Financial Markets and the Transparency Directive – 1st PGR Reading Group Seminar – 10/12/2013 – Mr. Melih Sonmez (Durham University)

The very first PGR Reading Group of DELI was held on the 10th of December 2013. Mr. Melih Sonmez, a third year PhD Candidate member of the Institute, presented a significant chapter of his research, entitled ‘A Direct Route to the Effective Transparency Regulations in the Financial Markets and the Recent Modifications on the Transparency Directive (2004/109/EC)’.  Starting with a general introduction about the concept of transparency, he proceeded to demonstrate the innovations introduced by the new Directive and whether it overhauled the problems inherent in the previous Directive.

For the first part of his presentation, he identified some of the main characteristics that should be assigned to the notion of transparency, namely clarity, accuracy and being up-to-date. He also demonstrated a comprehensive analysis of the advantages and disadvantages of implementing transparency rules in financial context. He argued that while increasing transparency reduces the asymmetric information, decreases volatility and highlights the early warning signs, implementing transparency rules, on the other hand, can lead to direct and competitive costs. He asserted that in order to respond to the enthusiasm to create better transparency regulations, a road map should be followed. First of all, he claimed that designating the specific areas of law where transparency rules should be improved is vital to the project of having effective transparency regulations.  He stressed that both company law and securities law need improvement in this context. He also added that the creation of a main framework while identifying the principles of effective transparency regulations is crucial and listed these principles as ‘enlightenment, protectiveness and dissuasiveness.’ In addition, disclosing information under the aim of increasing transparency should not be understood as ’information bombarding,’ which can distract market players from what is important. As his last point in the presentation, he emphasised that having effective legal institutions, which should adjust transparency regulations according to the changes in the market, play a significant role in the improvement of transparency regulations.

For the second part of the presentation, Mr Sonmez submitted a comparative analysis of the old and new directives. In order to successfully illustrate this, he identified a list of problems present in the old Directive. These, according to him, include the stick deadlines for periodic information, the lack of a single EU access regime and the problems regarding the notification of major shareholders. In addition to these, he argued that the enforcement mechanism is not deterrent and most importantly, the regulation do not follow the changes in the market.

He subsequently contended that the new Directive provides only partial solutions to the above problems. For example, the requirements on the disclosure of periodic information have been modified and thus the invisibility problem of SMEs, along with  the problems of enforcement have been solved. Furthermore, in order to resolve the shortcomings caused by the lack of a single EU access regime, according to Article 21 of the revised Directive, ‘a central European electronic access point’ will be established and its development and operation will be administered by ESMA, which he argued, will provide a solution to the current problem of having 28 different access regimes. Lastly, he argued that the measures to prevent the hidden ownership of enlisted companies have been taken with having expanded the list of the financial tools, which are now regulated by the new Directive. Mr. Sonmez stressed that Directive 2004/109/EC is a significant effort for improving transparency. However, he also reminded the audience that ‘transparency is a journey, not a destination;’ therefore, he claimed that transparency regulations should be maintained up-to-date with the changes in the markets at all times.

The presentation was followed by a session of questions and answers and the participants expounded how this subject relates to their own research topics. Based on the great success of this first session of the reading group, the series of DELI PhD Reading Groups will continue over the Epiphany and Easter Terms in 2014, giving an opportunity for the Postgraduate Researcher members of the Institute to present a chapter of their PhD thesis or an area of EU law that they are passionate about in an informal setting.

Ipek Akay

Student Representative at DELI


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