The EU is well advanced in (re-)shaping the regulatory structure for securities markets. As part of this exercise, the EU is rapidly finalising a more harmonised framework for disclosure in the prospectus, market abuse and transparency directives, and has created the structure for harmonised financial reporting principles with the International Accounting Standards regulation.
Disclosure is fundamental to investors’ decision-making, the functioning of capital markets, stock performance and market integrity. However, policy-makers should be aware that regulating disclosure is a moving target and that there never is an optimal level of disclosure that can be mandated. Adequate room and flexibility must be built-in for market-driven improvements.
This report critically evaluates the new disclosure framework and makes some recommendations for policy. It expresses reluctance regarding the move to quarterly reporting in the draft transparency directive and stresses the need for maintaining some competition between jurisdictions in setting the appropriate disclosure framework.