HM Treasury (HMT) and the Financial Conduct Authority (FCA) have jointly published a consultation paper outlining their proposals to implement the Directive 2013/50/EU (Amending Directive) which amends the Transparency Directive (2004/109/EC).

HMT is responsible for proposing amendments to the Financial Services and Markets Act 2000 (FSMA), whilst the FCA is responsible for implementing the amendments into its Disclosure and Transparency Rules (DTRs).

Click here to read the consultation paper.

What is the Transparency Directive?

The Transparency Directive (TD) harmonises requirements for companies regarding the disclosure of their information. In particular, it focuses on what information companies must disclose periodically, how they disclose and control inside information and how they distribute regulated information. It also ensures that investors disclose their stakes in companies.

What is the Amending Directive?

The Amending Directive amends, amongst other things, the Transparency Directive and came into force on 26 November 2013. Member States are required to implement the Amending Directive within 24 months of that date. The UK has already implemented certain provisions by removing the Transparency Directive's requirement to publish interim management statements and implementing the new requirement to report on payments to governments.

What are the key proposals?

The new consultation paper proposes amendments which implement the remaining provisions of the Amending Directive. Additionally, the FCA is proposing other miscellaneous changes to the DTRs in order to improve and clarify the existing provisions in the FCA Handbook.

We set out some of the key changes below.

Changes to implement the Amending Directive:

HMT's proposed amendments to FSMA

  • One of the objectives of the Amending Directive was to create a minimum standard for Member States' sanctions regimes for breaches of transparency rules. Consequently, HMT proposes several amendments to FSMA to align the sanctions regime with the regime set out in the amended Transparency Directive. The proposals include:

    • extending the sanctions to 'members of administrative, management or supervisory bodies of the legal entity concerned' – currently, the FCA mandates that 'directors knowingly concerned with a contravention' can be sanctioned,
    • providing the FCA with the power to apply to the courts for a suspension of voting rights, and
    • adding a new section to FSMA covering the publication of decisions for sanctions and measures relating to the Amending Directive and providing that there is a right to publish decision and final notices anonymously, rather than anobligation to do so.

FCA's proposed amendments:

Holdings of financial instruments that have a similar economic effect to holding of shares

  • The Amending Directive introduces the requirement to disclose holdings of financial instruments with similar economic effect to holding shares and entitlements to acquire shares. The UK's current super-equivalent regime covers these types of financial instruments and so the changes should not have a significant impact. One notable difference however, is that the Amending Directive, unlike the DTR regime, does not have a separate client-serving intermediary exemption that is distinct from the existing market maker and trading book exemptions. Consequently, the client-serving intermediary exemption will be deleted from the DTRs and transactions executed in a client-serving capacity will have to rely instead on the existing trading book exemption as set out in the new Regulatory Technical Standard (RTS).

Extension of the deadline to publish half-yearly financial reports

  • The FCA will amend the DTRs to reflect the Amending Directive's extension of the deadline to publish half-yearly financial reports from two to three months after the end of the relevant financial period. The deadline to publish annual financial reports will remain the same.

  • Amendments will also be made to increase the period of time for both annual and half- yearly financial reports to remain publicly available, from five years to ten years. The FCA intends for the new rules to apply only to reports published on, or after, the date that the new rules come into force.

Changes to rules on the home Member State

  • The rules on the choice of a home Member State have been amended by the Amending Directive to prevent an issuer from failing to declare a home Member State for the purposes of the Transparency Directive. The FCA proposes to amend the DTRs to require an issuer whose home Member State is the UK, or who chooses the UK as its home Member State, to disclose that it accordance with DTR 6.2 (Filing information with the FCA) and DTR 6.3 (Dissemination of information).
  • Additionally, a new DTR proposes to require an issuer to disclose its home Member State to the competent authorities of the Member State where it has its registered office; to the home Member State; and to all host Member States.

New stabilisation exemption

  • The DTRs will implement a new stabilisation exemption in respect of the vote holder notification obligations for voting rights attached to shares that have been acquired for stabilisation purposes in accordance with Commission Regulation (EC) No 2273/2003 of 22 December 2003, provided the voting rights attached to those shares are not exercised, or otherwise used, to intervene in the management of the issuer.

Other proposed DTR changes:

Stock lending and borrowing

  • Whilst the Transparency Directive remains silent on the treatment of stock lending transactions, ESMA has clarified the treatment of these transactions under the Directive by providing that 'right of recall' shares are subject to notification requirements. Currently, the DTRs exempt lenders from the requirement to disclose stock lending transactions and further exempt borrowers from disclosure provided that certain conditions are met. However, in order to harmonise the UK notification regime with other Member States and ensure that it is compliant with the intention of the Transparency Directive, the FCA proposes to remove its exemptions for stock lending transactions. Instead, the DTRs will provide that both borrowers and lenders under a stock lending contract must disclose their respective transactions at the EU minimum thresholds (that is, the 5%, 10% and higher thresholds).

Equality of treatment of investment managers under DTR 5.1.5R (certain voting rights to be disregarded)

  • Currently, under DTR 5.1.5R, for the purpose of determining whether a notification obligation exists, certain voting rights are to be disregarded except when determining whether the 5% and 10% (and higher) thresholds have been reached or crossed (the EU minimum requirements). Additionally, the FCA could prescribe a category of investment entities or managers who do not have to comply with the UK super-equivalent obligations and therefore, their voting rights can be disregarded, except at the thresholds of 5%, 10% and so on. Under this provision, the FCA had prescribed that US investment managers would be subject to the EU minimum requirements under these rules, as opposed to being subject to the UK super-equivalent rules. However, the FCA is now proposing to extend the exemption by allowing all investment managers (including those in the UK) to disclose at the EU minimum requirements, irrespective of their jurisdiction.

Third country exemptions

  • The DTRs have been amended to exempt issuers, whose registered office is in a non-EEA State, from certain requirements if the law of that State lays down equivalent requirements, or the issuer complies with the law of a non-EEA State that the FCA considers as equivalent.
  • The FCA notes that an exemption from the vote holder notification requirements (set out in DTR 5.1.2R) has been incorrectly transposed by it into the DTRs. Currently, there is an exemption from the vote holder notification requirements for a person in respect of the shares of an issuer which has its registered office in a non-EEA State, whose laws have been considered equivalent for the purposes of the Transparency Directive. Whilst the Transparency Directive exempts third country issuers from obligations to make public all information contained in a notification, it does not exempt a person from the vote holder notification requirements set out in DTR 5.1.2R. Consequently, the FCA proposes to delete the exemption and make the necessary consequential amendments.

Next steps

Responses to the consultation must be submitted by 20 May 2015. Changes must be implemented by the FCA by 25 November 2015.


The majority of the amendments arising from the Amending Directive should not have a significant impact on the UK disclosure regime which has, for some time, imposed super-equivalent disclosure requirements on issuers and investors. Perhaps, some of the more significant changes are the FCA's other amendments to the DTRs, including the removal of the exemption for stock lending transactions from vote holder notifications. This constitutes a considerable change in practice and borrowers and lenders will now need to have sufficient procedures in place to ensure that they comply with their respective notification obligations when they reach, or cross, the EU minimum thresholds. On the other hand, it is good news for all investment managers, who are now exempt from the notification obligations unless the 5% and 10% and higher thresholds are breached.