Overview of the SRD II
|
The Shareholder Rights Directive II is a revision of the 2007 regulation SRD 1. The SRD regulations are a set of measures which govern practices between shareholders and the companies whom they have invest in. The SRD regulations seek to reduce risk on the part of the shareholder by reducing excessive risk taking and short termism by companies.
The regulation is set to take place over two phases. The first phase was in June 2019, and the second is due in September 2020. SRD is one of many European regulations introduced after the last global recession revealed many weaknesses in the global financial system such as excessive risk taking, lack of transparency with regards to risk analysis, identification of shareholders and complex chains of intermediaries.
|
|
Examples of similar EU regulations are:
|
|
Who does SRD II apply to?The SRD II regulation applies to all intermediaries such as CSDs being used by shareholders (including third-country), asset managers and investment managers. Firms such as asset managers will also be subject to disclose transparency reports every six months, along with institutional investors who will have to disclose publicly how their equity investment strategy is aligned to the long-term performance of their assets.
|
Why do Legal Entity Identifiers satisfy the SRD II regulation?
To remedy this (identification of shareholders), SRD II proposes that issuers be given the right to receive information on shareholders (e.g. their name, address, email, Legal Entity Identifier [LEI] details, number of shares held).
- HSBC Bank
The first requirement of SRD II is concerned with identification of shareholders. When an issuer requests the identification of a shareholder details must be declared by way of a unique identifier such as an LEI Code (Legal Entity Identifier). The LEI record contains verified and up to date data on a shareholder entity such as address, name, and registration number.
The reason the LEI is the perfect identifier for the SRD II requirement is that the ID data must be provided in machine readable messaging format with a minimum requirement of data points, all of which the LEI code provides.
|
SWIFT messages for identification will also be used using the ISO 20022 standard, and an LEI may be integrated with the SWIFT payment process. This allows for assured identity validation at the point of payment. It also reduces the risk of identity related errors and fraud.
|
The global LEI system is freely accessible, public database providing details of legal entities globally. Each market participant falling under SDR is able to register to the LEI database so that they are easily verifiable and identifiable.
SRD II Reporting Deadline
Deadline |
Entities which fall under the rule |
Eligible to receive LEI? |
3 September, 2020 |
Intermediaries, CSDs, asset managers, institutional investors, shareholder entities, proxy advisors, issuers |
Yes |
LEI Worldwide provide a registration portal through which you can quickly, and easily register LEIs for EU entities. The LEI application process takes less than 10 minutes and for EU countries the LEI issuance timeframe is between a few minutes to an hour.
In order to prevent your LEI from lapsing, select auto-renewals at checkout.
If you have any questions or would like to find out more about LEIs and SDR 2 requirements please contact support at [email protected]
In order to prevent your LEI from lapsing, select auto-renewals at checkout.
If you have any questions or would like to find out more about LEIs and SDR 2 requirements please contact support at [email protected]
Join thousands of market participants and obtain your hassle-free LEI today.
