Transparency Directive Review (DTR5)


Find out how UnaVista can help you report your EU shareholder disclosures

What is the EU Transparency Directive Review?

The 2013 EU Transparency Directive is an initiative which requires investors to notify both national governments and the issuer of the securities when they form a significant shareholding in or amount of voting rights in a particular company (typically 5% or greater). By giving regulators, investors and issuers knowledge of who owns significant voting rights in a particular company, it becomes easier to identify abusive activity, or covert hostile takeover attempts. As such, the spirit of this directive is primarily aimed at determining who is the ultimate beneficiary of any voting rights in a company, and because of this, its remit extends beyond normal shares into convertible bonds, single stock options, and other instrument types which potentially endow the owner with voting rights

Transparency Directive distinguishes between the concepts of home and host member state regulation, allowing the issuer’s home country regulator to impose more stringent Transparency Directive disclosure requirements than those set out in the directive but restricting the host competent authority from doing the same.

Transparency Directive has created ongoing disclosure requirements for issuers that have securities traded on a regulated EU market, for the benefit of their investors. There are three broad areas covered under the directive:

  • The minimum content of annual, half-yearly and interim management statements.

  • The notification requirements of both issuers and investors in relation to the acquisition and disposal of the major holdings in companies; issuer’s continuing obligations can now be found in the FSA’s Disclosure and Transparency Rules (DTR) 4, 5 and 6.

  • The method of disseminating and storing the information covered in the above on a pan-European basis.

The EU Commission are currently reviewing the Transparency Directive and introducing changes as part of its ‘Responsible Lending Initiative’ package of measures. The proposal requires:

  • Disclosure of major holdings.

  • Abolishment of the requirement to publish quarterly financial information.

  • Broadening definition of financial instruments.

The FSA’s Disclosure and Transparency Rules implement the Transparency Directive in the UK. DTR 5 is the fifth chapter and covers Vote Holder and Issuer Notification Rules. It requires disclosure of certain interests in voting shares:

  • Issued by a UK issuer and admitted to trading on a prescribed market (such as AIM) or,

  • issued by a UK or non-UK issuer and admitted to trading on an EEA regulated market.

When does the Transparency Directive Review begin?

The Transparency Directive was adopted in 2004 and written into UK law in January 2007. In November 2013 a new version of the directive was released to fill some of the holes of the previous regulation.

The deadline for ESMA to post a draft series of technical standards is November 2014. Post November 2014 the European Commission will approve the regulatory technical standards drafted by ESMA, and publish them. Consequently, we could see major changes in the implementations of the directive by individual member state – member states may require different securities to be included in calculations, and different ways of calculating potential percentage of voting rights also.

Which firms will be affected by Transparency Directive Review?

All issuers, who have securities admitted to trading on a regulated market situated or operated within the EU, will be covered by the Transparency Directive. The Transparency Directive will require these issuers to disclose periodic and ongoing information for investors on a Pan-European basis.

How will the Transparency Directive Review affect you?

Key points at a glance

The Transparency Directive prescribes the minimum content of annual, semi-annual and interim management statements.

Annual Accounts –In accordance with IAS; these must be made public, at the latest, four months after the end of the financial year. The annual report must include audited financial statements, a management report and statements by responsible persons. The financial statements of both EU and non-EU issuers have to be prepared in accordance with International Financial Reporting Standards (IFRS) (or an equivalent standard)

Half Yearly Reports – The management report is required to include an explanation of material events and transactions that occurred during the first six months of the financial year and the impact of these events on the issuer and its controlled undertakings financial position.

Interim Management Statements –The statement must include an explanation of material events and transactions in this period, their impact on the financial position of the issuer, and a description of their financial position and performance.

Disclosure of Major Shareholders’ transactions – The notification requirement is triggered when the size of holdings reaches, exceeds or moves below certain thresholds stated in the TD (starting from 5% for non UK issuers and from 3% for UK only) The shareholder is required to inform the issuer. The issuer must then inform the market.

The proposal for the TD review encapsulates the following changes:

Broadening of the definition of ‘financial instruments’ within the major shareholdings regime to include ‘instruments of similar economic effect’ (cashsettled instruments) – this is similar to requirements already implemented in the UK

  • Minimum requirements for sanctions
  • The removal of the IMS requirement
  • Obligation for issuers in the extractive industries to publish an annual report on payments to Governments (similar to proposed elements of the Dodd Frank Act in the US)
  • Movement towards increased interoperability between officially appointed mechanisms

Related regulations

If you are affected by the this regulation you may also be affected by these:

How can UnaVista help you with the Transparency Directive Review?

UnaVista can assist you with a number of regulations, so that you don’t have to build separate solutions for each problem, future regulations can then be catered for through the platform when required. UnaVista's Shareholder Disclosure solution allows you to address multiple global disclosure regulations through one interface. You can read about the full solution on this page - UnaVista Shareholder Disclosure solution.

UnaVista’s specific benefits around TD include:

  • Increased daily position comprehension; calculate your firm’s position in each relevant instrument for each trading day, accounting for both direct and indirect holdings

  • Enhanced risk reaction; provide graphical dashboards and reports to alert you if the initial disclosure thresholds (starting at 3% for the UK and 5% for non UK) are reached, enabling more informed business decisions.

  • Increased timeliness of compliance; ensure your personnel are able to make the required disclosures, to the appropriate party, in a timely and controlled manner.

  • Exception management: provide an exception handling workflow process tailored to your internal business processes.

  • Meet regulatory demands with access to external data feeds, report forms and templates by using the LSEG’s own data sources such as SEDOL Masterfile, FTSE and Regulatory News Service (RNS )