FMC22 BE MIG Consultation on Market Standards for General
Meetings| DR| 29/07/2017
BEMIG : Consultation on Market Standards for
General Meetings
Executive summary
Overall comments:
The BE MIG proposal for process 1 (notification of a GM only) is subject to legal and compliance
approval. This has not been done by BE MIG, although it is a pre-condition for implementation.
According to BE MIG, the market standards go far beyond the Shareholder Rights Directive, but BE
MIG does not consider this to be a problem in itself. However, the combination between this and some
existing legal obstacles and the high cost of implementation of the standards raises doubts within BE
MIG about the feasibility of the implementation of the standards and their being taken into account.
The standards should be considered only from the point of view of ‘managing with less paper’ and
they must not lead to a bulk of paper.
Information must be put at the disposal of the shareholder, who will decide by himself whether or not
to participate, without the obligation to motivate his decision. The issuer’s website could be a key
element in the spreading of the information that is needed.
Translation of information could induce responsibilities and risk. The FI can assume these risks only
within the framework of an agreement with the issuer or the end shareholder.
Under Belgian law, physical securities will subsist until end 2013. BE MIG considers that physical
securities are not under the scope of these standards.
Under the given circumstances, the banking industry positively supports the standards discussion, and
wants to take an active participation in it, but has also other top priorities to consider.
Belgische Federatie van de financiële sector | Aarlenstraat 82 • B-1040 Brussel | http://www.febelfin.be
T +32 2 507 68 11 | F +32 2 888 68 11
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BEMIG proposals on Market Standards for General Meetings (for All Clients)
Standards
Process 1
Issuer
XXXX
Issuer Agent
Issuer Agent
www.XXXX.com
CSD
Process 2
Process 3
FI
FI
Basic service (Non Paper)
Contractual Service

For all clients shareholders

Contractual agreement

Notification only

Process 1, 2 and 3
o
Record date and entitlement
o
Notification of attendance

Electronic only

Refer to www.XXXX.com

Opt in for clients

No translation

Service as defined in the standards

Entitlement by last FI

At cost of end shareholder (notification, voting,..)

Voting possible with cost for client

End Shareholders
 No discrimination amongst shareholders
 Application depends on elimination of legal barriers and on application
of standards throughout the chain of custody.
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1. About BEMIG
BEMIG consists of five different bodies :





The
The
The
The
The
issuers, represented by the Association belge des Sociétés cotées ASBL;
CSD, Euroclear;
Stock Exchange, NYSE Euronext;
CCP, LCH Clearnet;
financial intermediaries, represented by Febelfin.
In reply to this consultation, BEMIG could give an answer consisting of several parts, where
consensus should be the main target. If a consensus cannot be reached, BEMIG will list each of
the different opinions. Participation to BEMIG does not prevent bodies from reporting through
their own EU channel (respectively, European Issuers and Business Europe, FESE, EACH, ECSDA
and EBF-FBE).
2. About the consultation paper
The consultation paper consists of two parts :


Explanatory note,
Standards.
The explanatory note (EN) deals with a number of general issues such as the scope and opt-out.
The standards are more a kind of “plumbing”, in that they give a description of information flows.
The high level objective of the Standards is to enable a streamlined flow of information from the
issuer to the shareholder and back. BEMIG believes that at a high level EN should set out the
basic and current context and the objectives to be achieved. For the moment, the EN gives an
analysis which is partly inaccurate and which can be disputed.
From our reading of the EN,
BEMIG deducts that the chain of intermediaries plays only a negative role in the dissemination of
the information, which can be discussed. Opt out and costs aspects seem to be out of the scope of
the consultation and considered as granted.
2.1. Comments on the explanatory note
a) Objective
In the current environment, which is more domestic,
the issuer does not know its
shareholders except for shares registered in the register under the name of the endshareholder.
Communication between issuer and shareholder is based by the
intermediary on an opt-in solution where the shareholder decide or not to receive the
information.
For cross-border issues, a chain of intermediaries is justified for legal
barriers, but also for cost and efficiency reasons. To-day, in a cross-border environment,
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issuers intend to know better their shareholders and to better communicate with them.
They are of opinion that the chain of intermediaries could prevent such a direct
communication1. Even if the barriers could be removed, investors will continue to use
intermediaries as they offer a cost effective solution
to the problem of maintaining
relationships with large number of domestic and international
issuers.
The financial
intermediaries take note of the new approach of the issuers and are ready to discuss this
new framework with them. A part of this work has already been achieved within the
Transparency Directive. They notice also that the cost aspect was removed from the
Shareholder Rights Directive (SRD)2 as no consensus could be reached on that subject.
They consider that this issue should be openly discussed with the issuers.
From the
discussion, a draft picture with a clear description of each entity responsibilities could be
drawn.
b) Ultimate goal
BEMIG agrees on the ultimate goal.
c) Scope of application

BEMIG confirms the scope as the one mentioned in the SRD (share, established in
EU, listed on a regulated market) but is ready to broaden this scope according to the
point g) of the explanatory note to shares held with a (I)CSD operating in Europe and
in the respect of Standard 1.3.

As stated in the SRD (Art.7), BEMIG confirms that shares registered in the issuer
register under the name of the endshareholder are out of the scope of the standards.
d) Opt-out of the communication with the (End) Shareholder
 BEMIG considers the opt-out as one of the key issues of this proposed consultation,
but is not part of the Standards, but decided in the EN. Opt out should be addressed
and consulted in the Standards. It is one of the most relevant factor of costs for the
intermediaries.
 General principles on cost/pricing.
o
Even a “basic service” as described in de Standards, has a cost which could not
be
charged
to the
(End)
Shareholder. As
the
standards
provide
for
communication by default, who bears the cost of the “basic service” should be
determined together with the Issuers.
1
From the EN “As a consequence, the identity of the (End) Shareholder is not known to the Issuer (except for shares
registered under the (End) Shareholder’s name) …which prevents direct communication)
2
http://eur-lex.europa.eu/Notice.do?hwords=&pgs=10&list=452297:cs,&val=452297:cs&nbl=1&lang=en&pos=1&page=1
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o An alternative solution could be an opt-in system, where the shareholder
expressly chooses for receiving the information on GM via its custodian. The
cost of this opt-in would be paid by the shareholder.
3. BEMIG proposals

Process 1 Notification of a GM only
o
Issuer CSD  FI :

Communication : as proposed in the Standards on GM, with minor adaptations
(see point 4: Specific remarks)

Content : as proposed in the standards on GM, with minor adaptations (see
text)

o
No translation
FI End shareholder: “Basic service “description for the (end) shareholder

Costs: to be determined together with the issuers.

Communication: @ only or best appropriate way choosen by the intermediary.

For all clients shareholders

Basic content: : refers to www.XXXXX.com (not standard 1.11)

No translation

Two major Belgian retail banks confirm that more than two third of the clients
which are also end shareholders can be reached by electronic means or
equivalent. This ratio is increasing by an average 10% per year and can even
reach 100% for banks specialized in e-trading. BEMIG considers that, on a
basis of an electronic communication, informing the shareholder of the
existence of a GM and referring him to the web site of the issuer, a basic
service could be proposed to the issuer.

The information on the issuer website should enable the shareholders to remit
its vote to the FI who will transmit this throughout the chain in a standard ISO
message. This will be conditioned by the efficiency of the chain and by
potential legal restrictions on the issuer side.

Belgian Issuers could agree on this basic service instead of the opt-out
solution.


The “basic service” description should be part of the standards.
Process 2 and 3
o
These processes should be part of the commercial agreement between shareholder
and FI.
o
At cost.
o
Paid by the issuer or the shareholder.
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4. Specific remarks

Process 1
o
Standard 1.7.
a) The Participant receiving the Meeting Notice from the (I)CSD, should
communicate it to its clients that have a holding or pending acquisition in the
concerned security. The Participant should also communicate it to not yet
informed clients who would later acquire an entitled holding.
BEMIG notices that for notification it is not required to cover pending
acquisition.
b) The Participant should communicate the Meeting Notice without undue delay from
receiving it or from recording the new acquisition, and at the latest
i) within 1 business day to Intermediaries
BEMIG considers this as step by step .
ii) within 2 business days to (End) Shareholders. 3
BEMIG notices that this timing can only be respected if the notification is in
respect of standard 1.2, 1.3, 1.4, and 1.6

With the proposal of a basic service, BEMIG can lift its remarks on Standard
1.11 as this will be part of the contractual service.

Process 2
o
Standard 2.1.
“There should be no blocking of shares prior to a given General Meeting in order to
ensure that a Shareholder may participate in and vote at that General Meeting.”
BEMIG does not agree with the reason of the blockage,
because this
blockage will prevent continuous liquidity and trading.
o
Standard 2.2.
BEMIG has real concerns on the implied complexity of “settled positions as reflected in
the books of the ICSDs” for the retail. This complexity must be further discussed for
example:
a) Is the Record Date definition for a GM consistent with the one of Corporate
Actions, which is not the SRD definition ?
The SRD (Article 7.2) stipulates that the ‘shares shall be determined with respect
to the shares held by that shareholder on a specified date prior to the general
meeting (the record date)’. The Standard 2.2 does not conflict with the SRD
3
These timelines are maximum timelines, actual timelines should be shorter so as to ensure that the information reaches the (E nd) Shareholder
in a timely manner. The higher the degree of STP, the shorter the communication timelines.
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definition, although we agree that the practicalities across the chain of
intermediaries should be discussed.
b) Should the Shareholder consider the Record Date or the cum/ex date, given the
settlement cycle.
‘It remains to be investigated how the right to participate in the meeting can be
determined based on the Record Date in the books of the Intermediaries’.
c) Should Market claims be introduced for late settlement? But some participants are
against market claim process for voting eligibility since there is no entitlement
distribution.
d) Reconciliation of the position which is not a costless operation.
e) Longer delay for the all process requesting an extension of the deadlines
established in standard 2.3., 3.1. , 3.2.. Market deadline should be at least 5
business days after record date.
All this will lead to major adaptations for retail bankers at high costs.
In Belgium there is a blockage of shares, due to physical shares, but this has to be
adapted with the implementation of the SRD. This issue should be considered in depth
with all related parties before coming to a final agreement. Retail and wholesale could
have to be considered on a different approach.
o
Standard 2.6
Same remarks as for standard 2.2.
o
Standard 2.7
The last intermediary cannot contact the issuer. In the BE MIG opinion, the process can
only function cost-efficiently (both for intermediaries and issuers) if we strictly respect the
chain of intermediaries not only for sending information to the end shareholder but also as
for sending shareholders participation to the issuer.
The end shareholder may always choose for not being identified within the chain of
intermediaries.
o
Proof of entitlement and standard 2.8.
The BE MIG agrees with the EBF position. We propose to find a workable solution with
the issuers instead of imposing a standard and costly proof of entitlement that will burden
the effectiveness of the process instead of increasing the participation.
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
Process 3
o
Standard 3.2
The market deadline that intermediaries will adopt depends on the way that the attendance
notification process takes place. It can thus not be imposed in such a straightforward way.
o
Standard 3.3
The BE MIG does not see how a direct flow would be possible. It is not realistic to demand
from all final intermediaries to set up, on a random basis, communication links with
potentially all issuers of the EU.
o
Standard 3.9
The content of the notification will depend on finding, with the issuers, a workable solution
for proof of entitlement and notification of attendance with the issuers. The current
proposals in the standards seem not workable to the BE MIG (cfr remark on standard 2.8 ).
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BEMIG proposals on Market Standards for General Meetings (for All Clients)
Issuer
XXXX
/
Issuer Agent
Standards
www.XXXX.com
Process 1
CSD
Process 2
Process 3
FI
FI
Basic service (Non Paper)
Contractual Service

For all clients shareholders

Contractual agreement

Notification only

Process 1, 2 and 3
o
Record date and entitlement
o
Notification of attendance

Electronic only

Refer to www.XXXX.com

Opt in for clients

No translation

Service as defined in the standards

Entitlement by last FI

At

Voting possible with cost for client
cost
of
end
shareholder
(notification,
voting,..)

EndShareholders
 No discrimination amongst shareholders
 Application depends on elimination of legal barriers and on application of
standards throughout the chain of custody.