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Shareholder Rights Directive II (SRD 2): engine fire-up!

09/07/2019

By June 2019, the Member States of the European Union should have completed the transposition into each national law of the Shareholder Directive II (SRD 2), natural evolution of the 2007 SRD1.

In Italy, the Legislative Decree n. 49/2019 has been published on Italian Official Journal on June 10th, 2019.

The ambition of the Parliament and the European Council with this directive is to enhance shareholder’s position, encouraging a more active participation in the companies in which they invest and improving their interactive communication flows. This will affect investors and asset managers operating in Europe, but this is in the utmost interest of the companies and to safeguard their long-term stability.

The implementing regulation that constitutes its pivot was introduced with the form of “implementing act” to avoid the risk of incompatibility between national laws.

However, some elements of potential “inconsistency” emerged between the objectives totally subscribed by the intermediaries and the risks entailed by certain aspects of the regulatory framework. To name one, the goal of process efficiency (through the definition of ISO standards that allow the STP processing of information/instructions) with respect to which the directive leaves a rather wide space of discretion in the transposition leads to different obligations for intermediaries depending on the place of issuance of the shares.

Below, some aspects of greatest impacts deserve special attention in our opinion:

  • The implementing regulation only includes a minimum set of requirements and not a standard to be followed in its entirety.
  • The above once again raises the matter of the harmonization of European standards and in a certain sense does not help the challenging process of convergence towards common standards also applied/applicable to “cross-border” transactions.
  • Communications for issuers that do not always follow the “custody chain”.
  • Processes not yet included in the standards such as disclosures and voting confirmation, which require:
    • Definition of standard;
    • Creation of new messages to ensure a “machine-readable” communication process.

In terms of a common European process, among the main introduced news we can note the Shareholder Identification and the “cross-border” applicability of the regulatory framework. This means that all those who invest in the company to which the event refers must comply with the regulations introduced, regardless of whether the investor is resident or not in the country where the security is issued and/or listed.

Regarding national implementation (IT), the government act no. 71 concerning the transposition of the directive (EU) 2017/828 which modifies the directive 2007/36/EC has been subject to consultation and submitted to parliamentary opinion. The technical report of the Senate delegates to Consob, in agreement with the Bank of Italy, the power to adopt implementing provisions of the EU Directive as envisaged by Article 2 and reiterates that CONSOB, COVIP and IVASS are competent (each for the respective supervisory sectors) for the definition of the aspects linked to the sanctions introduced by the directive in art. 4.

Paola Deantoni Executive Management Senior Advisor Societe Generale Securities Services SpA
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