Overview

Transparency concerning publicly traded companies is essential for the proper functioning of capital markets. Investors need reliable and timely information about the business performance and the assets of the companies they invest in.

The EU has special reporting rules for issuers with securities admitted to trading on regulated markets.

Transparency directive

The transparency directive (2004/109/EC) requires issuers of securities traded on regulated markets within the EU to make their activities transparent, by regularly publishing certain information.

The information to be published includes:

  • yearly and half-yearly financial reports
  • major changes in the holding of voting rights
  • ad hoc inside information which could affect the price of securities

This information must be released in a manner that benefits all investors equally across Europe.

The transparency directive was amended in 2013 by Directive 2013/50/EU to

  • reduce the adminstrative burden on smaller issuers, particularly by abolishing the requirement to publish quarterly financial reports
  • improve the efficiency of the transparency system, particularly regarding publishing information on voting rights held through derivatives

Access to information

The transparency directive requires each EU country to establish a storage mechanism (officially appointed mechanism, OAM) to ensure the public can access the information disclosed by listed companies. However, access to such information on a pan-European basis is currently complicated and involves using different national databases that are not sufficiently interconnected.

In 2007 the Commission adopted a recommendation to encourage EU countries to take steps to effectively interconnect their storage mechanisms.

The revised transparency directive requires the creation of a central European electronic access point (EEAP) providing access to the different storage mechanisms. The European Securities and Markets Authority (ESMA) is now developing this central access point and will be responsible for its operation.

ESMA is also developing a harmonised electronic format for reporting. The format for annual financial reports will be mandatory as from 1 January  2020. It will make reporting easier and facilitate accessibility, analysis and comparability of reports.

The European Financial Transparency Gateway (EFTG)

The Commission undertook a Pilot project to assess the added value of using distributed ledger technologies as a back-end solution to implement the EU central access point (EEAP). The European Financial Transparency Gateway (EFTG) web portal gives an overview (demo) of the functionalities that could be offered.

Initiated by DG FISMA, the project is sponsored by the European Parliament and technically developed by the Commission’s IT services. Most of the OAMs joined the project either as observers or as active players. The EFTG relies on the Steem blockchain technologies and open source communities.