The Transparency Obligations Directive is another key element of the Financial Service Action Plan, designed to improve the timeliness and disclosure of share issuers throughout the reporting cycle. Current practice varies across the EU, and certain elements of the proposed Directive will require significant changes in some Member States.
The Transparency Directive is due to be implemented in 2005, the same year in which International Accounting Standards will be introduced. This latter will be a significant change for companies, but also for their investors and analysts, who will have to work to understand the changes to the presentation of accounts. The timing of the Transparency Directive could therefore be problematic for companies and their shareholders.
In the wider policy context, there are aspects of the Transparency Directive also contained in the Commission’s Action Plan on Corporate Governance and Company Law, for example regarding directors’ liability. A further issue is the application of the Directive to third country issuers, and the question of equivalence of requirements, particularly regarding accounting standards.
The key provisions of the draft Directive relate to annual, half-yearly and quarterly reports, where the Commission sets out detailed requirements for the frequency and content of reporting. Regular and ad-hoc dissemination of price-sensitive events is an important part of a company’s relationship with the market, but this is not fully addressed in the proposals. It is important to provide a sensible disclosure regime for major shareholding in order to avoid confusion of the markets and unnecessary red tape.
Investors should have easy access to the information which they require, and in a format which is useful to them, both in terms of quality and frequency. The Commission proposals explore dissemination of information by electronic means, which has the potential of developing into an efficient method of communication by companies.