Securities regulation

Author: | Published: 1 May 2008
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Information and transparency are essential elements for the adequate operation of securities markets and an essential condition for their development and consolidation. Aware of this reality, the European legislator, in the context of the EU Financial Services Action Plan approved by the European Commission in 1999, adopted Directive 2004/109/EC of the European Parliament and of the Council of December 15 2004, on the harmonisation of transparency requirements in relation to information about issuers whose securities are admitted to trading on a regulated market. As established in the Directive, efficient, transparent and integrated securities markets contribute to a genuine single market in the Community and foster growth and job creation by better allocation of capital and by reducing costs. The disclosure of accurate, comprehensive and timely information about security issuers builds sustained investor confidence and allows an informed assessment of their business performance and assets. Ultimately this enhances both investor protection and market efficiency.


In its domestic laws Spain recently implemented the Community transparency requirements in relation to information about issuers whose securities are listed on a Spanish official secondary market or on any other EU regulated market. It passed Law 6/2007 of April 12, to reform the Securities Market Law and amend the system of public takeover bids and the transparency of issuers, and Royal Decree 1362/2007 of October 19, related to transparency requirements for information about issuers of listed securities, that came into force on December 20 2007 (although certain provisions will only apply to the financial statements for periods commencing after January 1 2008). In line with Community legislation, a new statutory class of information, namely "regulated information", is being created in Spain. It will consist firstly of regular public information that issuers should disclose to the market (basically, annual and half-yearly reports and interim management statements or quarterly reports), contemplated in Articles 35 and 35 bis of the Spanish Securities Market Law. Secondly it includes regular information about issuers, which should be made available to the public and disclosed (relevant information according to the system of market abuse, information about the total number of voting rights and capital, identity of significant shareholders and treasury stock transactions). Thus, regulated information includes all information generated by the issuer and any information in relation to major holdings in its capital, which, although not generated by the issuer, implies a specific disclosure obligation.

Spanish legislation establishes the obligation of issuers of securities admitted to trading on an official secondary market or other EU regulated market to make public and disclose such regulated information and to remit it at the same time to the Comisión Nacional del Mercado de Valores (Spanish National Securities Market Commission). The issuer must publish the regulated information on its webpage and simultaneously disseminate it through means that ensure fast access on a non-discriminatory and general basis by the public in the entire EU, without collecting any specific cost from investors for providing the information. The issuer may opt either to disseminate such information directly or to entrust this duty to a third party, which may be the Comisión Nacional del Mercado de Valores or other entities, such as the stock exchanges or the media. The regulated information register of the Comisión Nacional del Mercado de Valores act as the mechanism for the central storage of regulated information. The Commission will ensure that the mechanism complies with security standards, shows clear sources of information, time recording and easy access for end users.

Spanish law refers to the language system applicable to regulated information as the logical culmination, as established by Royal Decree 1362/2007, of a set of rules on financial information that are harmonised in the entire EU, and an indispensable provision in a context in which Community financial markets are becoming increasingly integrated. Accordingly, when securities are admitted to trading on only one or more Spanish markets and the issuer's registered office is in Spain, regulated information will be published in Spanish. However, when the issuer has its registered office outside Spain, regulated information may be published, at the discretion of the issuer, in a language customary in the context of international financial matters or in another language accepted by the Comisión Nacional del Mercado de Valores. In respect of disclosures of major holdings, those under the duty to disclose them may do so in a language customary in the context of international financial matters, without having to submit a Spanish translation. Regarding the content of regulated information and specific dissemination duties, as mentioned above, it is necessary to differentiate periodic information from ongoing information on major holdings, treasury stock, voting rights and material events.


Periodic information includes, first of all, the annual report, which includes the individual and consolidated financial statements and management report and the statements of responsibility for their content. In the statement of responsibility, directors will certify that to the best of their knowledge the financial statements prepared in accordance with the applicable accounting standards present a true and fair view of the net worth, financial position and profits and losses of the issuer and of the group, and that the management report includes a fair analysis of business performance and profits and losses and of the position of the issuer and its group, together with a description of the main risks and uncertainties they face. The deadline for publishing and disseminating the annual financial report is four months after the end of the issuer's financial year. It cannot fall after the date on which the call to the shareholders' meeting or other body authorised to approve the annual financial information is officially published.

Secondly, periodic information includes the half-yearly financial reports related to the first and, if appropriate, the second six months of the financial year. It includes the individual and consolidated condensed set of financial statements and interim management reports and statements of responsibility for their content. The deadline for publishing and disseminating the half-yearly financial report is two months after the end of the relevant half of the issuer's financial year. In line with this, the obligation to publish a half-yearly financial report will not apply to the second half of the year, where the annual financial report is made public within the first two months of the end of the year in question. If the half-yearly financial report was audited on a voluntary basis, the auditor's report will be published in full. Otherwise, the half-yearly financial report will contain a statement by the issuer that the report has not been audited or reviewed by auditors.

Lastly, periodic information will include the interim statements for the first and third quarter of the financial year, consisting of an explanation of the material events and transactions of the period and a general description of the financial position and performance of the issuer and its group. These statements are to be published no later than 45 days after the last day of the first and third quarters and must contain information relating to the period elapsed between the beginning of the financial year and the last day of each quarter.

Royal Decree 1362/2007 specifies various issues for each class of report – its detailed content, term for remittance, applicable accounting standards and liability arising from its drafting and publication. In respect of the procedure to be used to make public and disseminate periodic information, Royal Decree 1362/2007 empowers the Comisión Nacional del Mercado de Valores to approve, through a Circular and after a report issued by the Instituto de Contabilidad y Auditoría de Cuentas (Accounting and Auditing Institute), the standard forms to publish periodic information. In Circular 1/2008, the Comisión Nacional del Mercado de Valores approved the standard forms to be used to publish periodic information relating to half-yearly individual and consolidated condensed financial statements, as well as interim management reports and, if appropriate, the contents of quarterly financial reports.

Voting rights

In addition, the Royal Decree 1362/2007 outlines obligations to provide information on major holdings and treasury stock, on the basis of Article 54 of the Spanish Securities Market law, which establishes that shareholders and holders of certain financial instruments must notify the issuer and the Comisión Nacional del Mercado de Valores about the acquisition or disposal of a major proportion of the voting rights of the company.

Royal Decree 1362/2007 provides that shareholders acquiring or transferring the voting shares of an issuer must notify the issuer and the Comisión Nacional del Mercado de Valores of the proportion of voting rights they hold following transactions where, as a result of the transaction, this proportion is equal to, exceeds or falls below 3%, 5%, 10%, 15%, 20%, 25% 30%, 35%, 40%, 45%, 50%, 60%, 70%, 75%, 80% and 90%. These percentages will be replaced by 1% and its successive multiples where the notifying shareholder is resident in a tax haven or in a country or territory with zero taxation, or with which there is no actual exchange of tax information pursuant to the legislation in force. In this connection, "shareholder" will mean all individuals or legal entities that own directly or indirectly through a dependent entity: a) shares in the issuer in their own name or for their own account; b) shares in the issuer in their own name but for the account of another individual or legal entity; c) certificates of deposit, in which case the holder of the certificates of deposit will be the holder of the underlying shares represented by the certificates of deposit.

Voting rights will be calculated by computing all the shares to which voting shares are attached, even in cases in which the exercise of such rights is suspended on the basis of the total number of voting rights according to the most recent disclosure made by the issuer and published on the webpage of the Comisión Nacional del Mercado de Valores. If the total number of the issuer's voting rights changes, the disclosures of major proportions should be made to the extent that this is appropriate in accordance with the resulting new proportions of voting rights held.

The disclosure obligation referred to above will also apply to all individuals or legal entities which, independent of the ownership of the shares, acquire, transfer or have the possibility of exercising the voting rights attaching to those shares, where the proportion of the voting rights is equal to, exceeds or falls below of the foregoing percentages and is the result of one or more of the following actions: a) the execution of an agreement with a third party, which obliges them to adopt, through the concerted exercise of the voting rights they hold, an ongoing common policy with respect to the company's management or which is aimed at having a significant influence on it. The disclosure obligations will be collective and shared by all parties to the agreement; b) the execution of an agreement with a third party stipulating the temporary transfer, for consideration, of the voting rights in question; c) the deposit of shares in escrow, where an individual or legal entity controls the voting rights and expressly states its intention to exercise them; d) agreements on the creation of a right of usufruct over shares; e) the agreements or transactions stipulated in the foregoing letters, where executed by an entity controlled by the individual or legal entity.

Entities in charge of the management, registry and safekeeping of securities, are also obliged to report (if the proportion of voting rights acquired, transferred or owned is equal to, exceeds or falls below the significant percentages) where they are able to exercise the voting rights attaching to the shares at their own discretion in the absence of specific instructions from the shareholders, and the individual or legal entity holding voting rights attaching to shares acquired or transferred through an interposed person. For that purpose, "interposed person" means people that, in their own name, acquire, transfer or hold shares for the account of other individuals or legal entities. Such status shall also be presumed when the individual or legal entity is held totally or partially safe from the risks inherent in the acquisition, transfer or holding of the shares.

Another new feature to be noted is that the obligation to disclose major holdings is not limited to the acquisition or transfer of shares and extends also to the acquisition or transfer, directly or indirectly, of financial instruments that confer the right to acquire, exclusively on the initiative of the holder and under a formal agreement, shares already issued and which confer voting rights. These instruments include marketable securities and options, futures, swaps, forward rate agreements and any other derivative contracts mentioned in the provisions under which Annex I Section C of Directive 2004/39/EC of the European and of the Council is incorporated into Spanish law. The holder of the instrument must have, on maturity, the unconditional right to acquire the underlying shares or the right to choose whether or not to acquire them. "Formal agreement" means all agreements that are binding pursuant to the applicable legislation.

The maximum term for notification is four stock exchange days. Royal Decree 1362/2007 also regulates persons other than the shareholder who are obligated to notify the major holding. It regulates the exceptions to the obligation to notify and the content of the disclosures, establishment of provisions in relation to special events of notification of major holdings, such as cases of increases of capital charged to reserves, transfers of securities mortis causa due to the liquidation of a company or as a consequence of mergers or spin offs of companies, or notifications in the course of a takeover bid, which justify an increase of the transparency requirements. In particular, in the case of tender offers, shareholders of the affected company that acquire voting securities must disclose the acquisition to the Comisión Nacional del Mercado de Valores where the proportion of voting rights they hold is equal to or exceeds 1%. Shareholders that already held 3% of the voting rights must also disclose any transaction entailing a subsequent variation of that percentage. The Comisión Nacional del Mercado de Valores must disseminate the information immediately. These special disclosure obligations will apply, from the notice of the tender offer through its settlement or withdrawal.

In addition to the obligations on market abuse stipulated in Article 9 of Royal Decree 1333/2005, the directors of the issuer must disclose the proportion of voting rights (regardless of the percentage those rights represent) they continue to hold after the acquisition or transfer of shares or voting rights, and any financial instruments entitling them to acquire or transfer voting shares. This disclosure obligation shall also apply when they accept their appointment and upon their resignation from the office of director.

Treasury stock

Royal Decree 1362/2007 specifies certain disclosure obligations of the issuer in relation to the shares it holds (treasury stock). In particular, the issuer of shares admitted to trading is obliged to disclose to the Comisión Nacional del Mercado de Valores the proportion of voting rights it holds after it acquires treasury stock carrying voting rights, in a single or in successive acts, either itself, through a dependent entity, or through an interposed person, and when such an acquisition is equal to or exceeds 1% of the voting rights. The disclosure obligation will arise in the case of successive acquisitions, when the acquisition made, added to those made in the foregoing disclosure, exceeds 1% of the issuer's voting rights. Disposals or sales will not be deducted for this purpose. The issuer must make its disclosure within four stock exchange days of the acquisition.

Lastly, the Comisión Nacional del Mercado de Valores is also empowered to establish the standard forms to be used for the disclosure of major holdings and treasury stock. In Circular 2/2007, the Comisión Nacional del Mercado de Valores approved the standard forms to be used to disclose information on the holdings of significant shareholders, directors and executives and on the issuer's transactions with treasury stock.

The importance of the reviewed legislation, together with the other legislation on the information to be provided to the securities markets, is beyond any doubt. It promotes a more transparent and efficient securities markets performance and, ultimately, to the performance of the Spanish economy as a whole.

Author biographies

Fernando Vives


Fernando Vives is head of the Garrigues corporate/commercial law department, which deals with financial services, real estate, and energy and telecommunications (utilities). It also covers EU law, antitrust and mergers and acquisitions.

Vives has more than 20 years' experience at Garrigues, where he became partner in 1998. He works in financial services, specialising in corporate finance, restructuring transactions and acquisitions (M&A), and takeover bids. His practice also includes issues and offerings of securities, and regulatory matters regarding listed companies. He regularly advises on large M&A deals and private equity, where he acts in transactional work and debt raising. He has wide experience in the insurance industry, advising many insurance groups operating in Spain.

Vives completed a degree in Law, Economics and Business Administration at the Universidad Pontificia de Comillas (ICADE). He is a member of the Madrid Bar Association. He lectures in commercial law at ICADE, the Garrigues business and training centre, and ESADE.