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More consistency in the transparency regime – and less gold plating- needed to attract smaller listed companies on regulated markets


01 Sep 2010

The availability of reliable and transparent information for stakeholders in businesses of all sizes is vital to encourage investment and trade. The modernisation of the transparency regime for listed companies must, however, be consistent to bring the goal of a true single European market closer to realisation, says global accountancy body.

The European Commission is currently analysing the impacts, costs and benefits stemming from the Transparency Directive. The EU executive is working towards its possible improvement, namely in the field of the attractiveness of regulated capital markets for smaller listed companies (SMILES); holdings of voting rights; and the inefficient implementation of the Directive due to diverging national rules.

ACCA (the Association of Chartered Certified Accountants) welcomes the Commission’s desire to improve access to financial information for investors while reducing the burden on issuers of securities - particularly those at the lower end of the size scale for listed entities (typically with a value of around €250million). The global accountancy body warns, however, that exempting smaller issuers from the requirement to publish quarterly information would reduce transparency. The financial crisis has highlighted the fact that they can present a higher risk than larger issuers and therefore merit the highest level of scrutiny and regulatory control. Extending the timescale for publication of this information, however, might actually increase the visibility of smaller issuers, as their releases would not coincide with those for larger, better known, businesses.

ACCA also stresses that, as observed in the context of the abolition of audit and accounting requirements for small, medium and micro entities, the absence of pan-European legislation does not necessarily lead to simplification or a reduction in local administrative burdens. It is even likely to result in the creation of domestic regimes which are incompatible with each other, hence acting as a barrier to cross-border transactions, warns ACCA.

"It is the inconsistency of guiding regulatory principles that causes the problems, rather than their absence", said John Davies, head of Business law at ACCA.

“The minimum harmonisation approach of the Transparency Directive allows inconsistency to flourish, as individual Member States can introduce or retain listing rules that are more onerous on issuers than those required by the Directive. If investors are to have confidence to invest in businesses outside their home state then they must not only have confidence on the accuracy of the information, but must also feel comfortable with the presentation and interpretation of that information”, said John Davies.

In addition, ACCA warns against a definition of small listed companies based upon local factors rather than a Europe wide threshold. “Investors would see not simply two different types of issuer in Europe - SMILEs and “large” issuers-, but up to 54 different types, with the boundary between small and large set at a different level for each of the 27 member states. In the context of investor requirements to notify issuers of significant interest, this level of complexity would be counterproductive, and risk increasing the perception of a fragmented European investment market from non- EU investors’ perspective”, added John Davies.

For the global accountancy body, the purpose of information disclosure is to provide data that market participants will find useful for making their investment decisions.

“Keeping regulatory burdens to a reasonable and proportionate level is a worthwhile objective, but this aim must be secondary to the information needs of the capital markets. The views of the investment community will be crucial in this exercise”, John Davies concluded.

- ends -

For further information, please contact:

Cecile Bonino

tel:+32 (0) 2 286 11 37

mob: +44 (0) 7809595008

Notes to Editors

         1. ACCA is the global body for professional accountants. We aim to offer business-relevant, first-choice qualifications to people of application, ability and ambition around the world who seek a rewarding career in accountancy, finance and management. We have 362,000 students and 131,500 members in 170 countries worldwide.

         2. ACCA has worked with governments, national organisations and development agencies in emerging economies- for over 20 years- promoting the accounting profession, to create value for the communities, businesses and individuals it serves.

         3. ACCA believes that globalisation of business means that one set of reporting standards is essential. We favour the principles-based IFRS.

         4. ACCA understands the real issues facing small businesses as 63,000 of our members work in SMEs or small partnerships worldwide.

Cecile Bonino

Public Affairs and Media Relations Officer-EU ACCA

CBI business house

14 rue de la Science

BE-1040 Brussels

tel:+32 (0) 2 286 11 37

mob: +44 (0) 7809595008



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