Implementation of the Transparency Directive - Investment Entities Listing Review
Comments from ACCA
June 2006
ACCA is pleased to comment on the section of consultation paper 06/04 which deals with the above issue. We comment below on some of the specific matters raised in the paper.
Q1 Interim management statements
The rationale for the inclusion in the Directive of provision for issuers to publish interim management statements rather than quarterly reports was to minimise the regulatory burden. We would not therefore think it appropriate for FSA rules to embellish the basic requirements if the Directive in this respect. We think the proposal to allow market practice to develop and to review the situation within two years is sensible.
Q12 Additional notifiable interests
We consider that the exemption for voting rights associated with positions recorded in institutions’ trading books should be continued, provided that the voting rights are not exercised or otherwise used. We also agree that stock lending should be made subject to the proposed restriction outlined in paragraph 3.20. We do, however, consider that, while there would be practical difficulties, there is a strong argument in principle for making contracts for difference subject to the notification rules, at least where these have a significant effect on the ownership and voting rights of a company. We accept that this would be difficult to achieve since there is no register for these instruments and hence no overall control over them. But conceivably, the CREST system could be used as the basis for a requirement for contracts to be reported to companies when they are written on their shares.
Q13 Notification thresholds
We consider that the current rules on notification thresholds are well understood by market participants and do not present practical difficulties in complying with them. We would therefore favour the retention of the content of the current rules. The stricter UK requirements will ensure a higher level of visibility as regards the identity of shareholders than is provided for by the Directive. It can be difficult enough at present trying to establishing the control of companies, and the Directive thresholds would, if enacted, add to this difficulty.
Q15 Should the FSA mandate the continued use of the PIP/SIP regime?
Since the PIP/SIP regime regulates the flow of information to the market, this should continue to be mandated by the FSA.
Liability of directors and auditors
We share the concern of those who have claimed that the requirements of the Directive risk extending the potential liabilities of directors and auditors of listed companies. We agree that this potential exists because of the implication in the Directive that the information to be provided by issuers is intended for the direct benefit of individual investors and even prospective investors, as opposed to the established understanding under UK company law that company reports satisfy directors’ obligations to report to the shareholder body as a whole on how they have fulfilled their stewardship functions. We are aware that the DTI has issued draft clauses on this matter under the draft company law reform bill and will be commenting to the DTI on their contents.