Retail investors should find it less risky to buy and sell stocks throughout the EU following the Eu...
Retail investors should find it less risky to buy and sell stocks throughout the EU following the European Commission's proposal for a new directive that demands greater transparency from listed companies and improved levels of consumer protection .
The directive would force all companies listed on recognised EU stock exchanges to publish condensed half-yearly financial reports, along with the full annual reports.
Listed companies would have to publicly provide "swifter and better information about the material interests of important shareholders" and "facilitate participation in general meetings", including providing minimum levels of information about proxy voting.
Companies will also be free to issue all information in English – or as the EC puts it: "a language customary in the international sphere of finance" – in addition to the language of the country in which the security is listed.
Perhaps most importantly, the directive will also force all listed firms to adopt international accounting principles, which should remove a major barrier to comparing the finances of competing companies with primary listings on different stock markets.
The EC says it recognises that certain member states have already gone beyond the minimum demands the directive will apply.
Indeed, the London Stock Exchange has long used the argument that the UK's stricter listing rules means plcs here represent a better deal for investors because of the lower risk implied.
The directive, if passed by the European Parliament, should mean a narrowing of risk discounts, applied to continental European stocks because of differences in accounting and financial reporting rules, making European companies that can meet the stricter rules more attractive as investments.
Conversely, those companies that are identified by the improved transparency to be lacking will see their market values drop.
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