Implementation of SRD II is a current topic. What is the present situation and how is the central depository prepared?
The aim of the Directive 2007/36/EC of the European Parliament and of the Council on the exercise of certain rights of shareholders in listed companies (SRD II) is to facilitate communication between the shareholders and issuers. The implementation applies to companies with registered office in the EU Member State, whose shares are admitted to trading in the regulated market located or operating within the Member State of the EU. From 3 September 2020 the intermediaries, it means also Centrálny depozitár cenných papierov SR, a.s. (CDCP) and it’s participants who keeps accounts for their clients have to inform an issuer, based on its request, on identification data on all its shareholders that have share on its registered capital or on voting rights higher than 0.5 %. CDCP is also obliged to forward the issuer’s request to other intermediary to whom it administers an account.
The intermediaries have to forward without delay the information from the issuer to a shareholder recorded in their registry. It means they shall forward the information the issuer has to provide to a shareholder to enable him to exercise the shareholder rights flowing from his shares. The information is meant for all shareholders owning the same type of shares. An announcement in which the central depository specifies link to the issuer’s website, where respective information can be found in case the information is available to the shareholders on the website of the issuer is included.
Attempt to postpone the date of entry into force of SRD II
Since readiness of the financial markets to implement SRD II originally planned on 3 September 2020 was not satisfactory, the letter was sent to the European Commission on 9 April 2020 by which the industry associations (the European Banking Federation, the European Central Securities Depositories Association, the Association of Global Custodians, the International Securities Lending Association, Association for Financial Markets in Europe, etc.) asked the European Commission to postpone the implementation to 3 September 2021.
Response to the request sent by the Director General for Justice and Consumers of the European Commission and not by the Directorate for Financial Markets of the European Commission was negative and didn’t approve the postponement. The response focused only on arguments related to COVID-19 and the overall low level of readiness of the markets was not accepted. Consequently, despite weak readiness of the markets and uncomplete transition to laws in certain countries, the SRD II entered into force on 3 September 2020.
SRD II implementation status in CDCP
CDCP preparation to implement the Shareholder Identification and General Meetings included also acceptance testing of messages transfer completed in June 2020, and the participants were involved in testing performed from August 2020. CDCP assessed the testing as successful.
CDCP implemented required changes to the Rules of Operation in order to regulate conditions for provision of services related to issuers request for shareholder identification and the changes apply to the issuers and CDCP participants. The Rules of Operation of CDCP are governing also conditions for provision of services regarding information on convening the General Meeting.
For purpose of provision of SRD II services CDCP created on its web site new separate sections for the issuers and the owners. New sections provide the issuers with information necessary for utilisation of CDCP services. In case of owners, the new section includes information on convening of the General Meeting, that the issuers are obliged to provide to CDCP under the SRD II.
Relevant changes in services will be implemented also to the Scale of Fees of CDCP in its next update, whereas expected date of its entry to force is 1 January 2021.
SRD II – next steps
Transfer of messages between CDCP and intermediaries is preferred via SWIFT. CDCP supports this option and is able to transfer respective information via SWIFT services FileAct. Considering the interest of the participants CDCP is also preparing to utilise the SWIFT service FINPlus, enabling exchange of messages among involved entities – presently mainly the SWIFT messages related to SRD II.
Due to small number of local issuers to which SRD II applies, and low awareness of the SRD II, CDCP together with the participants and selected issuers held in August 2020 a joint online meeting of the issuers, Bratislava Stock Exchange (BSSE), CDCP and its participants. During the online meeting the representatives of the issuers presented several proposals and requirements as regards the general meetings and the list of shareholders, but not all of them concerned CDCP and the participants. In the meeting has been agreed, among other things, that unified process for communication of CDCP and its participant with the issuers and shareholders shall be developed in the future. For purpose of evaluation of SRD II implementation status in broader community of issuers, the joint questionnaire shall be prepared and shall be sent to all issuers registered in the regulated market of the BSSE.
Author: Peter Nagy
