EC Proposes Investor Protection Directive

by Ulrika Lomas, for LawAndTax-News.com, Brussels

28 March 2003

The European Commission on Wednesday unveiled plans for a new directive introducing minimum transparency requirements for listed companies within the EU, with the aim of increasing investor protection.

Recommendations contained within the directive called for increased reporting from publicly quoted companies, with all issuers of securities required to produce an audited annual financial report and management report, and a semi-annual condensed financial report and updated management report.

Under the terms of the proposed law, less extensive quarterly reports must also be produced by share-issuing companies for the third and fourth quarters, and issuers of debt securities - currently not subject to any interim reporting requirements - will be obliged to publish a report for the first six months of the year alongside the full year report.

Speaking on Wednesday, Internal Market and Taxation Commissioner, Frits Bolkestein explained that:

'This proposal aims to ensure that investment decisions are based on sound information about issuers of securities - information available to all investors, large and small, experts and non-experts. Better informed investment decisions will lead to better allocation of capital. That will help both listed companies and investors and bring enormous benefits for the European economy as a whole.'

'A true Internal Market in financial services needs investors to be able to invest across borders easily and with confidence. I want to achieve that without excessive burdens on issuers.'

In order to reduce the compliance burden on issuers whose securities are traded in several EU member states, the directive also contains a provision whereby 'when disclosing information to a host member state market, such issuers would be able to use, in addition to the language of their own home member state, a language customary in the international sphere of business'.

This comes in response to points raised by many European companies during the two year consultation period, who argued that having to produce information in several different languages is both costly and burdensome.

The proposed directive will now go before the European Parliament and the EU's Council of Ministers.

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