Minister Michael Ahern announces introduction of new regulations implementing the EU Transparency Directive

Mr. Michael Ahern, Minister of State at the Department of Enterprise, Trade and Employment to-day (14^th June 2007) announced the introduction of new regulations implementing the EU Transparency Directive and related regulations entitled European Communities (Admission of Listing and Miscellaneous Provisions) regulations which take effect from 13^th June 2007.

The Transparency Directive, which is one of the key measures adopted in the EU as part of the Financial Services Action Plan(FSAP), is designed to enhance transparency on EU capital markets by requiring issuers admitted to trading on a regulated market to produce periodic financial reports (annual and half yearly) along with quarterly management statements and shareholders in such companies to disclose major holdings when acquisitions or disposals cause these to reach or breach certain thresholds. The Transparency Directive also deals with the mechanisms through which this information is to be disseminated to the public and stored.

The Transparency Directive replaces and updates parts of the existing EU legislation in this area – the Consolidated Admissions and Reports Directive (2001/34/EC

The Financial Regulator has been designated as the central competent authority with responsibility for carrying out and ensuring the obligations provided for in the Transparency Directive and also ensuring that the provisions adopted in the regulations pursuant to the Transparency Directive are applied. The Irish Auditing and Accounting Supervisory Authority (IAASA) has also been designated as competent authority for ensuring that the periodic financial reporting requirements of the Transparency Directive (annual and half yearly reports) are complied with.

Commenting on the publication of the Regulations Minister Ahern expressed confidence that “the focus on disclosure of accurate, comprehensive and timely information by issuers and shareholders in relation to major holdings in the issuer would facilitate a more informed assessment of issuers business performance and assets and changes in ownership of its capital thereby helping to build greater investor confidence and enhance investor protection and market efficiency in the process.”

Mr. Ahern has also announced the introduction of new Regulations entitled European Communities (Admission to Listing and Miscellaneous Provisions) Regulations 2007. These effectively replace what is left of the European Communities (Stock Exchange) Regulations 1984 (S.I. 282 of 1984), namely “admissions to listing” matters, as a result of their further amendment arising from the Transparency Directive. These Regulations also take effect from 13^th June 2007

The Irish Stock Exchange will continue as competent authority for the purposes of these Regulations.

Commenting on the publication of the Regulations Mr. Ahern “expressed the hope that these new regulations would prove to be more user friendly for practitioners by reflecting more clearly what remains of the former 1984 Regulations following the implementation of the Transparency Directive.”

http://www.djei.ie/commerce/companylawlegislation/transparency.htm

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Note for Editors

Purpose of Transparency Regulations

These Regulations together with some provisions provided in primary law (Investment Funds, Companies and Miscellaneous Provisions Act 2006) and any rules made by the central competent authority under regulation 40(3) of the Regulations, will transpose the EU ‘Transparency’ Directive (Transparency Directive) into Irish law. The Regulations, entitled European Communities Transparency (Directive 2004/109/EC) Regulations 2007 (S.I. - of 2007 take effect from 13^th June 2007.)

Transparency Directive- 2004/109/EC

The Transparency Directive (Transparency Directive) is made up of the co- decision framework Directive 2004/109/EC and Commission Directive 2007/14/EC which provides additional implementing detail in relation to certain provisions of the framework Directive.

Key provisions of Transparency Directive:

Applies to issuers with securities admitted to trading on a regulated market in the Community.

Requires issuers to produce annual and half yearly reports, and issuers of shares to also produce interim management statements.

Establishes requirements for the disclosure of acquisitions or disposals of major shareholdings by investors.

Requires issuers to disseminate Transparency Directive information in a timely manner on a pan-European basis.

Requires the establishment of at least one officially appointed mechanism for the central storage of such information.

Periodic Reporting Requirements

The Transparency Directive requires regulated market issuers to disclose annual and half-yearly financial reports. These are comparable to the ‘annual report and accounts’ and ‘half-yearly reports’ required under existing Company Law and Listing Rules. Under the Transparency Directive, the issuer has to make public its annual financial report which is made up of its audited financial statements, a management report, the audit report and an appropriate statement of assurance from persons responsible in the issuer. For half-yearly reports, the Transparency Directive requires an issuer to make public a condensed set of financial statements, an interim management report and an appropriate statement of assurance from persons responsible in the issuer.

Many of the Transparency Directive requirements are based on and replace comparable provisions of existing EU law in this area - the Consolidated Admissions and Reporting Directive (2001/34/EC).

Regulated market issuers of shares will also have to produce interim management statements during each half-year. Existing Company Law and Listing Rules do not require the production of such statements. Interim management statements will have to include an explanation of material events and transactions that have taken place during the relevant period, their impact on the financial position of the issuer and a general description of the financial position and performance of the issuer during the relevant period. The requirement to produce an interim management statement does not apply if the issuer already produces quarterly financial reports.

Disclosure of major shareholdings

The Transparency Directive sets out requirements for the disclosure of major holdings of shares by investors. Where a shareholder acquires or disposes of shares of an issuer to which voting rights are attached and which are admitted to trading on a regulated market, that shareholder must notify the issuer if the proportion of voting rights they hold reaches, exceeds or falls below the thresholds set out in the Transparency Directive (article 9) The Transparency Directive extends this basic notification requirement to certain situations where a person is entitled to acquire, to dispose of, or to exercise voting rights.(article 10) The basic notification requirement is further extended to include financial instruments that result in an entitlement to acquire shares to which voting rights are attached(article 13).

However, to avoid unnecessary burdens for certain market participants and allow for greater clarity about who actually exercises influence over an issuer, the Transparency Directive allows for certain market participants, such as custodians and market makers, to be exempted from the notification requirements.(article 9)

Article 12 sets out the procedures governing the notification and disclosure of major holdings while article 11 provides for certain exemptions in respect of ECB.

In addition issuers, with a view to facilitating notifications by investors, must make public information on acquisitions/disposals of own shares (article 14) and total number of voting rights and capital on a regular basis (article 15).

Finally a person making a notification to an issuer is also required to notify the competent authority of the home member state at the same time.(article 19.3).

Dissemination of Regulated Information

The Transparency Directive also sets out requirements for the dissemination of all ‘regulated information’. Regulated information, broadly speaking, is the information issuers are required to announce to the market under the Transparency Directive, article 6 of the Market Abuse Directive (e.g. inside information) and any further information which the home Member State may require. The Transparency Directive requires Member States to ensure that regulated market issuers disclose regulated information in a manner which ensures fast access to such information on a non-discriminatory basis and make it available for central storage at an ‘Officially Appointed Mechanism’ (see separate note below on this).

While the Transparency Directive does not mandate a dissemination model, article 12 of the Commission Directive sets out minimum standards which must be complied with.

Central Storage of Regulated Information

Article 21 of the Transparency Directive requires Member States to ensure the existence of at least one ‘Officially Appointed Mechanism’ (OAM) for the central storage of regulated information disclosed under the Transparency Directive. The OAM must meet minimum standards of security and certainty about the information source, time-recording and easy access by end-users. It must also be aligned with the procedures for filing regulated information with the competent authority.

However, the details of these standards have yet to be finalized by the Commission. Pending the introduction of the detailed OAM standards, Member States are permitted to implement an interim solution to meet the requirement to appoint an OAM.

More Stringent Provisions

Article 3.1 of the Directive allows Member States to impose more stringent requirements in situations where a Member State is the “home Member State” for a particular issuer/shareholder having to make notifications.( The ‘home Member State’ determines which regulatory authority has responsibility for a particular issuer.)

In addition to transposing the provisions of the Directive the Regulations (regulation 40(3)) gives power to the competent authority (Financial Regulator) to apply through their rules more stringent requirements to such issuers/shareholders.

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