07 December 2022

ADVICE TO ESMA SMSG reply to the Call for evidence on the implementation of SRD2 provisions on proxy advisors and the investment chain

1.The SMSG welcomes the opportunity to respond to the call for evidence on certain provisions of SRDII and considers that the cross-border voting process should become simple, cost effective, and efficient.

I. Executive summary

2.In view of the SMSG, the shareholder identification process has not significantly improved, as the term‘shareholder’ continues to be defined by applicable national corporate law, which makes shareholderidentification incomplete. The SMSG therefore considers that the definition of the ‘shareholder’ shouldbe harmonized and aim at capturing the end-investor.
3.Moreover, the option provided by SRD II to limit the scope of shareholder identification to holdingsexceeding a given threshold should be repealed and be made at the level of the first intermediary, notat each intermediary in the holding chain to ensure that shareholdings are captured correctly.
4.The SMSG also considers that the transmission of information along the intermediaries’ chain remainsnot fully satisfactory and may have had an impact on the flow of information between issuers and inves-tors around a general meeting. The main reasons for this are:
- the late implementation: Not all Member States had transposed SRD II into national law by 3 September 2022.
- the lack of ‘same language’ format: The format to achieve a “same language” purpose, ISO 20022, originally foreseen for 22 November 2021, had been postponed and ‘go live’ is now planned for November 2023. The reason for the delay is unclear and will hamper the communication be-tween issuers and shareholders for a further general meeting season (2023).
- the late enforcement: Neither shareholders nor issuers, have any valid means to accelerate the harmonisation process nor do (national) regulators often have the option yet to enforce the rules of SRD II and its Implementing Regulation which are being delayed by the late ISO 20022 implemen-tation effectively at least until four years after transposition. The SMSG sees a need to review the regulatory oversight of general meeting-related processes to ensure that shareholder rights become enforceable in all Member States....

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