agreement, to be
followed by a European Parliament second reading in the Autumn
of 2004.
Conclusion
15.6 We are grateful to the Minister for this
further update on progress on the measure and for the statement
of the Government's view of the overall aim of the draft Directive
as it now stands. We clear the document.
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