The Transparency Directive: A Choice And A Deadline

Many issuers of securities admitted to trading on regulated markets in Europe, particularly non-European issuers, have a choice of home member state for the purposes of their obligations to file and publish annual reports, half-yearly reports and other information under the Transparency Directive (2004/109/EC). A deadline of 27 November 2015 is now looming for any such issuer which has the right to make such a choice but has not yet done so.

What is the Transparency Directive?

The function of the Transparency Directive regime is to ensure that, for all securities admitted to trading on a regulated market in any member state, certain minimum standards are observed throughout the European Economic Area (EEA) for the provision of routine information to the holders of those securities and potential investors. The principal requirements of the Transparency Directive regime are for an issuer to publish periodic financial reports (an annual report and a half-yearly report) and other information important to holders of the issuer's securities and potential investors, such as information concerning changes to the rights attaching to those securities or meetings of holders of those securities and, in the case of shares, information concerning major shareholdings.

Home member state

An issuer's obligations under the Transparency Directive regime will be determined by reference to the requirements of its home member state for Transparency Directive purposes (this may not be the same as its home member state for other purposes such as Prospectus Directive (2003/71/EC) purposes). For an issuer incorporated in an EEA member state which has its shares (or debt securities with a denomination of less than €1,000 (or equivalent)) admitted to trading on a regulated market, there is no choice: its home member state is the member state in which it is incorporated. Any other issuer will have a choice.

Issuers having a choice of home member state

For an issuer not incorporated in an EEA member state which has its shares (or debt securities with a denomination of less than €1,000 (or equivalent)) admitted to trading on a regulated market, the issuer may choose its home member state from among the member states in which it securities are admitted to trading on a regulated market. Any other issuer, wherever incorporated, of any other securities may choose its home member state from among the member states in which its securities are admitted to trading on a regulated market and, if applicable, the member state in which it is incorporated.

27 November 2015 deadline

Any issuer which has the right to make a choice of home member state for Transparency Directive purposes but has not notified such a choice to the competent authority of its home member state by 27 November 2015 will face a deadline to make such a choice. Any such issuer will have a period of three months from 27 November 2015 to disclose its choice, failing which its home member state for these purposes will be:

• the member state where the issuer's securities are admitted to trading on a regulated market; or
• where the issuer's securities are admitted to trading on regulated markets situated within more than one member state, all those member states until a subsequent choice of a single home member state has been made and disclosed by the issuer.

Securities not admitted to trading by 27 November 2015

For any issuer whose securities are admitted to trading on a regulated market in a member state for the first time on or after 27 November 2015 and which has the right to choose a home member state for Transparency Directive purposes but fails to do so, the same provisions will apply except that the period of three months will begin on the date the issuer's securities are first admitted to trading on a regulated market.

Disclosure of choice

An issuer that has made a choice of a home member state for Transparency Directive purposes must:

• publish its choice of home member state in the same manner as the Transparency Directive requires all regulated information to be published; and
• disclose its home member state to the competent authority of the member state where it has its registered office (if applicable), to the competent authority of the home member state and to the competent authorities of all host member states.

However, an issuer which has the right to make a choice of home member state for Transparency Directive purposes and has communicated that choice to the competent authority of its home member state prior to 27 November 2015 is exempted from these other disclosure requirements unless it chooses another home member state after 27 November 2015.

Why is this choice important?

From a legal perspective, the Transparency Directive is a minimum harmonisation Directive so member states have a discretion to impose more onerous requirements. Also, from a practical perspective, an issuer may have a preference for a competent authority with which it is familiar and which works in a language with which the issuer is comfortable. Finally, an issuer which has the ability to choose but which fails to make a choice may find it has the burden of having to deal with more than one competent authority.

Why now?

These requirements were inserted into the Transparency Directive by Directive 2013/50/EU which entered into force on 26 November 2013 with an implementation deadline of 26 November 2015. These requirements have been implemented in the UK by: (i) the Transparency Regulations 2015 (SI 2015 No. 1755) with effect from 1 November 2015 for the purposes of making rules under Part VI of the Financial Services and Markets Act 2000 and for all other purposes with effect from 26 November 2015; and (ii) the FCA making changes to the Transparency Rules in the FCA Handbook, again with effect from 26 November 2015.