SRD II

Overview

The Shareholder Rights Directive II (SRD II) is a European Union (EU) directive, which aims to strengthen the position of shareholders and ensure that decisions are made for the long-term stability of companies. The rules, which will amend the original SRD which came into effect in 2007, are designed to materially enhance corporate governance standards at companies which are registered within the European Economic Area (EEA), and whose securities are traded on EEA regulated markets.

The updated directive will require transposition into each Member State’s law. As a result of the directive, HSBC are implementing changes related to corporate actions messaging, proxy voting and disclosures messaging.

The Shareholder’s Rights Directive II is due to be implemented on 03 September 2020 for core operational changes.

Scope

Scope includes equities with voting rights attached that are admitted for trading on an EEA regulated market and whose issuer has a registered office within the EEA. Some markets have increased the in scope securities to include Bonds.

Impacted Entities

All intermediaries, asset managers, asset owners, and proxy advisors holding or providing services to EEA securities, regardless of their location.

Key Changes

  • Shareholder Identification: SRD II places an obligation on intermediaries to transmit the necessary information they hold on shareholder identity. Intermediaries must also transmit any relevant information from the company to the shareholder to allow the shareholder to exercise their rights.
  • Faster processing: SRD II introduces very specific processing timeframes that intermediaries must adhere to going forward. The key takeaways are that any corporate action notices received from issuers/agents/CSDs before 4pm in the intermediary’s location need to be processed and transmitted to the next intermediary by the end of the same day. Any Corporate Action notices received after 4pm need to be processed by 10am the next day.
  • Facilitation of greater shareholder engagement: Through new proxy voting provisions, greater shareholder engagement will be achieved. Clients who are intermediaries are advised to sign up to ISS proxy voting services via SWIFT or the ISS website.

Important Links on SRD II

HSBC SRD II Information for Clients

Last updated: 31 August 2020