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CMVM recommends adopting principles of sustainability and transparency in information to the market and in dividend and crisis management policies


14 April 2020

In the context of the Covid-19 pandemic, the CMVM today issued a recommendation for Securities Issuers that in financial reporting procedures, as well as in the distribution of dividends, remunerations and crisis management, adopt transparent and sustainable principles, taking into account long-term interests of shareholders and other interested parties.

"In view of the developments observed in recent weeks, with relevant impacts on the entire economy, although dissimilar in the various sectors; and considering the uncertainty regarding the evolution of the economic activity in the coming months and the recovery that will follow, the CMVM underlines the relevance of the quality of information to be provided to the market by the Boards of Directors regarding the current and expected impacts of Covid-19 in their activities, as well as the adoption of sustainability principles based on perspectives that value the medium and long term and all interested parties in the life of the company, aiming to ensure the necessary operational and financial resilience in a context of increased risk ", the recommendation reads.

The CMVM guidelines include information quality requirements that are significant for investors and other interested parties; underline that decisions "with an impact on maintaining a solid and resilient financing structure", which include, for example, proposals for the distribution of dividends and share repurchases, must be carefully considered and clearly framed and justified in the face of challenges and medium term risks of each issuer; and require the explanation by each entity of the business continuity plans that are being adopted, in order to ensure the respective operational resilience in the medium term and in the face of adverse scenarios.
 
The issuance of this recommendation is part of the CMVM's approach to the effects of the Covid-19 pandemic on the various segments of the national market and aims to support investors and supervised entities in facing the current context. The CMVM's response principally values four dimensions: the quality of information in the market and investor protection, the monitoring of short and medium-term operational and financial risks; careful consideration - and flexibility when necessary - of regulatory and reporting obligations; and the issuing of guidelines on best practices, which value principles of sustainability and good corporate governance.

Specifically, with regard to issuers and in addition to the current recommendation, the CMVM has already taken, in the context of the current pandemic, the following decisions:
  • Flexibility of the deadlines for disclosing to the market, financial information of the Transparency Directive, following the recommendation of ESMA, and allowing coherence with the extension of the deadline for holding general shareholders' meetings until 30 June 2020.
     
  • Recommendation to consider telematic means for holding general shareholders' meetings, in a position aligned with AEM (Association of Issuers of Listed Securities) and IPCG (Portuguese Corporate Governance Institute).

  • Adoption of ESMA's position, which, in conjunction with EBA, recommended the application of uniform criteria for the application of IFRS 9 in the calculation of expected credit losses arising from Covid-19.

  • Support and adopt ESMA's recommendations of 11 March, so that, according to the rules on market abuse, issuers disclose as soon as possible all relevant information about the impacts of Covid-19 on their business, financial situation and economic performance. And so that the financial reports - in particular, the 2019 annual financial report when it has not yet been finalised or, otherwise, when reporting interim information - reflect both current and potential impacts, as far as possible, ascertained, based on a quantitative and qualitative assessment.
     
  • To underline that the existence of quality information is essential to the sound formation of market prices and open markets are important so that investors can continue to invest, have access to liquidity, rebalance portfolios and comply  with their duties.

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