September 10, 2020 marked the deadline for member states of the European Financial Space (EEA) to implement new measures required by the Shareholder Rights Directive II (SRD II).
SRD II, which got here into power on June 09, 2017, amends the Shareholder Rights Directive to strengthen shareholder engagement, enhance transparency, and enhance company governance in firms whose securities are traded on the European Union’s (EU) regulated markets.
Key modifications embody the identification of shareholders once they maintain greater than a threshold share of situation capital, elevated rights for buyers and shareholders at normal conferences, entry to funding technique info, and higher insights into proxy advisors’ actions and the way they set up voting directions.
Globally, the directive is far-reaching as a result of it impacts all companies that maintain or commerce shares in EU-based issuers listed on regulated EU markets, no matter the place they’re primarily based.
Which means any firm that gives companies similar to safekeeping of EU shares, administration of EU shares or upkeep of securities accounts on behalf of shareholders within the EU, should adjust to SRD II. And that goes for Swiss intermediaries and proxy advisors that perform actions in relation to shares of EU firms.
Rising demand for transparency
As mentioned in Bottomline’s whitepaper leveraging their expertise of supporting 40+ prospects in SRD II compliance; How will SRD II positively impression the securities trade in 2020 and past?, regardless of the problems raised, the price of implementation and busy regulation roadmaps, SRD II has the potential to revolutionise company funding and encourage investor confidence
“As a result of SRD II requires asset managers to doc and publicize their funding technique, shareholders acquire larger visibility and knowledge, and are thus capable of make higher, extra knowledgeable selections,”
stated Frédéric Viard, Product Director – Securities at Bottomline.
SRD II is a brand new kind of company motion designed with new flows and new requirements aiming at extra automation and pace. The directive additionally gives issuers with elevated choices to place and disclose their methods with a view to acquire market share”
And since the directive offers shareholders the possibility to vote on director’s remuneration, it gives actual readability on the businesses they’re investing in and represents a vital step in avoiding any future scandals by creating a brand new platform for investor confidence, the paper stated.
Not solely that, however since SRD II requires all events to move info down the chain of intermediaries in a well timed and safe method, it is also a catalyst for change, accelerating adoption of expertise to enhance operational effectivity and enhance automation.
“SRD II is assembly evolving buyer expectations. Buyers will prefer it as a result of they want transparency and they’re taking a look at firms with robust charges in governance. SRDII is a part of that and empowers buyers far more than ever earlier than and that is appreciated by the market,”
Some specialist proxy voting and disclosure-handling firms are already exploring the usage of distributed ledger expertise (DLT) as a extra environment friendly approach of sharing shareholder info.
Delays and tech points
SRD II might need been in impact since final 12 months, nevertheless it’s nonetheless very a lot within the early phases of a full and seamless adoption throughout EU regulated markets.
As of January 2021, seven nations had not but absolutely transposed the necessities into nationwide regulation, particularly Cyprus, Liechtenstein, Poland, Portugal, Slovenia, Spain, and Sweden, and two nations, Norway and Iceland, have been nonetheless awaiting the EEA settlement to be up to date earlier than they transposed the directive.
“SRD II is a brand new kind of company motion designed with new flows and new requirements aiming at extra automation and pace. The directive additionally gives issuers with extra choices to place and disclose their methods with a view to acquire market share,”
For the reason that guidelines are being utilized otherwise throughout European markets, many market individuals have indicated technical points and delays in requests for info. Along with that, some intermediaries don’t but have programs in place that enable them to course of disclosure requests.
Beneath SRD II, intermediaries are required to transmit info on the identical enterprise day, and to make any disclosures by the top of the next enterprise day.
Penalties for non-compliance with SRD II range on a member state by member state foundation, and plenty of jurisdictions have already confirmed they may levy fines for non-compliance with necessities.
Featured picture credit score: edited from Unsplash