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Transparency Directive Adopted In European Union

by Ulrika Lomas, for, Brussels

21 December 2004

The European Commission last week welcomed the definitive adoption of the directive on minimum transparency requirements for listed companies.

The legislation is intended to raise the quality of information available to investors on companies’ performance and financial position as well as on changes in major shareholdings, which should contribute to better investor protection, enhanced investor confidence and a better functioning of European capital markets.

Under the terms of the directive, all securities issuers will have to provide annual financial reports within four months after the end of the financial year. Investors in shares will receive more complete half-yearly financial reports. In addition, those issuers who do not publish quarterly reports will need to provide quarterly management statements. Bond issuers will also be required to publish half-yearly reports.

It is hoped that the directive will improve the European dissemination of information on issuers, removing a barrier to cross-border investment.

Internal Market Commissioner Charlie McCreevy observed on Friday that:

“This is another important milestone towards the completion of the Financial Services Action Plan. The Directive is balanced: good for issuers and for investors. It is in companies’ own interest to invest in transparency to build loyalty and trust among present and future shareholders."

He continued:

"More disclosure will also, over time, lower companies’ capital costs and provide important discipline for management. More frequent, timely and reliable information from issuers will help re-instil confidence in European financial markets – confidence which is needed to ratchet up growth and give more impetus to the EU’s Lisbon strategy for making Europe more competitive."

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