Shareholders Rights Directive 2017/828: What is the impact on the financial players.
The new Shareholders Rights Directive 2017/828 aims to strengthen the position and involvement of shareholders and to ensure that decisions are made for the long-term stability of a listed company. For this reason, it provides for a bundle of obligations that are imposed to different financial players such as EU listed companies, intermediaries, Institutional investors (life insurance, reinsurance), asset managers and proxy advisors.
The present Directive pursues a systemic change given the fact that it aims to change the relationship between issuers and investors to something that is transparent, regular and compulsory.
More specifically, it obliges different financial players to comply with the European requirements
- EU listed companies (listed in a Member State or whose shares are traded on a regulated market in a Member State) have obligations related to:
- the retention period of shareholders’ information
- the transmission of information giving the opportunity to the shareholders to exercise their rights stemming from their shares
- transparency of the voting process at shareholders’ meetings establishment of transparent procedure for their director’s remuneration. (“say on pay”)
- For Financial Intermediaries, means the implementation of new processes and tools to
- identify companies’ shareholders and transmit this information to the issuer
- allow their clients to “remotely” participate to the vote
- Send receipts to clients that voted on an electronic way
- Institutional investors (such as life insurance, reinsurance, pension funds) and asset managers must render their engagement policies and investment strategy more transparent by making their voting policies public.
SRD II is a real progress for shareholders rights, but has huge impacts on Financial Intermediaries. Most of them does not provide proxy voting services anymore and they must then implement completely new processes by September 2020. Technical providers have anticipated Financial Intermediaries’ challenges and are developing solutions that can manage the complete flow of proxy voting. They could be a good alternative for institutions that have not started yet to develop their own solutions.